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…
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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) remains the most shorted ASX share with short interest of 20%. Short sellers appear concerned about a potential oversupply of graphite.
- Independence Group NL (ASX: IGO) has short interest of 17%. Production delays at its key Nova operation last year appear to have weighed on investor sentiment.
- Domino’s Pizza Enterprises Ltd. (ASX: DMP) has short interest of 16.6%. Short interest in the pizza operator continues to rise ahead of earnings season.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest remain flat at 15.8%. Morgan Stanley may have recently upgraded it to an overweight rating, but that hasn’t put short sellers off.
- Healthscope Ltd (ASX: HSO) has short interest of 13.4%. A disappointing FY 2017 and soft outlook appear to be the reason for this negative sentiment.
- Retail Food Group Limited (ASX: RFG) has short interest of 12.5%. Short sellers continue to target the embattled food and beverage company despite its incredible share price decline over the last 12 months.
- Flight Centre Travel Group Ltd (ASX: FLT) has 9.9% of its shares held short. Despite this, last week the travel company’s shares rose to a 52-week high following a broker upgrade.
- HT&E Ltd (ASX: HT1) has short interest of 9.7%. Short sellers are targeting the outdoor advertising company due to the loss of its Yarra Trams contract. Management expects the loss to hit EBITDA by approximately $15 million.
- APN Outdoor Group Ltd (ASX: APO) has 9.5% of its shares held short. Short sellers appear concerned that competition is heating up greatly in the industry after JC Decaux won the Yarra Trams contract HT&E had held for six years.
- Myer Holdings Ltd (ASX: MYR) has short interest of 8.9%. The department store operator has been a real favourite with short sellers during the last 12 months due to the lack of progress being made by its turnaround plan.
Instead of risking your money in highly shorted shares, I would consider these growth shares with enormous potential and low levels of short interest.
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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 and has recommended Flight Centre Travel Group Limited 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.