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. Short sellers will borrow shares to sell on market with the aim of buying them back at a lower price in the future and profiting from the difference. It is a high-risk strategy with the potential for unlimited losses, so short sellers will often only take a short position when they believe they have a high probability of success. Because of this I think it is important for investors to keep a close…
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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.
Short sellers will borrow shares to sell on market with the aim of buying them back at a lower price in the future and profiting from the difference.
It is a high-risk strategy with the potential for unlimited losses, so short sellers will often only take a short position when they believe they have a high probability of success. Because of this I think it is important for investors to keep a close eye on short interest levels.
Here are the 10 most shorted shares on the ASX this week:
- Syrah Resources Ltd (ASX: SYR) remains the most shorted share on the Australian share market. This week it has seen short interest rise to 21.2% amid concerns over graphite pricing and terror attacks not far from its Balama project.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest rebound to 15.6%. Increased competition in the appliance market and the launch of Amazon Prime are likely to be weighing on sentiment. And rightly so in my opinion.
- Domino’s Pizza Enterprises Ltd (ASX: DMP) has seen its short interest continue to slide week-on-week. It now stands at 15.5%, notably lower since this time last week. Short sellers may be concerned that Domino’s is going to hit its guidance in FY 2018.
- Galaxy Resources Limited (ASX: GXY) has 14.3% of its shares held short, which is flat week-on-week. Short sellers may be cooling on Galaxy after the lithium miner agreed to sell tenements from its Sal de Vida operation to South Korea’s POSCO.
- Orocobre Limited (ASX: ORE) is a lithium miner which has seen short interest rise. Orocobre now has 12.9% of its shares held short. This time last year Orocobre downgraded its guidance, investors may be fearful that history will repeat itself.
- Myer Holdings Ltd (ASX: MYR) has seen its short interest fall notably lower to 12.3%. The department store operator may have seen short interest decline but I wouldn’t be buying.
- Vocus Group Ltd (ASX: VOC) has short interest of 12.1%. The whole telco sector may have been sold off over the last 12 months, but short sellers continue to target Vocus.
- Australian Agricultural Company Ltd (ASX: AAC) has seen short interest slide again to 11.7%. Short sellers appear confident that the agribusiness company will bounce back in FY 2019 after a disastrous FY 2018.
- Nanosonics Ltd (ASX: NAN) has seen its short interest slide to 11.6%. Short sellers may be closing positions and calling this one a mistake.
- InvoCare Limited (ASX: IVC) has short interest of 11.1%. I think short sellers could be targeting InvoCare due to the premium its shares trade at and the low growth expectations it currently has.
Finally, here are four top shares that I think have such strong growth prospects that short sellers wouldn't dare target them.
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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.