The market is exiting FY18 on a high note as positive offshore leads have lifted the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) in early trade, but there are some stocks that are under pressure as short-sellers are increasing their bearish bets on these companies.
The latest ASIC data on short positions, which is always a week behind, has put the spotlight on poultry company Inghams Group Ltd (ASX: ING) as the amount of its shares that are short-sold have recorded the biggest increase of any other ASX stock over a one-month period.
Short-sellers are investors who borrow stock to sell on-market in the hope of buying it back at a lower price later to profit from the difference.
The amount of Inghams' shares out on loan surged by 3 percentage points to 9.9% in the month to June 22 as short-sellers have grow increasingly confident that the stock has further to fall, after the unexpected resignation of its chief executive officer earlier this month.
You could say Inghams is now a headless chicken as it undertakes a major restructure with no CEO at the helm.
I suspect short-interest has not waned over the past week and that means the stock will likely underperform going into the new financial year.
I would avoid trying to pick the bottom of this stock although I won't be surprised if a potential suitor is running the numbers on the company for a potential bid if the stock continues to weaken.
Another stock that has seen a big surge in short-interest is Metcash Limited (ASX: MTS). The amount of its shares out on loan to bearish traders surged 2 percentage points to 10% over the period and the trade has been a particularly lucrative for short-sellers given that its share price has crashed 15% over the past month.
The trigger was likely news that it had lost a major customer in South Australia and was taking a $352 million impairment charge in late May/early June.
The grocery distributor and hardware retailer's full year results that were released on Monday will likely add to the bearish sentiment towards the stock.
I would avoid Metcash too as the stock is unlikely to stage a turnaround in the near-term.
On the flipside, stocks under the takeover spotlight like outdoor advertising company APN Outdoor Group Ltd (ASX: APO) and skin care products group BWX Ltd (ASX: BWX). Both saw the biggest decrease in short-interest over the month to last week.
That's to be expected but it's noteworthy that embattled theme park operator Ardent Leisure Group (ASX: AAD) is the third most improved stock on this measure.
Its total shares on loan have fallen by 2.3 percentage points to 6.7% as the government enquiry into the deaths at its Dreamworld park on the Gold Coast kicks off.
This could mean that the stock may have found a bottom and could be poised for further gains in FY19 – unless the enquiry uncovers something more sinister and unexpected.
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