Electronic and white goods retailer JB Bi-Fi Limited (ASX: JBH) is a favourite target of short sellers with 15.7% of its outstanding shares shorted as at 1 April 2019.
Short sellers have bet heavily against it over the last couple of years in the belief that overseas discounters such as Amazon. Inc. are set to eat into its market share. Worse is the belief that Amazon's discounting could see JB Hi-Fi be forced to cut its own profit margins in a bid to compete.
However, JB hI-Fi has a great track record as a listed business and is also a dominant player in Australia. As such those betting against it may be making a rod for their own backs.
This is also the opinion of Melbourne-based fund manger Yarra Capital that recently took a 'small' overweight position in the electronics retailer.
"We continue to believe concerns regarding Amazon's entry into the Australian market are overplayed with respect to the electronics retailer. Compared to its overseas counterparts, JBH has a more resilient business to withstand new competition, with lower prices and costs, greater sales density and a more sophisticated online offering," commented the professional investors.
At $24.49 today JB Hi-Fi shares could be cheap then given it trades on a low multiple of profits and boasts a trailing 5.6% dividend yield plus full franking credits.
Other retailers on potentially beaten-down valuations include Accent Group Ltd (ASX: AX1) or Super Retail Group Ltd (ASX: SUL).
