Profit warnings from two high profile S&P/ASX 200 (Index:^AXJO) (ASX:XJO) companies this morning is adding to the reporting season anxiety.
Investors fretting where the next earnings landmines might want to look at which ASX stocks short sellers are increasingly attacking as the profit season kicks off proper.
Short-sellers tend to be more sophisticated than most investors, so it’s a good idea to keep an eye on what the group is doing.
Short-sellers missed this profitable opportunity
Mind you, they don’t always get it right. Looking at the latest short-selling data from ASIC (which is always a week old) wouldn’t have let on that vitamin supplier Blackmores Limited (ASX: BKL) or building materials group Boral Limited (ASX: BLD) were in trouble.
Short-sellers are those who borrow stock to sell on-market with the aim of buying it back at a lower price later.
The amount of Boral’s stock that was short-sold (called short-interest) increased modestly by 17 basis points to 1.3% since January. Short interest in Blackmores actually fell 139 basis points to 8.7% over the same period.
Short-sellers must be kicking themselves for not foreseeing these opportunities!
Shorting the galaxy
But these bearish traders have been increasing their attack on a range of stocks. I suspect they are betting on bad earnings news from these companies later this month.
The stock that recorded the biggest increase in short-interest since the start of 2020 is the Galaxy Resources Limited (ASX: GXY) share price.
The percentage of its shares being short-sold jumped 189 basis points to 18.1%. Short-sellers are probably anticipating bad earnings news ahead due to the weak lithium price.
Aerial mapping technology company Nearmap Ltd (ASX: NEA) is in second spot as short-interest increased 180 basis points to 14%.
The company issued a profit warning recently due to cancellations and deferments of some customer contracts.
While management is still sticking to its double-digit growth forecasts, short-sellers aren’t convinced the worst is over.
Online sales coming up short
Short-sellers may have seen Kogan.com Ltd’s (ASX: KGN) profit warning coming. The percentage of its shares being shorted jumped from 4.6% on January 2 to 6.4% on February 3 (ASIC’s data is always a week old, remember?).
There’s plenty of room left to short-sell the stock too as the overall level of short-interest in the online retailer is relatively low.
Shareholders will be hoping Kogan won’t have any more skeletons hiding in the closet when it posts its results.
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Motley Fool contributor Brendon Lau owns shares of Nearmap Ltd. The Motley Fool Australia owns shares of and has recommended Blackmores Limited and Nearmap Ltd. The Motley Fool Australia has recommended Kogan.com 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.
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