At the start of each week I like to 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:
- Inghams Group Ltd (ASX: ING) has continued to be the most shorted share on the ASX with 19.4% of its shares held short. Short sellers appear to be expecting a weak full year result from the poultry producer this month due to the negative impact of the droughts.
- Nufarm Limited (ASX: NUF) has seen its short interest rise slightly 18.8%. As with Inghams, Nufarm has been targeted due to tough trading conditions caused by the droughts. In addition to this, concerns over potential repercussions from its sales of glyphosate have weighed on its shares.
- Bellamy’s Australia Ltd (ASX: BAL) has recorded a small decline in the percentage of shares held short to 15.8%. The infant formula company has fallen out of favour this year due to the lengthy delays it has faced in being granted the SAMR accreditation required to sell its key infant formula products in China.
- Galaxy Resources Limited (ASX: GXY) has 15.8% of its shares held short, which is down slightly week on week. The lithium miner’s shares have been crushed this year due to weakening prices of the battery-making ingredient.
- Orocobre Limited (ASX: ORE) has seen its short interest increase slightly to 15.8%. As with Galaxy, Orocobre has been targeted by short sellers due to weakening lithium prices and concerns that things may get worse before they get better.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest remain flat at 14.2%. Short sellers may be regretting this one as the retailer’s shares raced to an all-time high last week after delivering a strong full year result.
- Syrah Resources Ltd (ASX: SYR) has seen its short interest rise again to 14.1%. Although its short interest has fallen materially over the last few weeks after a sharp share price decline, it appears as though some short sellers believe its shares can still sink even lower due to weakening prices and higher costs.
- NEXTDC Limited (ASX: NXT) has 13.8% of its shares held short, which is up slightly week on week again. Some short sellers may believe that the data centre operator won’t deliver strong enough growth to justify its current valuation.
- BWX Ltd (ASX: BWX) has 11.9% of its shares held short, which is down slightly week on week. BWX is the company behind the Sukin brand. Its shares have come under pressure this year due to softer than expected sales and a failed takeover approach.
- Domino’s Pizza Enterprises Ltd (ASX: DMP) has entered the top ten with short interest of 11.6%. Later this week the pizza chain operator will release its full year results and is widely expected to fall short of its guidance.
Instead of those highly shorted shares, I would buy these buy-rated stocks which have low levels of short interest and have been tipped as market-beaters.
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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.