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) remains the most shorted share on the Australian share market with short interest of 18.1%. Short sellers have been targeting the agricultural chemicals company due to concerns over the droughts and its sales of glyphosate.
- Galaxy Resources Limited (ASX: GXY) has 16.3% of its shares held short, which is up sharply week on week. This lithium miner’s shares have come under significant pressure this year due to a sustained decline in lithium prices and a bleak outlook for the battery making ingredient.
- Orocobre Limited (ASX: ORE) has seen its short interest rise week on week to 16.1%. Orocobre is another lithium miner that short sellers continue to target due to weakening lithium prices.
- Inghams Group Ltd (ASX: ING) has seen its short interest slide to 15.2%. The poultry producer’s shares dropped lower last month after its guidance for FY 2020 disappointed the market. The droughts have had a major impact on its performance due to higher input costs.
- Bellamy’s Australia Ltd (ASX: BAL) has 15.1% of its shares held short, which is up strongly week on week. The infant formula company’s shares crashed lower last month when its full year result fell short of expectations and it deferred its sales targets.
- Syrah Resources Ltd (ASX: SYR) has seen its short interest rise to 14.9%. Short sellers will have been celebrating last week when the graphite miner’s shares crashed lower after it downgraded its production materially in response to a significant drop in graphite prices.
- NEXTDC Limited (ASX: NXT) has 14.5% of its shares held short, which is up week on week. The data centre operator appears to have been targeted due to increasing competition and its nosebleed valuation.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest rise slightly to 13%. Some short sellers are sticking with the retailer despite its strong full year result last month.
- GWA Group Ltd (ASX: GWA) has entered the top ten with short interest of 11.4%. Last month the company warned that weaker consumer sentiment, credit tightening, and falling house prices are expected to weigh on its performance in FY 2020.
- HUB24 Ltd (ASX: HUB) has re-entered the top ten with short interest of 9.5%. 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 has been tipped for very big things.
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James Mickleboro owns shares of Galaxy Resources Limited and NEXTDC Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia has recommended Bellamy's Australia and Hub24 Ltd. 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.