At the start of each week I like to look at which shares are being targeted by short sellers.
As short selling is one of the riskiest strategies out there, short sellers will generally only take out a position if they have a high conviction of success. Considering 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 ASX with short interest of 20.8%. Short sellers appear to be betting that Syrah won’t be as profitable as first expected.
- Domino’s Pizza Enterprises Ltd. (ASX: DMP) has seen its short interest rise to 17%, making it the second-most shorted share on the local market. The pizza chain operator has come under pressure after falling short of expectations during earnings season.
- Independence Group NL (ASX: IGO) has short interest of 16%, down notably week-on-week. Some short sellers may be admitting defeat on this one and closing positions. Independence’s shares are up 27% over the last 12 months.
- JB Hi-Fi Limited (ASX: JBH) has 15.7% of its shares held short, down slightly from last week. Short sellers may be targeting the retailer due to concerns over the threat of online competition.
- Galaxy Resources Limited (ASX: GXY) has 14.2% of its shares held short, up slightly since last week. Short sellers may be regretting this one already. Last week the lithium miner’s shares rose 14% after sentiment shifted positively on lithium demand once again.
- Healthscope Ltd (ASX: HSO) has short interest of 13.2%. The private hospital operator has come under pressure from short sellers due to concerns that falling private health insurance numbers is continuing to negatively impact its business.
- Vocus Group Ltd (ASX: VOC) has short interest of 11.4%. Investor sentiment in the telco industry continues to remain negative amid concerns about increased competition and lower margins.
- HT&E Ltd (ASX: HT1) still has 11.3% of its shares held short. Short interest has fallen notably lower since the outdoor advertising company released a better than expected half-year result last month.
- Flight Centre Travel Group Ltd (ASX: FLT) has returned to the top ten with short interest of 10.8%. Short sellers may believe that the travel agent’s shares are overvalued following an impressive share price rally.
- Retail Food Group Limited (ASX: RFG) has short interest of 10.7%, down sharply week-on-week. It looks as though many short sellers are now locking in their gains after the embattled food and beverage company’s shares sank 80% lower over the last 12 months.
Finally, here are three high quality shares that I think short sellers wouldn't dare short.
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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 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.