Every now and then I like to take a look at ASIC's list of the most heavily shorted shares from the S&P/ ASX200 (ASX: XJO) because if a share is being heavily shorted it suggests certain "professional" investors are confident the shares will fall.
Of course the professionals or speculators can be glaringly wrong, but it's still worth being aware if shares you own are being shorted.
Anything more than 10% of outstanding scrip being shorted I'd suggest is quite a lot. So let's take a look at why these three businesses have got traders betting against them. All data accurate as at 11 June 2019 according to ASIC.
Nufarm Limited (ASX: NUF) has 13.7% of its shares shorted which is curious as I recently met a high profile professional investor who insisted the stock was cheap around $5.70 back in February 2019. Reasons given were the lessening of competition in the agricultural sector and because its move into the Omega 3 supply space was set to be a huge long-term winner. Since then the stock has tumbled to $3.90 on the back of a weaker-than-expected March 2019 profit report and worries over the safety of glysophate which is a product Nufarm has supplied. As such the short sellers might be onto something.
JB Hi-Fi Limited (ASX: JBH) has 15.3% of its scrip shorted which is curious given it's guiding for net profit growth up to 5.1% in FY 2019 despite some well documented tough retail conditions.
It also has a long track record of profit growth and doesn't trade on an especially high multiple of earnings. However, short sellers are probably betting that the likes of online discounting giant Amazon.com are set to take market share from it and harm its margins. This would be a double whammy if it came to pass. For now though JB Hi-Fi appears to be performing reasonably well.
Kogan.com Ltd (ASX: KGN) has 8.2% of its scrip shorted probably also because speculators expect the likes of Amazon.com could start to steal market share, with Kogan already operating on very low profit margins. It has also run into problems with the ACCC recently over its alleged treatment of customers. As such investors could expect this stock to remain volatile as the bulls and bears battle it out.
