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 down the line and profiting from the difference.
As it is a high-risk strategy with the potential for unlimited 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) remains the most shorted share on the ASX with short interest of 19%. However, this is a sizeable drop from last week and could be a sign that sentiment is shifting for the graphite miner. Last week a note out of Credit Suisse revealed that it has an outperform rating and $6.60 price target on its shares.
- Domino’s Pizza Enterprises Ltd (ASX: DMP) has seen its short interest fall slightly week-on-week to 16.2%. Although many in the market expect Domino’s to miss its guidance again this year, there hasn’t been a downgrade out of the pizza chain operator yet and the end of the financial year is rapidly approaching.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest remain flat at 15.8%. Short sellers appear to expect the underperformance of its Good Guys business in a highly competitive market to weigh heavily on its results.
- Galaxy Resources Limited (ASX: GXY) has 14.5% of its shares held short, down slightly week-on-week. Opinion continues to be divided on the future direction of lithium prices.
- Myer Holdings Ltd (ASX: MYR) has seen its short interest rise again to 12.8%. The department store operator released its latest quarterly results this month and posted yet another decline in sales.
- Nanosonics Ltd (ASX: NAN) has seen its short interest rise slightly to 12.4%. A weaker than expected half-year result and a nosebleed valuation appears to have brought the infection control specialist onto the radar of short sellers.
- Vocus Group Ltd (ASX: VOC) has seen short interest fall again to 11.8%. The appointment of a new and experienced CEO may have led to improvements in investor sentiment.
- Australian Agricultural Company Ltd (ASX: AAC) has seen short interest rise again to 11.5%. Last week the agribusiness company posted a statutory EBITDA loss of $35.3 million for FY 2018, compared with $133.2 million profit in FY 2017.
- Orocobre Limited (ASX: ORE) has seen short interest fall to 11.3%. Last month’s full-year production downgrade due to unfavourable weather conditions has weighed on the lithium miner’s shares.
- InvoCare Limited (ASX: IVC) is a new entry in the top ten with short interest of 11.1%. Short sellers appear to be targeting the funeral company due to its premium valuation and lack of earnings growth.
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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.