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:
- Galaxy Resources Limited (ASX: GXY) has become the most shorted share on the ASX with short interest rising to 17.1%. Short sellers have been targeting the lithium miner due to a sharp drop in lithium prices amid soft demand and increasing supply.
- Syrah Resources Ltd (ASX: SYR) has seen its short interest rise to 16.6%. Later this month the graphite producer will reveal its production plans for the near term. Syrah recently cut it materially due to weak graphite prices.
- Orocobre Limited (ASX: ORE) has seen its short interest rise slightly week on week to 16.3%. Orocobre is yet another battery-ingredient producer which is under pressure amid falling prices.
- NEXTDC Limited (ASX: NXT) has 14.3% of its shares held short, which is flat week on week. Rising competition in the data centre industry appears to be partly to blame for the high level of short interest.
- GWA Group Ltd (ASX: GWA) has short interest of 12.2%, which is up week on week. In August the building products company warned that trading conditions in FY 2020 would be tough. This appears to have caught the eye of short sellers.
- Nufarm Limited (ASX: NUF) has seen its short interest slide down to 12.2%. Short sellers were closing their positions in a hurry earlier this month when Nufarm released a strong full year result and announced a major asset sale.
- HUB24 Ltd (ASX: HUB) has short interest of 11.5%, which is up week on week. Short sellers have been targeting the company due to concerns over the impact of low interest rates on its business model. Though, it is worth noting that last week HUB24 released a very strong Q1 update.
- Blackmores Limited (ASX: BKL) has entered the top ten with short interest of 10.7%. Short sellers don’t appear to believe that the health supplements company is over the worst of its issues.
- Speedcast International Ltd (ASX: SDA) has also entered the top ten with short interest of 10.5%. Its shares have come under significant pressure this year following another severe deterioration in its performance.
- Bingo Industries Ltd (ASX: BIN) has short interest of 10.35%, which is up slightly week on week. A weak performance in FY 2019 appears to have caught the eye of short sellers.
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 owns shares of and has recommended Blackmores Limited. The Motley Fool Australia has recommended 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.