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) continues to be the most shorted ASX share with short interest rising slightly to 20.3%. As well as concerns over future graphite prices, recent terror attacks not far from its Balama project have weighed on sentiment.
- Domino’s Pizza Enterprises Ltd (ASX: DMP) has seen its short interest slide week-on-week to 16.2%. Brokers have become increasingly positive on Domino’s recently, with many believing it has a good chance of hitting its full-year guidance.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest fall slightly week-on-week to 15.4%. Recent news that Kogan.com Ltd (ASX: KGN) aims to disrupt the white goods and built-in kitchen appliance market later this year will have pleased short sellers.
- Galaxy Resources Limited (ASX: GXY) has 14.3% of its shares held short, down sharply week-on-week. Short interest has continued to slide after the lithium miner 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 yet again to 13.6%. Despite the department store operator’s shares falling significantly over the last 12 months, short sellers appear to believe they can still go lower.
- Nanosonics Ltd (ASX: NAN) has seen its short interest slide to 12.6%. Short sellers continue to target the infection control specialist’s shares despite not making their short case public.
- Orocobre Limited (ASX: ORE) has seen its short interest rise again to 12.2%. A spot of insider buying at the lithium miner last week could give short sellers something to think about.
- Vocus Group Ltd (ASX: VOC) has 12.1% of its shares held short. The embattled telco company’s shares may have fallen notably lower during the last 12 months, but short sellers don’t appear to believe they have bottomed yet.
- Australian Agricultural Company Ltd (ASX: AAC) has seen short interest slide to 11.8%. Short sellers may not believe the agribusiness company will bounce back in FY 2019 after a disastrous performance in FY 2018.
- InvoCare Limited (ASX: IVC) is back in the top ten with short interest of 11.1%. A reasonably high earnings multiple for its growth profile and possible market share losses could be weighing on investor sentiment.
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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 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.