When investors "short" a share they are borrowing shares to sell on market with the aim of buying them back at a cheaper price further down the line.
It can be a lucrative investment strategy, but comes with high risks and theoretically limitless losses. Whilst short sellers don't always get it right, I believe investors should be wary about investing in shares with high short interest as it could be seen as an early warning sign of a share price decline.
According to the most recent data provided by ASIC, these are the 10 most shorted shares on the ASX as of November 28.
- Myer Holdings Ltd (ASX: MYR) is yet again the most shorted share on the ASX with 16.6% of its shares held short. Pleasingly though for shareholders this is the fourth week in a row that short interest has fallen. Possibly hinting that a change of market sentiment is coming.
- Western Areas Ltd (ASX: WSA) has 14.2% of its shares held short. There has been a small drop in short interest for the nickel producer since last week.
- Aconex Ltd (ASX: ACX) has rocketed to third place in the most shorted list with 12.4% of its shares held short. Despite the software-as-a-service company falling 35% in the last three months, short sellers clearly think it can go lower.
- Bellamy's Australia Ltd (ASX: BAL) has 12.4% of its shares held short also. These short sellers will no doubt have celebrated over the weekend after the infant formula company fell 43% on Friday.
- Worleyparsons Limited (ASX: WOR) has seen short interest decline again this week, this time to 12.3%.
- Metcash Limited (ASX: MTS) is once again being targeted by short sellers. 11.9% of its shares have been shorted, up slightly from last week. The potential arrival of Amazon into the Australian grocery space may be a concern for investors.
- Nine Entertainment Co Holdings Ltd (ASX: NEC) has seen short interest drop to 11.5% this week.
- TFS Corporation Limited (ASX: TFC) continues to see short interest rise to a new high. Short interest in the sandalwood plantation manager has risen to 10.4%.
- Monadelphous Group Limited (ASX: MND) has seen short interest fall slightly from last week. The mining services company has 10.2% of its shares in the hands of short sellers currently.
- Syrah Resources Ltd (ASX: SYR) is a new addition to the top 10 with 9.8% of its shares held short. Its shares have just hit a 52-week low, but short sellers appear to believe they can fall further.
