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.
