While the majority of investors want share prices to appreciate, not all of them do.
Some will borrow shares to sell on market with the aim of buying them back at a cheaper price further down the line. This high risk investment strategy is known as short selling or shorting.
According to the most recent data provided by ASIC, the 10 most shorted shares on the ASX at present are as follows:
- Orocobre Limited (ASX: ORE) is once again the most shorted share on the ASX with 20.1% of its shares held short. Short sellers will have been celebrating last week after the lithium miners were sold-off.
- Syrah Resources Ltd (ASX: SYR) has seen short interest rise to 18.8%. Short sellers believe that Syrah's massive Balama Project will cause an oversupply of graphite when it finally opens.
- Western Areas Ltd (ASX: WSA) has seen short interest drop to 16.3%. A weak outlook on nickel prices has weighed heavily on the miner's shares. When prices do eventually improve, I think Western Areas could be worth a closer look.
- Myer Holdings Ltd (ASX: MYR) short interest has risen to 15.4%. A weak quarterly update from the department store operator and the potential arrival of an e-commerce behemoth in Australia appear to be the reason behind the negative sentiment.
- Independence Group NL (ASX: IGO) has seen short interest fall slightly to 14.6%. Short sellers appear to have targeted the miner due to production delays at its key Nova mine.
- Mayne Pharma Group Ltd (ASX: MYX) has 13.2% of its shares in the hands of short sellers. Until President Trump's policies on drug prices are known, I expect the pharmaceutical company's shares could remain under pressure.
- Aconex Ltd (ASX: ACX) has 12.6% of its shares held short. Pleasingly for its shareholders, short interest in the software-as-a-service company continues to fall. Possibly indicating that sentiment is shifting positively.
- Metcash Limited (ASX: MTS) has jumped back into the top 10 with short interest of 12.5%. With ALDI growing its market share and the big supermarkets embarking on a price war, I am concerned that Metcash's results could suffer.
- Domino's Pizza Enterprises Ltd. (ASX: DMP) has 12.2% of its shares in the hands of short sellers. Its reasonably expensive shares and allegations that a number of its licensees have underpaid staff are likely to be the reason for the high level of short interest.
- Flight Centre Travel Group Ltd (ASX: FLT) has entered the top 10 with short interest of 11.5%. With the travel agent's shares rallying over 30% in the last three months, short sellers appear to believe they could be due for a pullback in the near future.
