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:
- Nufarm Limited (ASX: NUF) has become the most shorted share on the Australian share market despite a reduction in its short interest to 16.1%. Short sellers have targeted the agricultural chemicals company due to concerns over the droughts and its sales of glyphosate.
- Inghams Group Ltd (ASX: ING) has seen its short interest slide to 15.3%. Last month the poultry producer’s shares dropped lower after its guidance for FY 2020 disappointed. As with Nufarm, the droughts have had a big impact on its performance.
- Orocobre Limited (ASX: ORE) has seen its short interest slide week on week to 14.3%. It has been targeted by short sellers due to weakening lithium prices and a bleak outlook for the white metal due to an oversupply and weakening demand.
- Galaxy Resources Limited (ASX: GXY) has 14.2% of its shares held short, which is down week on week. This lithium miner’s shares have also come under significant pressure this year due to falling lithium prices and the increasingly bleak outlook for the battery making ingredient.
- Bellamy’s Australia Ltd (ASX: BAL) has 13.3% of its shares held short, which is down week on week. The infant formula company’s shares crashed lower last month when it released a disappointing full year result and deferred its sales targets due to SAMR accreditation delays.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest fall to 12.9%. A strong full year result by this retailer appears to have spooked short sellers and led to them closing positions.
- Syrah Resources Ltd (ASX: SYR) has seen its short interest slide to 12.4%. Short sellers have done very well from this one and could continue doing so. The graphite miner’s shares are in a trading halt ahead of a major announcement regarding trading conditions and its operational response.
- NEXTDC Limited (ASX: NXT) has 11.7% of its shares held short, which is down week on week. The data centre operator appears to have been targeted due to the sky high multiples that its shares trade on.
- IOOF Holdings Limited (ASX: IFL) has returned to the top ten with 9.55% of its shares held short. Short sellers don’t appear confident that the embattled financial services company’s performance will improve any time soon.
- Pilbara Minerals Ltd (ASX: PLS) has also returned to the top ten with short interest of 9.5%. Pilbara is yet another lithium miner which has come under pressure due to falling prices and subdued demand.
Instead of those highly shorted shares, I would buy these buy-rated stocks which has been tipped for very big things.
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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.