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

Every Monday morning 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 borrows 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.

According to data provided by ASIC, here are the 10 most shorted shares on the ASX this week:

  • Orocobre Limited (ASX: ORE) continues to be the most shorted share on the ASX with 20.9% of its shares in the hands of short sellers. Short interest shot up after the lithium miner surprised the market with a downgrade to its full-year production guidance.
  • Syrah Resources Ltd (ASX: SYR) has short interest of 17.6%, down slightly from a week earlier. Whilst I think the graphite miner could have a bright future ahead of it, a group of notorious short sellers believe Syrah is vastly overvalued and have tipped it for a heavy fall.
  • Vocus Group Ltd (ASX: VOC) has short interest of 17.1%, up sharply on last week. The increasingly higher levels of short interest in the telco company’s shares is certainly a concern in my opinion.
  • Western Areas Ltd (ASX: WSA) has seen another slight drop in short interest to 17%. Weakening nickel prices have weighed heavily on the miner’s shares this year.
  • Myer Holdings Ltd (ASX: MYR) has seen its short interest rise again to 15%. Short sellers have taken a keen interest in the department store after its disappointingly weak quarterly update.
  • Independence Group NL (ASX: IGO) has seen short interest increase to 14.2%. Production delays at its key Nova mine appear to be the reason behind the sudden and sharp increase in short interest.
  • Mayne Pharma Group Ltd (ASX: MYX) has 13.3% of its shares in the hands of short sellers. Alleged price-fixing of generic drugs and Trump’s policies on prices are largely behind the negative sentiment.
  • Aconex Ltd (ASX: ACX) has 12.9% of its shares held short. Short interest in the software-as-a-service company has fallen sharply in the last few months as sentiment shifts positively.
  • iSentia Group Ltd (ASX: ISD) has short interest of 12.1%. Although there have been signs of improvement at the media monitoring company, short sellers appear to believe the problems with its content marketing business are not over.
  • Domino’s Pizza Enterprises Ltd. (ASX: DMP) is back in the top 10 with 11.7% of its shares in the hands of short sellers. The pizza chain operator came under pressure from short sellers after a number of its licensees were accused of allegedly underpaying staff.

Finally, if you'd like to avoid shares with high short interest then I would suggest you take a look at these incredible growth shares.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of ACONEX FPO and Vocus Communications Limited. 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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