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 borrow shares to sell on market with the aim of buying them back at a lower price down the line and pocketing the difference. As it is a high-risk strategy with the potential for unlimited losses, short sellers often only take a position if they believe they have a high probability of success.
Here are the 10 most shorted shares on the ASX this week:
- Syrah Resources Ltd (ASX: SYR) has returned to the top of the list with short interest of 19.6%. Last week the graphite miner downgraded its full-year production guidance and advised that it has only managed to sell 72% of its produce. The sales were made at prices lower than inferred by external price reporters.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest fall to 19%. Short sellers appear to expect a weak result from the retailer next Monday due to increasing competition and a cooling housing market.
- Galaxy Resources Limited (ASX: GXY) has seen its short interest surge higher to 16.4%. Concerns over future lithium prices have weighed on investor sentiment and led to short sellers targeting the miner. Galaxy shares are higher today after it said the timetable for completion of the POSCO transaction is now ahead of the previously disclosed schedule.
- Domino’s Pizza Enterprises Ltd (ASX: DMP) has seen its short interest remain flat week-on-week at 14.9%. Short sellers are betting on Domino’s results falling short of its guidance on Tuesday of next week.
- Orocobre Limited (ASX: ORE) has short interest of 14.3%, up sharply week-on-week. Short interest has risen despite Orocobre recently announcing a record sales result with record prices for its lithium.
- Inghams Group Ltd (ASX: ING) has 12.9% of its shares held short, up week-on-week. The surprise exit of the poultry company’s CEO and competitive pricing appears to have caught the attention of short sellers.
- Myer Holdings Ltd (ASX: MYR) has seen its short interest drop slightly to 11.9%. Last week the department store operator’s shares rose strongly despite there being no news out of it. This could have been driven by short sellers closing positions ahead of its results release.
- Metcash Limited (ASX: MTS) has seen its short interest slide week-on-week to 11.7%. The probable loss of the Drakes SA supply contract has weighed on Metcash’s shares in recent weeks.
- Vocus Group Ltd (ASX: VOC) has seen its short interest slide once again to 11.2%. It looks as though short sellers may believe the telco company is over the worst now.
- Greencross Limited (ASX: GXL) has short interest of 10.9%, up slightly week-on-week. A weak trading update in May appears to have the market concerned about its growth strategy.
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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.
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