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Why I think the JB Hi-Fi share price could climb higher

The JB Hi-Fi Ltd (ASX: JBH) share price rocketed 11.50% higher yesterday after the Aussie retailer surprised the market with its half-year results.

Why the JB Hi-Fi share price surged higher

On Monday, the JB Hi-Fi share price rocketed higher after releasing its half-year earnings for the period ended 31 December 2019.

Total sales increased by 3.9% to $4 billion with a pickup across all 3 of its divisions.

JB Hi-Fi Australia saw sales growth of 5.1% to $2.72 billion while its New Zealand operations increased sales by 0.8% to NZ$132.8 million.

The Good Guys increased sales by 1.5% to $1.15 billion with a 14.7% increase in EBIT to $50.1 million.

The strong result saw the JB Hi-Fi share price rocket higher on Monday after surprising most in the market. This continues a bullish run for the Aussie retailer, which has seen its shares surge 95.07% in the last 12 months.

What has surprised me more is how well JB Hi-Fi and fellow retailer Harvey Norman Holdings Ltd (ASX: HVN) have performed this year. There have been a number of Aussie retailers enter insolvency proceedings but some of these big names are still going strong.

Why the Aussie retailer’s shares could climb even higher

Aside from strong earnings, there’s one big reason why I’m watching JB Hi-Fi’s shares in 2020.

JB Hi-Fi is one of the most shorted ASX shares on the market. According to ASIC’s start of week report, JB Hi-Fi has short interest of 11.1%. That means that 11.1% of its available shares are being used to short the stock (i.e. bet on it going lower).

Yesterday’s bumper result won’t have pleased those parties betting on the JB Hi-Fi share price to go lower. The flipside of shorting a stock is that you can get caught out if the share price actually rises.

Given the retailer’s shares have rocketed nearly 100% higher in the last year, and 11.50% yesterday, some short-sellers might have to close out their positions.

In closing this out, they would be buying back shares to offset the position. Heavy buying could increase demand for the group’s shares and push its valuation higher.

Foolish takeaway

The Aussie retailer surprised the market with a strong half-year result, but this could be just the start. Keep an eye on the JB Hi-Fi share price in the second half of the year for further gains.

In the meantime, here are 3 more ASX dividend shares that I'm watching in the February earnings season.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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