Every Monday I like to start the week with a look at ASIC’s short position report 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…
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Every Monday I like to start the week with a look at ASIC’s short position report 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 short interest of 20.6%. Short sellers have previously voiced their concern over the impact that the company’s massive Balama project would have on the supply of graphite.
- Domino’s Pizza Enterprises Ltd. (ASX: DMP) has seen its short interest rise week-on-week to 17.7%. Short sellers appear to believe that the pizza chain operator is destined to deliver another disappointing result in August.
- JB Hi-Fi Limited (ASX: JBH) has 16.5% of its shares held short, up slightly from last week. Short sellers may be betting against the retailer due to the increasing competition online and a cooling housing market.
- Galaxy Resources Limited (ASX: GXY) has 14.8% of its shares held short. Galaxy is one of a number of lithium miners with high levels of short interest due to concerns that lithium prices could tumble by half over the next few years because of increased production in Australia and Argentina.
- Healthscope Ltd (ASX: HSO) has seen short interest rise again to 13.9%. Short sellers continue to expect the private hospital operator to underperform due to the impact of falling private health insurance numbers.
- Vocus Group Ltd (ASX: VOC) has short interest of 12.1%, up strongly week-on-week. Last month UBS stated its belief that Vocus wouldn’t be able to command as much for its NZ business as it hoped. Meaning a capital raising may be required instead.
- Independence Group NL (ASX: IGO) has short interest of 11.7%, notably lower week-on-week. The gold and nickel miner has seen a significant reduction in short interest over the last few months as sentiment shifts positively.
- Nanosonics Ltd. (ASX: NAN) has entered the top ten with short interest of 11.2%. Short sellers may be targeting the infection control specialist due to the sky-high multiples that its shares trade on.
- Myer Holdings Ltd (ASX: MYR) has short interest of 11.1%. Rumours that David Jones is planning to launch a takeover bid for Myer sent its shares rocketing higher last week.
- Mayne Pharma Group Ltd (ASX: MYX) has short interest of 11%. Weakness in the massive U.S. generic drug market continues to weigh heavily on investor sentiment.
I would suggest investors avoid Mayne Pharma and look at these top growth shares instead.
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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 Nanosonics 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.