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. For this reason I believe 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) continues to be the most shorted share on the Australian share market with 22.2% of its shares held short. The graphite miner appears to have been targeted amid concerns that it may not be commanding as high prices as first expected.
- Independence Group NL (ASX: IGO) has short interest of 17%. Short sellers may expect the miner to continue suffering from the production issues that impacted its performance last year.
- Domino's Pizza Enterprises Ltd. (ASX: DMP) has short interest of 16.7%. Heavy insider selling and its continued underperformance appears to have attracted short sellers to the pizza chain operator.
- JB Hi-Fi Limited (ASX: JBH) has 16% of its shares held short. Last month the retailer delivered a strong first-half profit result, but then spooked the market with a weaker-than-expected outlook.
- Galaxy Resources Limited (ASX: GXY) has 14% of its shares held short. Short interest in the lithium miner has risen fast following a bearish note out of Morgan Stanley which tipped an oversupply of the metal in the future due to increased production in Australia and Argentina.
- Healthscope Ltd (ASX: HSO) has short interest of 13.7% amid concerns that falling private health insurance numbers is continuing to negatively impact the private hospital operator.
- Retail Food Group Limited (ASX: RFG) has short interest of 13.6%. Last week the food and beverage company's shares fell sharply after returning to trade following its disastrous half-year update and decision to suspend its dividend indefinitely.
- HT&E Ltd (ASX: HT1) still has 12.2% 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 12.1%. Last month Vocus released a disappointing half-year result which has weighed heavily on sentiment. Shareholders will be hoping that a change of CEO fixes things.
- Mayne Pharma Group Ltd (ASX: MYX) has 11.3% of its shares held short. Although there are signs of improvements in U.S. generic drugs markets, not all investors appear convinced that Mayne Pharma is on the road to recovery yet.
