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.
Because of this I think 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) is yet again the most shorted share on the Australian share market with 22% of its shares held short. Last week the graphite miner warned that production at its Balama project would be lower over the next eight weeks due to issues with its machinery.
- Independence Group NL (ASX: IGO) has short interest of 17.1%. Last year Independence suffered from numerous production issues and short sellers appear to expect more of the same this year.
- Domino’s Pizza Enterprises Ltd. (ASX: DMP) has short interest of 16.1%. Insider selling from its CEO has weighed heavily on sentiment recently and appears to have short sellers betting that it falls short of its ambitious full-year guidance.
- JB Hi-Fi Limited (ASX: JBH) has 15.8% of its shares held short. Although the retail giant posted a decent first-half result last month, its weak outlook seems to have spooked the market.
- Healthscope Ltd (ASX: HSO) has short interest of 14.2% amid concerns that falling private health insurance numbers is negatively impacting the business. Last month the private hospital operator reported a 17% decline in operating net profit after tax and a cut to its dividend.
- Retail Food Group Limited (ASX: RFG) has short interest of 13.2%. This morning the food and beverage company’s shares are expected to return to trade after a disastrous half-year update. The company also suspended its dividend.
- Galaxy Resources Limited (ASX: GXY) has 13% of its shares held short. A Morgan Stanley note continues to weigh heavily on the lithium miners. That note tipped an oversupply of the metal in the future due to increased production in Australia and Argentina.
- HT&E Ltd (ASX: HT1) still has 12% of its shares held short despite the release of a better than expected half-year result last month from the outdoor advertising company.
- Vocus Group Ltd (ASX: VOC) shares have short interest of 11.3%. Last month Vocus released a disappointing half-year result which appears to have attracted more short sellers.
- Mayne Pharma Group Ltd (ASX: MYX) has entered the top ten with 11.3% of its shares held short. Short sellers seem to believe that the weakness in the generic drugs market hasn’t improved yet.
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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 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 Scott Phillips.