Every Monday I like to start the week with a look at ASIC’s short position report in order to find out which shares are being targeted by short sellers.
This is because I believe it is worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.
With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:
- Syrah Resources Ltd (ASX: SYR) remains the most shorted share on the Australian share market after its short interest rose again to 19.3%. Last week the graphite producer released its latest quarterly update and revealed weaker than expected production and further declines in its pricing. So much so, it costs more for the company to produce its graphite than it receives for it from customers.
- Nufarm Limited (ASX: NUF) has seen its short interest rise strongly week on week to 18.3%. Short sellers continue to increase their positions despite speculation that the struggling agricultural chemical company could be a takeover target.
- Bellamy’s Australia Ltd (ASX: BAL) has seen its short interest increase very strongly once again, this time to 16.5%. I suspect that short sellers don’t believe the infant formula company will receive its SAMR accreditation in time for FY 2020. Not being able to sell its products on mainland China could mean another 12 months of minimal earnings growth.
- Inghams Group Ltd (ASX: ING) has seen its short interest rebound week on week to 16.4%. The poultry company has been targeted due to concerns that the droughts have led to higher input costs and lessened its profitability.
- Orocobre Limited (ASX: ORE) has experienced a sharp increase in short interest to 15.7%. Short sellers have been shorting the company’s shares due to a collapse in lithium prices caused by softening demand and increasing supply.
- Galaxy Resources Limited (ASX: GXY) has short interest of 14.7%, which is up strongly week on week. As with Orocobre, weak lithium prices and a subdued outlook for the white metal have weighed heavily on its shares this year.
- NEXTDC Limited (ASX: NXT) has 14.3% of its shares held short, which is flat week on week. The data centre operator appears to have been targeted due to the lofty multiples its shares trade on.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest ease once again to 13%. Short sellers may be closing positions due to the prospect of tax cuts and an improving housing market boosting the retailer’s sales.
- BWX Ltd (ASX: BWX) has seen its short interest slide week on week to 12.2%. BWX’s shares have fallen heavily over the last 12 months due to the underperformance of its Sukin skincare range. Some short sellers may believe they have now bottomed and are closing their positions.
- Domino’s Pizza Enterprises Ltd (ASX: DMP) has short interest of 11.1%, up slightly week on week. Short sellers appear to believe the pizza chain operator is going to fall short of expectations again in FY 2019.
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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited and NEXTDC Limited. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia has recommended Bellamy's Australia. 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.