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:
- Orocobre Limited (ASX: ORE) is once again the most shorted share on the ASX with short interest of 20.1%. Last month the lithium miner was forced to downgrade its full-year production guidance for the second time this year due to severe weather conditions.
- Syrah Resources Ltd (ASX: SYR) has 18.9% of its shares held short. Short sellers have targeted the miner due to concerns that its Balama Project will upset graphite's supply-demand balance when it opens.
- Myer Holdings Ltd (ASX: MYR) has 15.4% of its shares in the hands of short sellers. Weak retail conditions and the imminent arrival of Amazon in Australia appear to be behind the negative sentiment.
- Independence Group NL (ASX: IGO) has seen short interest rise to 15.2%. Unexpected production delays at its Nova mine have weighed heavily on the gold miner this year.
- Western Areas Ltd (ASX: WSA) has seen short interest drop for a second week in a row to 15.2%. Due to the hard work it has done with cost-savings, I think Western Areas could be worth a look when nickel prices improve.
- Metcash Limited (ASX: MTS) has 12.7% of its shares held short. Despite the high level of short interest, the wholesaler and distributor's shares climbed 17% in June.
- iSentia Group Ltd (ASX: ISD) has short interest of 12.7%, up sharply from last week. As we enter confessions season it appears short sellers expect more bad news regarding the media intelligence company's content marketing segment.
- Mayne Pharma Group Ltd (ASX: MYX) has 12.6% of its shares in the hands of short sellers. Concerns over President Trump's policies on drug prices are largely behind the negative sentiment.
- Aconex Ltd (ASX: ACX) has 12.5% of its shares held short. Short interest in the software-as-a-service company has fallen sharply this year, possibly hinting that sentiment has shifted positively.
- Retail Food Group Limited (ASX: RFG) is a new entry into the top ten. A disappointing trading update last month appears to have attracted short sellers to the food and beverage company.
