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 21.8%. The graphite miner has been targeted due to concerns over the prices it is commanding for its produce.
- Domino’s Pizza Enterprises Ltd. (ASX: DMP) has seen a week-on-week increase in short interest to 17.2%. But on Friday the pizza chain operator’s shares surged higher after the release of positive sales data out of its U.S. equivalent.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest rise week-on-week to 16.2%. Concerns over a cooling housing market and increased online competition are likely to be behind the high level of short interest.
- Galaxy Resources Limited (ASX: GXY) has 15.2% of its shares held short, up slightly week-on-week. Galaxy recently released its latest update which revealed surprisingly weak production results.
- Healthscope Ltd (ASX: HSO) has seen short interest fall to 13.2%. News that the private hospital operator is a takeover target will have been a big blow to short sellers.
- Nanosonics Ltd (ASX: NAN) has seen its short interest rise sharply to 12.7%. Short sellers may be regretting this one as well. The infection control specialist’s shares rocketed higher last week when it announced FDA clearance for its new trophon2 device.
- Vocus Group Ltd (ASX: VOC) has seen short interest remain flat at 12.4%. Weaker than expected NBN margins and increased competition appear to be behind the negative investor sentiment.
- Retail Food Group Limited (ASX: RFG) has returned to the top ten with 11.2% of its shares held short. Short sellers appear to believe the embattled food and beverage company’s shares can go even lower.
- Myer Holdings Ltd (ASX: MYR) has also returned to the top ten this week with short interest rising to 11.2%. The department store operator recently announced its new CEO, but short sellers don’t appear to believe he will be able to turn the ship around.
- Orocobre Limited (ASX: ORE) has seen short interest rise slightly to 11%. Short sellers have been capitalising on unfavourable weather conditions which have impacted Orocobre’s production in FY 2018.
Instead of risking your money on shares with high levels of short interest, I would suggest you snap up at these high flying mid cap shares with explosive growth prospects.
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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. The Motley Fool Australia has recommended Domino's Pizza Enterprises 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.