At the start of each week I like to have quick 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) continues to be the most shorted share on the ASX with short interest of 19%. Last week there were concerns about a terror attack in Mozambique, but analysts at Credit Suisse believe there’s no reason for alarm as Syrah’s Balama operation is a highly secure site. It retained its outperform rating and $6.60 price target, which implies over 100% upside.
- Domino’s Pizza Enterprises Ltd (ASX: DMP) has seen its short interest fall again week-on-week to 16.1%. Much to the dismay of short sellers, Domino’s shares have been on fire over the last month as brokers become more optimistic on its full-year results.
- Galaxy Resources Limited (ASX: GXY) has 15% of its shares held short, up slightly week-on-week. Unfortunately for short sellers, Galaxy’s shares rocketed higher last week after it agreed to sell several tenements at its Sal de Vida operation for US$280 million.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest slide notably lower week-on-week to 14.5%. Short sellers may be concerned about a broker note out of Morgan Stanley last month that slapped an overweight rating and $32.00 price target on the retailer’s shares.
- Myer Holdings Ltd (ASX: MYR) has seen its short interest rise again to 13.2%. Short interest has been on the rise since the department store operator released its quarterly results last month and posted yet another decline in sales.
- Nanosonics Ltd (ASX: NAN) has seen its short interest fall 11.9%. Short sellers appeared to take an interest in the infection control specialist in recent months after it delivered a weaker than expected half-year result.
- Vocus Group Ltd (ASX: VOC) has 11.8% of its shares held short again. The embattled telco company recently appointed a new and experienced CEO, which shareholders will no doubt hope leads to a big improvement in its performance.
- Orocobre Limited (ASX: ORE) has seen its short interest rebound to 11.7%. Concerns over future lithium prices have weighed heavily on investor sentiment in the industry this year.
- Australian Agricultural Company Ltd (ASX: AAC) has seen short interest rise slightly to 11.6%. However, significant insider buying at the agribusiness company last week might give short sellers something to think about.
- News Corp (ASX: NWS) has entered the top ten with short interest of 11.3%. The media company’s shares have rallied strongly over the last 12 months and short sellers appear to believe they are overvalued now.
I would agree that News Corp is overvalued and would suggest investors check out one of these hot stocks 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. 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.