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:
- Nufarm Limited (ASX: NUF) remains the most shorted share on the Australian share market with short interest rising to 17.7%. This morning the agricultural chemicals company is due to release its full year results. Short sellers appear confident it will be a bad report card.
- Syrah Resources Ltd (ASX: SYR) has seen its short interest rise again to 16.2%. Later this month the graphite producer will advise of its production plans for the medium term after a sharp drop in prices meant that it costs more for Syrah to produce graphite than it receives from buyers.
- Orocobre Limited (ASX: ORE) has seen its short interest remain flat week on week at 16.1%. This lithium miner continues to be a favourite of short sellers due to weakening lithium prices and a bleak outlook for the battery material.
- Galaxy Resources Limited (ASX: GXY) has 15.3% of its shares held short, which is down again week on week. Galaxy is another lithium miner which short sellers have done very well with this year due to a sustained decline in lithium prices.
- Inghams Group Ltd (ASX: ING) has seen its short interest remain flat at 14.9%. Due to the negative impact of the droughts and concerns over new contracts renewals, this poultry producer remains a firm favourite of short sellers.
- NEXTDC Limited (ASX: NXT) has 14.3% of its shares held short, which is down slightly week on week. I suspect that rising competition in the data centre industry and its lofty valuation are the key reasons for the high level of short interest.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest fall slightly to 13.4%. Unfortunately for short sellers, last week this retailer’s shares hit an all-time high of $35.00.
- GWA Group Ltd (ASX: GWA) has short interest of 12.2%, which is up again week on week. Short sellers may be targeting the building products company after it warned that weaker consumer sentiment, credit tightening, and falling house prices are expected to weigh on its performance this year.
- HUB24 Ltd (ASX: HUB) has short interest of 11.2%, which is down slightly week on week. Concerns over the impact of low interest rates on its business model appear to be why short sellers are taking an interest in the company.
- Domino’s Pizza Enterprises Ltd (ASX: DMP) has seen its short interest slide to 9.9%. Short sellers may believe Domino’s is going to disappoint again this year after a poor showing in FY 2019.
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 Domino's Pizza Enterprises Limited 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.