The corporate regulator ASIC publishes a daily report showing share market participants what percentage of outstanding scrip members of the S&P/ ASX200 have shorted by hedge funds betting on the share prices falling.
If a company has more than or close to 10% of its outstanding shares shorted it's fair to say some speculators are betting heavily its shares are set to fall.
So while short-selling is a high stakes game that can lead to egg on the face of speculators who get their bets wrong, it's always worth noting what companies are being bet against and why.
Bellamy's Australia Ltd (ASX: BAL) is the Tasmania-based baby formula maker that has 13.2% of its shares shorted. Speculators are probably betting the group's unpredictable China sales could hit the skids for any number of reasons including the fact that it is reportedly still awaiting an important regulatory license to sell into China.
Orocobre Ltd (ASX: ORE) is the lithium miner that has 12.3% of its shares shorted as speculators are probably betting on global lithium prices falling. Lithium prices are not exchange traded and this can add to their volatility alongside the unknowns around supply and demand. Recently, we have even seen leading electric car maker Tesla hint that demand for its cars is not as strong as expected.
Syrah Resources (ASX: SYR) is a west African graphite miner that is in the production stage but still posted an operating cash loss of US$8.27 million for the quarter ending March 31 2019. It has a whopping 16.6% of its shares shorted.
SEEK Limited (ASX: SEK) has nearly 6% of its shares shorted, but has a successful long-term track record of growth unlike most businesses that are targets of short sellers. It's probably being bet against on valuation grounds, however, betting against businesses on valuation grounds is a tricky business over the short term and some of SEEK's shorters are likely underwater for now.
