Do you own the 10 most shorted shares on the ASX?

Aconex Ltd (ASX:ACX) is once again the most shorted share on the ASX. Is Aconex or the other nine in your portfolio?

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When investors short a share they are borrowing shares to sell on market with the aim of buying them back at a cheaper price further down the line. It can be a lucrative investment strategy, but comes with high risks and theoretically limitless losses.

Whilst short sellers don't always get it right, I believe investors should be wary about investing in shares with high short interest, as it could be seen as an early warning sign of a share price decline.

According to the most recent data provided by ASIC, these are the 10 most shorted shares on the ASX:

  1. Aconex Ltd (ASX: ACX) continues to be the most shorted share on the ASX. This week the software-as-a-service company has short interest of 16.4%. Although its shares have fallen 32% in the last six months, short sellers appear to believe it can still fall further.
  2. Myer Holdings Ltd (ASX: MYR) has seen short interest fall for a second week in a row to 16%. I believe there's a good chance the department store operator will report strong Christmas sales, so short sellers may want to be careful.
  3. Western Areas Ltd (ASX: WSA) has 13% of its shares held short. Short interest has risen sharply since Indonesia lifted its ban on nickel exports. I expect this to postpone the predicted recovery in nickel prices for another year.
  4. TFS Corporation Limited (ASX: TFC) has 11.1% of its shares in the hands of short sellers. Although this is a sharp drop from last week, short interest in the sandalwood plantation manager is still at some of the highest levels in recent times.
  5. Vocus Communications Limited (ASX: VOC) has seen short interest jump up to 10.9%. Although rising short interest is a concern, I still believe its bargain price means Vocus provides investors with a compelling risk/reward profile.
  6. Syrah Resources Ltd (ASX: SYR) has 10.6% of its shares held short. Despite the high short interest this graphite miner's share price has rallied higher by 10% so far in 2017 compared to a slight decline by the S&P 200.
  7. Nine Entertainment Co Holdings Ltd (ASX: NEC) has short interest of 11.2%. Despite the media company's shares losing 36% of their value in the last 12 months some short sellers appear to believe there's further to go.
  8. Worleyparsons Limited (ASX: WOR) is once again being targeted by short sellers. The mining services company has short interest of 9.4%. As competition is fierce and margins are low, I would avoid Worleyparsons and the industry as a whole.
  9. Metcash Limited (ASX: MTS) has seen short interest drop sharply to 10.4%. This is the second week in a row this has happened, which could be interpreted as a sign that investors are becoming bullish on the wholesale distributor.
  10. News Corp (ASX: NWS) is another media company with high short interest. News Corp has 9% of its shares in the hands of short sellers, down slightly from last week.
Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of ACONEX FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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