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.
