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.
