Every Monday morning I like to start the week with a look at ASIC's short position report in order to find out which unfortunate shares are being targeted by short sellers.
For those unfamiliar with short selling. A short seller will borrow shares to sell on market with the aim of buying them back at a lower price in the future and pocketing the difference.
As it is a high risk strategy with the potential for limitless losses, short sellers will often only take a short position if they believe they have a high probability of success.
For this reason I believe it is prudent for investors to keep a close eye on short interest levels.
At the moment short sellers are betting on the 10 shares below taking a tumble in the coming months:
- Orocobre Limited (ASX: ORE) is yet again the most shorted share on the Australian share market with short interest of 19.3%. Although I am bullish on the lithium mining sector, two production downgrades this year makes me think it would be best to avoid Orocobre's shares.
- Western Areas Ltd (ASX: WSA) has seen its short interest surge higher to 18.1%. Although improvements have been made in nickel prices recently, it hasn't stopped short sellers from taking an interest in its shares.
- Syrah Resources Ltd (ASX: SYR) short interest has rebounded after two weeks in a row of declines. Short interest in the graphite miner has jumped to 17.8% ahead of next month's opening of its Balama project.
- Myer Holdings Ltd (ASX: MYR) has 16.6% of its shares in the hands of short sellers. A recent full-year profit downgrade is likely to be the reason for the sudden rise in short interest.
- Independence Group NL (ASX: IGO) has seen short interest rebound to 14.5%. Delays at its Nova operation and increasing costs are largely behind the high level of short interest.
- JB Hi-Fi Limited (ASX: JBH) has now seen short interest lessen slightly to 13.6%. Short sellers appear very bearish on the electronics retailer's prospects due to the imminent launch of Amazon in Australia.
- Retail Food Group Limited (ASX: RFG) has 13.2% of its shares held short. Short interest has risen sharply in the last few weeks following the release of a disappointing trading update from the food and beverage company.
- Metcash Limited (ASX: MTS) has 12.1% of its shares held short due largely to concerns over how the supermarket price war and the Amazon launch will impact its future results.
- Aconex Ltd (ASX: ACX) has climbed back into the top 10 with short interest of 12.1%. It appears as though short sellers expect Aconex to disappoint during earnings season.
- Ardent Leisure Group (ASX: AAD) has short interest of 12.1%, up slightly from last week. While a recent trading update from its theme parks division revealed major improvements in its performance, it hasn't been enough to shake off interest from short sellers.
