Whilst 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 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 are as follows:
- Syrah Resources Ltd (ASX: SYR) continues to be the most shorted ASX share by some distance. The graphite miner has 22.7% of its shares held short, up sharply from last week. Despite this interest, its shares have still carved out a 58% gain in the last six months.
- Independence Group NL (ASX: IGO) has seen its short interest climb to 18.9%. Production delays and the prospect of rising interest rates in the United States could be why short sellers are targeting the gold miner.
- Domino’s Pizza Enterprises Ltd. (ASX: DMP) has seen short interest rise to 16%. Last week the pizza chain operator’s shares had a mixed week after it announced the acquisition of the rest of Domino’s Japan from Bain Capital.
- JB Hi-Fi Limited (ASX: JBH) has short interest of 15%. Like many retailers, the market appears to be bearish on JB Hi-Fi due to the imminent arrival of Amazon in Australia.
- Healthscope Ltd (ASX: HSO) has short interest of 13.7%. With private health insurance numbers falling and the company forecasting flat EBITDA in FY 2018, I can’t say I’m surprised by the short interest.
- Orocobre Limited (ASX: ORE) has 13% of its shares held short. Short interest has fallen significantly in the last few months due largely to the increasingly bullish outlook for global lithium demand.
- Retail Food Group Limited (ASX: RFG) has seen short interest slide to 12%. With its shares down sharply this year and its dividend yield one of the more generous on the market, I think it could be worth a closer look now.
- Western Areas Ltd (ASX: WSA) has seen its short interest fall to 11.8%. A positive outlook for nickel due to electric vehicle adoption is likely to be the reason for the fall in short interest.
- Myer Holdings Ltd (ASX: MYR) has 11.3% of its shares held short. Short interest continues to fall ahead of its AGM next month.
- Aconex Ltd (ASX: ACX) has seen its short interest rise to 11.2%. The software-as-a-service company’s shares have risen 27% in the last three months. Next week investors will find out if this gain was justified when it updates the market at its AGM.
If you're not keen on companies with rising short interest then you might want to consider removing these toxic shares from your portfolio as well. I think they could easily be next in line to gain attention from short sellers.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of ACONEX FPO and Retail Food Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.