Every Monday I like to start the week with a look at ASIC's short position report in order to find out which shares are being targeted by short sellers.
A short seller will borrow shares to sell on market, with the aim of buying them back at a lower price in the future and pocketing the difference.
As it is a high risk strategy with the potential for limitless losses, short sellers will often only take a short position if they believe they have a high probability of success. For this reason I believe it is prudent for investors to keep a close eye on short interest levels.
Here are the 10 most shorted shares on the ASX this week:
- Myer Holdings Ltd (ASX: MYR) is once again the most-shorted share on the ASX with short interest of 17.6%. Short interest rose slightly from last week, which could be a sign that some investors are pessimistic on the department store operator's turnaround.
- Aconex Ltd (ASX: ACX) isn't far behind with short interest of 16.4%. Short interest in the software-as-a-service company has risen sharply from last week.
- Western Areas Ltd (ASX: WSA) has 13.7% of its shares held short. Indonesia recently lifted a ban on nickel exports, which is expected to weigh heavily on nickel prices.
- TFS Corporation Limited (ASX: TFC) has 12.3% of its shares in the hands of short sellers. The company expects to deliver adjusted cash EBITDA growth of at least 25% in FY 2017. Judging by the high short interest some investors appear doubtful.
- Vocus Group Ltd (ASX: VOC) has seen short interest rise slightly to 11.2%. Following its strong half-year result last week, I would expect to see short interest in the telco company start to fall over the next few months.
- Worleyparsons Limited (ASX: WOR) has 11.1% of its shares held short. Last week the mining service's share price fell 19% following a terrible half-year result, much to the delight of short sellers.
- Nine Entertainment Co Holdings Ltd (ASX: NEC) has short interest of 10.7%. Despite the fact its shares have lost a third of their value in the last 12 months, short sellers appear to believe the media company's shares could yet fall further.
- Orocobre Limited (ASX: ORE) is a new entry in the top 10 with 10.7% of its shares held short. The lithium miner's share price has fallen 22% in the last month.
- Syrah Resources Ltd (ASX: SYR) has short interest of 10.4%, up slightly on last week. Whilst the graphite miner looks attractive at the current share price, the rising short interest is a worry.
- Mayne Pharma Group Ltd (ASX: MYX) has seen short interest fall to 9.7%. It appears as though short sellers are still targeting the pharmaceutical company on the back of fears of how President Trump's policies could impact the pharmaceutical industry.
