At the start of each week I like to 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…
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At the start of each week I like to 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, these 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 rising to 20%. This rise comes despite a note of Credit Suisse labelling the graphite miner’s shares as a buy with a sizeable $6.60 price target.
- Domino’s Pizza Enterprises Ltd (ASX: DMP) has seen its short interest rise week-on-week to 16.3%. The bulls and the bears continue to battle it out ahead of the pizza chain operator’s high-anticipated full-year results release in August.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest rise sharply week-on-week to 15.5%. News that Kogan.com Ltd (ASX: KGN) plans to enter the white goods and built-in kitchen appliance market later this year appears to have weighed on sentiment.
- Galaxy Resources Limited (ASX: GXY) has 14.8% of its shares held short, down slightly week-on-week. Short interest has been on the decline after Galaxy agreed to sell several tenements at its Sal de Vida operation for US$280 million to South Korea’s POSCO.
- Myer Holdings Ltd (ASX: MYR) has seen its short interest rise once again to 13.4%. Short interest has been increasing since the department store operator released another disappointing quarterly result.
- Nanosonics Ltd (ASX: NAN) has seen its short interest rise sharply to 13.2%. Short sellers may be regretting this one, though. Last week the infection control specialist’s shares rose to an all-time high.
- Vocus Group Ltd (ASX: VOC) has 12% of its shares held short. The embattled telco company’s shares may be down 33% over the last 12 months, but short sellers appear to believe they could fall further.
- Australian Agricultural Company Ltd (ASX: AAC) has seen short interest rise to 12% despite a recent bout of insider buying. Short sellers appear to believe that the agribusiness company won’t bounce back from its disastrous year any time soon.
- Orocobre Limited (ASX: ORE) has seen its short interest rise slightly to 11.9%. Orocobre’s shares fell sharply last week despite there being no news out of the company. This could be a sign that short sellers have been increasing their positions in the lithium miner even further.
- Greencross Limited (ASX: GXL) is back in the top ten with short interest of 11.4%. Short interest dipped recently after speculation that the integrated pet care company could be a takeover target. But with no bid forthcoming, short sellers appear to have returned in force.
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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 Greencross Limited, Nanosonics Limited, and Vocus Communications Limited. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited and Kogan.com ltd. 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.