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.
