I like to start each week with a look at ASIC's short position report in order to find out which 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) has short interest of 21.4%, making it the most shorted ASX share once again. Short interest has increased since management warned that the prices it is commanding may not be as high as some expect.
- Independence Group NL (ASX: IGO) has short interest of 16.8%. Although Independence had a reasonably solid December quarter, short sellers appear to think that it is still overvalued.
- Domino's Pizza Enterprises Ltd. (ASX: DMP) has short interest of 16.6%, up sharply since last week. Last week the UK version of Domino's delivered an impressive result which I think short sellers should take note of.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest fall to 14.1%. Short sellers continue to close positions after Morgan Stanley added the retailer's shares to its model portfolio and slapped an overweight rating on them.
- Healthscope Ltd (ASX: HSO) has short interest of 13.8%. Considering the tough trading conditions it faces and its weak outlook, short sellers may believe that the private hospital operator's shares are overvalued.
- Retail Food Group Limited (ASX: RFG) has short interest of 13.2%. It appears as though short sellers don't believe that the food and beverage company is over the worst of it just yet.
- HT&E Ltd (ASX: HT1) has short interest of 10.7%. The outdoor advertising company has had a tough time of late. In the last few months it has lost a major contract and been slapped with a sizeable tax bill from the ATO after being issued amended assessments.
- Flight Centre Travel Group Ltd (ASX: FLT) has 9.9% of its shares held short. Despite the high level of short interest, the travel agent's shares have been flying higher recently following a broker upgrade.
- Greencross Limited (ASX: GXL) has short interest of 9.8%. The integrated pet care company has suddenly come on the radar of short sellers ahead of earnings season. They may be predicting a weaker-than-expected half-year result.
- Mayne Pharma Group Ltd (ASX: MYX) is back in the top ten with short interest of 9.5%. The pharmaceutical company's shares have come under pressure recently due to price pressures in the lucrative US market.
