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 borrows 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 21.3% of its shares held short. Last week Syrah announced a sales agreement with Zhanjiang Juxin New Energy Materials. No pricing terms were provided.
- Independence Group NL (ASX: IGO) has short interest of 19%. Concerns over gold, nickel, and copper prices may be weighing on its shares.
- Domino's Pizza Enterprises Ltd. (ASX: DMP) has 17.1% of its shares held short. The pizza chain operator has come under fire since missing its FY 2017 guidance.
- JB Hi-Fi Limited (ASX: JBH) has 15.6% of its shares in the hands of short sellers. Last week the retailer's shares performed well after an underwhelming Amazon launch.
- Healthscope Ltd (ASX: HSO) has short interest of 15%. Short sellers appear to believe that falling private health insurance participation numbers could have a negative impact on its business.
- Retail Food Group Limited (ASX: RFG) has short interest of 12.4%. The food and beverage company recently held its AGM and provided a reasonably mixed trading update.
- Ardent Leisure Group (ASX: AAD) has 11.3% of its shares held short, up slightly on last week. A weaker-than-expected performance from its growth engine, its US-based Main Event business, appears to have caught the eye of short sellers.
- Western Areas Ltd (ASX: WSA) has 10.5% of its shares in the hands of short sellers. While its shares have rallied strongly this year, if nickel prices improve I feel they could still go higher.
- Aconex Ltd (ASX: ACX) has 10.5% of its shares held short. Short sellers may believe the software-as-a-service company will struggle to grow at a level that justifies the sky high multiple its shares trade at.
- APN Outdoor Group Ltd (ASX: APO) has entered the top ten with 10.1% of its shares held short. In October the advertising company lost a major Yarra Trams contract that had been worth $7 million in EBITDA.
