Every Monday 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) continues its run as the most shorted share on the ASX with 19.5% of its shares held short. On Wednesday the poultry producer is scheduled to release its full year results and short sellers appear confident the droughts will have weighed heavily on its performance.
- Nufarm Limited (ASX: NUF) has seen its short interest remain flat at 18.8%. Short sellers may be targeting the agricultural chemical company due to the tough trading conditions caused by the droughts and concerns over potential repercussions from its sales of glyphosate.
- Galaxy Resources Limited (ASX: GXY) has 16.5% of its shares held short, which is up notably week on week. Last week lithium giant SQM revealed plans to increase production materially in order to gain market share. This could be bad news for prices given the current oversupply of the battery-making ingredient.
- Orocobre Limited (ASX: ORE) has seen its short interest increase slightly to 15.9%. As with Galaxy, weakening lithium prices and a bleak outlook for the white metal have weighed heavily on its shares.
- Bellamy’s Australia Ltd (ASX: BAL) has seen the number of shares held short remain flat at 15.8%. On Wednesday the infant formula company will release its full year results and short sellers appear to believe its guidance for FY 2020 will disappoint due to SAMR accreditation delays.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest increase to 14.7%. Short sellers have increased their positions despite the retailer’s shares racing to an all-time high this month after delivering a strong full year result.
- Syrah Resources Ltd (ASX: SYR) has seen its short interest rise again to 14.3%. Some short sellers must believe its shares can sink even lower due to weakening prices and higher costs.
- NEXTDC Limited (ASX: NXT) has 14.1% of its shares held short, which is up slightly week on week again. Later this week the data centre operator is due to release its full year results and short sellers don’t appear confident that it will deliver one strong enough to justify its current valuation.
- BWX Ltd (ASX: BWX) has 11.9% of its shares held short, which is flat week on week. Much to the dismay of short sellers, last week the personal care products company’s shares rocketed higher after it provided positive guidance for FY 2020.
- HUB24 Ltd (ASX: HUB) has entered the top ten with short interest of 11.7%. The fintech company may have been targeted due to concerns over the impact of low rates on its business model.
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.