At the start of each week I like to take a look at data provided by ASIC to see which ASX shares are currently being targeted by short sellers.
Although short sellers often get it wrong, I believe investors should pay close attention to high short interest as it could be seen as an early warning sign of a share price decline.
At present these are the 10 most shorted shares on the ASX:
- Aconex Ltd (ASX: ACX) holds onto the top spot for another week with just over 16% of its shares held short. Today it announced a downgrade, which is likely to please the shorters.
- Myer Holdings Ltd (ASX: MYR) has seen short interest remain flat at 16% this week. I think the department store operator's turnaround plan may have delivered strong Christmas trade. If this is the case then short sellers ought to be careful.
- Western Areas Ltd (ASX: WSA) has 12.1% of its shares in the hands of short sellers. With nickel prices likely to stay lower for longer following Indonesia's decision to lift its ban on nickel exports, I think Western Areas could have another difficult year ahead.
- Vocus Communications Limited (ASX: VOC) has seen short interest increase again to a new high of 11.5%. Despite the short interest this growing telco company does look like a great option for investors at the current price.
- TFS Corporation Limited (ASX: TFC) has 11.5% of its shares held short. Despite its shares trading on low multiples and management forecasting adjusted cash EBITDA growth of at least 25% in FY 2017.
- Nine Entertainment Co Holdings Ltd (ASX: NEC) has short interest of 10.6%. Despite the high level of short interest the media company's share price has still managed to rally 20% in the last three months.
- Metcash Limited (ASX: MTS) has seen short interest drop for a third week in a row to 10%. I believe this could be interpreted as a sign that investors are becoming bullish on the wholesale distributor.
- Syrah Resources Ltd (ASX: SYR) has seen short interest drop sharply to 9.8%. The graphite miner's shares are down 27% in the last six months thanks partly to the surprise resignation of its managing director Mr Tolga Kumova.
- Worleyparsons Limited (ASX: WOR) has 9.5% of its shares in the hands of short sellers. The mining services industry looks like a tough place to operate in at the moment with strong competition and low margins. I would stay clear of Worleyparsons and its peers.
- Mayne Pharma Group Ltd (ASX: MYX) is a new entry into the top 10 with 9.3% of its shares now held short. The pharmaceutical company is likely to have been targeted due to price-fixing allegations and concerns over the impact a Trump presidency will have on the industry.
