Every now and then it’s worth taking a look at what companies on the S&P/ ASX200 traders or short sellers are betting heavily will fall in value.
If a company has more than say 10 per cent of its outstanding scrip shorted it suggests that some in the market are pretty confident the share price will fall. Of course short sellers can be spectacularly wrong in their views as well, but let’s take a quick look at some businesses being bet against currently. All stats as at September 9 2019 according to ASIC.
The a2 Milk Company Ltd (ASX: A2M) has 7 per cent of its shares shorted, although it has not historically been a target of short sellers due to its strong growth. Traders are probably betting against it on valuation grounds and as sales into China for consumer goods companies can be unpredictable.
Syrah Resources Ltd (ASX: SYR) has 15 per cent of its shares shorted by traders who are having a field day. The graphite miner’s share price has collapsed 34 per cent over the last month after it warned of a “sudden and material” decrease in graphite prices due to waning Chinese demand.
Rural Funds Group Ltd (ASX: RFF) has 3.6 per cent of its scrip shorted, which is relatively low, but notable because it announced today that it plans to sue its principal short seller Bonitas Research in court for damages. According to Bonitas its sticking to its short position despite the pending legal proceedings for financial damages.
Perpetual Limited (ASX: PPT) is the Australian-focused funds manager that has 8.4 per cent of its scrip held short. The fund manager has struggled with net outflows as industry super funds yank large mandates in house and the popularity of passive or low-fee index-tracking investing grows with retail investors.
JB Hi-Fi Limited (ASX: JBH) has 13 per cent of its shares shorted, but every short will be underwater seeing the stock hit a new record high of $34.45 today. Given its dominant market position, growing online sales, and modest valuation it’s easy to see why the shorts are in a losing battle for now.
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Motley Fool contributor Tom Richardson owns shares of A2 Milk. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia owns shares of A2 Milk. 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.
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