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:
- Galaxy Resources Limited (ASX: GXY) continues to be the most shorted share on the ASX with short interest of 17.2%. Galaxy has come under significant pressure this year due to weakening lithium prices. Prices have collapsed in 2019 due to increasing supply and weaker demand.
- Syrah Resources Ltd (ASX: SYR) has seen its short interest rise to 16.8%. Short sellers appear to be returning to the graphite producer. They may believe that things can still get worse for the company in 2020 due to the state of the battery material industry.
- Orocobre Limited (ASX: ORE) has seen its short interest slide to 13.7%. This lithium miner recently released a pricing update which revealed a further sharp decline in lithium prices during the December quarter.
- Speedcast International Ltd (ASX: SDA) has short interest of 13.6%, which is flat week on week. Speedcast was a very poor performer in FY 2019 and it appears as though short sellers expect another poor result in FY 2020. In addition to this, its massive debt may be sparking fears that a recapitalisation will be necessary in 2020.
- Inghams Group Ltd (ASX: ING) has short interest of 12.8%, which is up week on week. The poultry producer has been a target of short sellers this year due a significant jump in feed costs because of the droughts. They don’t appear to believe these costs can be passed on. This could mean a sharp decline in its margins.
- GWA Group Ltd (ASX: GWA) has short interest of 12.2%, which is flat week on week. The catalyst for its sky high short interest was management warning that tough trading conditions would impact its performance in FY 2020.
- NEXTDC Limited (ASX: NXT) has 11.9% of its shares held short, which is up slightly week on week again. Although the data centre operator recently advised that it expects EBITDA growth of 17% to 23% in FY 2020, this hasn’t put off some short sellers. They may believe this growth isn’t strong enough for the multiples its shares trade on.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest remain flat at 11.8%. Short sellers continue to target the retailer despite its shares racing to an all-time high this month.
- Bega Cheese Ltd (ASX: BGA) has short interest of 11.1% once again. The diversified food company is being targeted due to unprecedented competitive milk supply conditions. This is expected to weigh on its performance in FY 2020. So much so, management’s normalised EBITDA guidance is for a decline of 8.7% to 17.5%.
- Nearmap Ltd (ASX: NEA) has seen its short interest remain flat at 11.1%. Short sellers appear concerned with growing competition in the aerial imagery technology and location data market. In addition to this, its increased investments in sales, marketing, and R&D is weighing on sentiment.
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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 Nearmap 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.