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.
Here are the 10 most shorted shares on the ASX according to data provided by ASIC:
- Syrah Resources Ltd (ASX: SYR) continues its run as the most shorted share on the ASX with short interest of 20.6%. Syrah has been targeted due to concerns over the impact its massive Balama project will have on graphite prices.
- Domino’s Pizza Enterprises Ltd. (ASX: DMP) has seen its short interest rise once again to 17.2%, cementing its place as the second-most shorted share on the local market. Short sellers appear to doubt that Domino’s will hit its full-year guidance.
- JB Hi-Fi Limited (ASX: JBH) has 16% of its shares held short, up slightly from last week. Short sellers may be targeting the retailer due to concerns over the threat of online competition and Amazon in particular.
- Galaxy Resources Limited (ASX: GXY) has 14.3% of its shares held short. Last week Galaxy delivered a strong full-year result. Thanks to increased production and lithium prices, combined with lower production costs, Galaxy delivered full-year EBITDA of $52 million.
- Healthscope Ltd (ASX: HSO) has seen short interest rise to 13.5%. Short sellers continue to target the private hospital operator due to concerns that falling private health insurance numbers is negatively impacting its business.
- Independence Group NL (ASX: IGO) has short interest of 12.2%, down sharply for a second week in a row. Some short sellers may be admitting defeat on this one and closing positions. Independence’s shares are now up 30% over the last 12 months.
- 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 NBN margins.
- Mayne Pharma Group Ltd (ASX: MYX) has returned to the top ten with short interest of 10.9%. The pharmaceutical company has been suffering greatly from weak prices in the U.S. generic drugs market.
- Retail Food Group Limited (ASX: RFG) has short interest of 10.6%. The food and beverage company continues to be targeted by short sellers despite its sizeable decline this year.
- HT&E Ltd (ASX: HT1) has 10.5% of its shares held short. Short interest has been falling quickly since the outdoor advertising company released a better than expected half-year result last month.
I would stay away from most of these shares due to the high levels of short interest. Instead, I would buy these market darlings which continue to kick goals.
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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 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.