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) has become the most shorted share on the Australian share market despite a small decline in short interest to 16.3%. Short sellers have been targeting this lithium miner due to a sustained drop in prices of the battery making ingredient.
- Syrah Resources Ltd (ASX: SYR) has seen its short interest fall to 16%. As with Galaxy, short sellers have been taking aim at the graphite producer due to concerns over falling prices. Prices have fallen so far that Syrah has opted to reduce its production materially to conserve cash.
- Orocobre Limited (ASX: ORE) has seen its short interest slide to 13.5%. This lithium miner’s shares have been pushing higher this year after industry giant SQM had its production expansion plan denied by the Chilean government. This may have led to some short sellers closing positions.
- Inghams Group Ltd (ASX: ING) has short interest of 12.7%, which is up slightly week on week. Short sellers have been targeting the poultry producer due to concerns over rising feed costs due to the droughts and now the bushfires.
- Speedcast International Ltd (ASX: SDA) has short interest of 12.7%, which is down week on week once again. A poor performance in FY 2019, weak outlook, and a debt that is greater than its market cap appears to be behind the high level of short interest.
- Nearmap Ltd (ASX: NEA) has seen its short interest rise again to 12.4%. Concerns over growing competition and softening margins have been weighing on investor sentiment in recent months.
- GWA Group Ltd (ASX: GWA) has short interest of 11.9%, which is down slightly week on week once again. In August the building products company warned that trading conditions would be tough in FY 2020.
- NEXTDC Limited (ASX: NXT) has 11.9% of its shares held short, which is down again week on week. Short sellers may have concerns over the data centre operator’s sky high earnings multiple and increasing competition.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest slide to 11.8%. Short sellers may be regretting this one. Last week JB Hi-Fi’s shares hit an all-time high.
- Bega Cheese Ltd (ASX: BGA) has seen its short interest rise slightly to 11.1%. Unprecedented competitive milk supply conditions are expected to weigh heavily on the diversified food company’s performance in FY 2020.
Instead of those highly shorted shares, I would snap up these quality shares which have been tipped as strong buys.
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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.