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.
According to data provided by ASIC, here are the 10 most shorted shares on the ASX this week:
- Syrah Resources Ltd (ASX: SYR) remains the most shorted share on the ASX with short interest of 20%. Short sellers may be regretting this one, though. Syrah's shares have risen over 30% in the last 30 days as positive news flows in.
- Orocobre Limited (ASX: ORE) has seen short interest fall again, this time to 18.2%. A solid full-year result in August appears to have given short sellers something to think about.
- Western Areas Ltd (ASX: WSA) has seen its short interest drop sharply for a second week running, this time to 16.9%. Short sellers have been heading for the exits since the nickel producer reported full-year net profit after tax growth of 165% to $19.3 million.
- Myer Holdings Ltd (ASX: MYR) has 15.5% of its shares in the hands of short sellers. Short sellers appear to believe that weak retail conditions and the arrival of Amazon will hinder Myer's turnaround.
- Independence Group NL (ASX: IGO) has seen its short rise to 14.9%. Despite the high level of short interest, the gold miner's shares have risen 17% since the start of the month due to rising tensions in North Korea.
- Select Harvests Limited (ASX: SHV) has 13% of its shares in the hands of short sellers. A decline in production volumes and a disappointing 73% decrease in its reported full-year net profit after tax is likely to have caught the eye of short sellers .
- Ardent Leisure Group (ASX: AAD) has short interest of 12.6%. As well as its continued underperformance, short sellers may be targeting Ardent Leisure due to its Main Event centres in Texas being impacted by Hurricane Harvey.
- Retail Food Group Limited (ASX: RFG) has 12.4% of its shares held short. Although the food and beverage company posted a reasonably solid 14% lift in net profit after tax to $75.7 million in August, it hasn't been enough to shake off short sellers.
- Domino's Pizza Enterprises Ltd. (ASX: DMP) has 12.3% of its shares held short. Short sellers have been targeting the pizza chain operator since its full-year results fell short of its guidance last month.
- JB Hi-Fi Limited (ASX: JBH) has short interest of 12.1%. Weak retail conditions and the imminent arrival of Amazon in Australia appears to be weighing heavily on investor sentiment.
