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 a good idea for investors to keep…
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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.
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 a good idea 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 Australia’s most shorted share with 19.7% of its shares held short. Short interest in the graphite producer has fallen notably week-on-week, which could be an indication that some short sellers are moving on now.
- JB Hi-Fi Limited (ASX: JBH) has seen yet another increase in short interest and is closing in fast on Syrah Resources. Its short interest now stands at 19.1%. Short sellers may be targeting the retailer due to increasing competition and a weak performance from its Good Guys brand.
- Domino’s Pizza Enterprises Ltd (ASX: DMP) has seen its short interest remain steady week-on-week at 15.1%. Short sellers are expecting Domino’s to fall short of its earnings guidance when it reports its FY 2018 results in August.
- Galaxy Resources Limited (ASX: GXY) has 14% of its shares held short this week, down slightly week-on-week. Short interest could be on the decline after the lithium miner delivered a strong result last week.
- Orocobre Limited (ASX: ORE) has seen its short interest fall week-on-week to 13.1%. The lithium miners have been under pressure this year amid concerns that prices of the battery making ingredient could tumble.
- Myer Holdings Ltd (ASX: MYR) has seen its short interest slide slightly to 12.1%. Many investors appear to have lost faith in the struggling department store operator’s turnaround plan.
- Inghams Group Ltd (ASX: ING) has short interest of 11.9%. The surprise exit of the poultry company’s CEO and several negative broker notes may have weighed on investor sentiment. Earlier this month UBS downgraded its shares to a sell rating with a $3.40 price target.
- Vocus Group Ltd (ASX: VOC) has seen its short interest slide once again to 11.9%. Some short sellers may believe the telco company’s shares have bottomed now.
- Metcash Limited (ASX: MTS) has seen its short interest ease week-on-week to 11.3%. The wholesale distributor’s shares have come under significant pressure due to the expected loss of the Drakes SA supply contract.
- Greencross Limited (ASX: GXL) has re-entered the top ten with short interest of 10.9%. Concerns over the success of its in-store veterinary clinic rollout have weighed on investor sentiment in recent months.
While some of those shares may be best avoided, these shares are certainly in the buy zone in my opinion.
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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 and Vocus Communications Limited. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited. 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.