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.
Here are the 10 most shorted shares on the ASX this week according to data provided by ASIC:
- Syrah Resources Ltd (ASX: SYR) is once again the most shorted share on the ASX with 21.3% of its shares held short. Short interest has been on the slide since last week, which could be a positive sign for shareholders.
- Independence Group NL (ASX: IGO) has seen its short interest remain relatively flat at 19.7%. Despite a positive first-quarter of FY 2018, the majority of short sellers appear to believe the gold miner could disappoint this year.
- Domino’s Pizza Enterprises Ltd. (ASX: DMP) has seen short interest rise to 16.7%. Judging by the rising short interest, short sellers may expect the pizza operator to fall short of its guidance again in FY 2018.
- JB Hi-Fi Limited (ASX: JBH) has 15.6% of its shares in the hands of short sellers. JB Hi-Fi’s shares could come under pressure this week if Amazon finally launches in Australia.
- Healthscope Ltd (ASX: HSO) has short interest of 14.6%. Short sellers appear to be targeting the healthcare provider due to falling private health insurance participation numbers and its weak full-year guidance.
- Retail Food Group Limited (ASX: RFG) has short interest of 12.4%. While the high level of short interest is a worry, I feel its shares could be good value now and worth a closer look.
- Western Areas Ltd (ASX: WSA) has continued to see its short interest fall, this time to 11.1%. Short sellers may be concerned that nickel prices could rise sharply due to the electric vehicle boom.
- Metcash Limited (ASX: MTS) has short interest of 10.8%. Like JB Hi-Fi, the impending launch of Amazon in Australia could be weighing heavily on the wholesale distributor’s shares.
- Orocobre Limited (ASX: ORE) has seen short interest soften to 10.7%. With the lithium miners storming higher amid the bullish outlook for the metal, short sellers appear to be closing positions in a hurry.
- Aconex Ltd (ASX: ACX) has 10.6% of its shares held short. It appears as though short sellers believe the software-as-a-service company’s shares are a little expensive at approximately 6x sales. I believe Aconex can grow into its valuation.
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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.