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.
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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.