I like to start the week with a quick look at which shares are being targeted by short sellers.
When an investor shorts a company’s shares it means they are borrowing shares to sell on market with the aim of buying them back at a lower price further down the line and pocketing the difference.
Last year there were some big wins for short sellers, proving time and time again that it pays to keep an eye on what they are doing.
According to data provided by ASIC, short sellers are betting on the 10 shares below taking a tumble in the coming months:
- Syrah Resources Ltd (ASX: SYR) continues to be the most shorted share on the Australian share market with a massive 21% of its shares held short. Short sellers appear to believe that its Balama graphite project may not be commanding as high prices as initially expected.
- Independence Group NL (ASX: IGO) has short interest of 16.8%. After the miner was beset with production issues last year, short sellers may expect more of the same this year.
- Domino’s Pizza Enterprises Ltd. (ASX: DMP) has short interest of 15.7%. Earlier this month Domino’s delivered a weaker-than-expected half-year result. Although it has held firm its optimistic full-year guidance, short sellers don’t appear to believe it will achieve it.
- JB Hi-Fi Limited (ASX: JBH) has 15.5% of its shares held short. The retailer released a decent first-half result this month, but its weak outlook has only encouraged short sellers to continue targeting it.
- Healthscope Ltd (ASX: HSO) has short interest of 14.2%. It isn’t hard to see why the private hospital operator is being targeted, it recently reported a disappointing 17% decline in operating net profit after and a cut to its dividend.
- Retail Food Group Limited (ASX: RFG) has short interest of 13%. Short sellers may be expecting more bad news out of the embattled food and beverage company when its releases its half-year results this week.
- Galaxy Resources Limited (ASX: GXY) has 12.5% of its shares held short. The lithium miners have been targeted amid concerns there could be an oversupply of the metal in the future due to increased production in South America.
- Flight Centre Travel Group Ltd (ASX: FLT) has returned to the top ten with short interest of 11.1%. Short sellers may have regretted this move after the travel agent’s strong half-year result last week.
- Vocus Group Ltd (ASX: VOC) shares also have short interest of 11.1%. But unlike Flight Centre, Vocus released a very disappointing half-year result last week.
- HT&E Ltd (ASX: HT1) has 11% of its shares held short. Short interest continues to dwindle after the outdoor advertising company surprised the market with a better-than-expected half-year result.
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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited, Retail Food Group Limited, and Vocus Communications 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.