Every Monday morning I like to start the week with a look at ASIC's short position report in order to find out which unfortunate shares are being targeted by short sellers.
For those unfamiliar with short selling, 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. At the moment short sellers are betting on the 10 shares below taking a tumble in the coming months:
- Syrah Resources Ltd (ASX: SYR) continues as the most shorted share on the ASX with 21.4% of its shares held short. Last week the company announced that production has commenced at its Balama graphite project. Short sellers appear to believe this will lead to an oversupply of the battery-making ingredient.
- Independence Group NL (ASX: IGO) has seen its short interest slide to 19%. Short sellers may be closing positions due to the bullish outlook for nickel due to electric vehicle sales growth.
- Domino's Pizza Enterprises Ltd. (ASX: DMP) has 17% of its shares held short. It appears as though short sellers are sceptical that the pizza operator will deliver strong enough growth in FY 2018 to justify the premium its shares trade at.
- JB Hi-Fi Limited (ASX: JBH) has 15.4% of its shares in the hands of short sellers. One leading broker tipped JB Hi-Fi as a sell last week ahead of the Amazon launch.
- Healthscope Ltd (ASX: HSO) has short interest of 15%. Short sellers may be targeting the healthcare provider due to the impact that falling private health insurance participation numbers could have on its business.
- Retail Food Group Limited (ASX: RFG) has short interest of 12.5%. The food and beverage company's shares are down 37% this year after a mixed FY 2017.
- Ardent Leisure Group (ASX: AAD) has 10.9% of its shares held short. A slowdown in the growth of its Main Event business in the United States appears to have many in the market concerned.
- Western Areas Ltd (ASX: WSA) has continued to see its short interest fall, this time to 10.8%. The miner could be a big winner if nickel prices rise sharply due to the electric vehicle boom.
- Aconex Ltd (ASX: ACX) may have 10.6% of its shares held short, but this hasn't stopped them from climbing higher. Last week Aconex saw its share price rise almost 13% despite there being no news out of the company.
- Myer Holdings Ltd (ASX: MYR) has 10.3% of its shares in the hands of short sellers. They are likely to be targeting the department store operator due to its abject performance and the arrival of Amazon in Australia.
