Each Monday I like to start the week with a quick look at which ASX shares are attracting the most unwanted attention from short sellers.
When an investor shorts a company's shares they are essentially borrowing shares to sell on market with the aim of buying them back at a lower price further down the line.
But as rewarding as the strategy can be, it is a high risk one with theoretically limitless losses.
At the moment short sellers are betting on the 10 shares below taking a tumble in the coming months:
- Western Areas Ltd (ASX: WSA) has now become the most shorted share on the ASX with short interest of 20.5%. Although nickel prices have improved, it appears as though short sellers don't expect this to last.
- Orocobre Limited (ASX: ORE) has seen its short interest remain flat at 19.3%. Despite the lithium miner's shares falling almost 30% this year, short sellers seem to believe there is still significant downside risk for its shares.
- Syrah Resources Ltd (ASX: SYR) short interest has continued to rise and has now reached 18.2%. Delays to the opening of its Balama project are likely to be behind the negative sentiment.
- Myer Holdings Ltd (ASX: MYR) has 16.5% of its shares in the hands of short sellers. Short interest in the department store operator jumped after its recent full-year profit downgrade.
- Independence Group NL (ASX: IGO) has seen short interest edge lower to 14.3%. Delays at its Nova operation and its increasing all-in sustaining costs are largely behind the high level of short interest.
- JB Hi-Fi Limited (ASX: JBH) has seen another small reduction in short interest to 13.5%. With Amazon's Australian launch looking to be imminent, I can't say I'm surprised with its high level of short interest.
- Retail Food Group Limited (ASX: RFG) has 12.5% of its shares held short, down reasonably sharply from last week. With the food and beverage company's shares down significantly this year, short sellers may believe that its shares have bottomed now.
- Ardent Leisure Group (ASX: AAD) has short interest of 12.2%, up slightly from a week earlier. Although I felt that its most recent trading update was reasonably positive and showed signs of improvement, short sellers continue to add to their positions.
- Metcash Limited (ASX: MTS) has 12% of its shares held short. Like JB Hi-Fi, the impact of the impending launch of Amazon in Australia appears to have worried the market.
- Aconex Ltd (ASX: ACX) has short interest of 12%, down slightly from last week. Short sellers may be predicting a weaker-than-expected full-year result from software-as-a-service company.
