Every Monday I start the week with a look at ASIC's short position report in order to find out which shares are being targeted by short sellers.
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, short sellers will often only take on 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 as it could be a precursor to a share price decline.
Here are the 10 most shorted shares on the ASX this week:
- Syrah Resources Ltd (ASX: SYR) continues to be the most shorted share on the ASX with 20.7% of its shares held short. Despite the high level of short interest Syrah's shares have risen almost 16% in the last 30 days.
- Independence Group NL (ASX: IGO) has seen its short interest rise sharply to 16.5%. With U.S. rates tipped to rise four times by the end of next year, short sellers appear to believe this gold miner could be negatively impacted by a falling gold price.
- Orocobre Limited (ASX: ORE) has seen its short interest fall once again, this time to 15.9%. Short sellers appear to be closing their positions due to the increasingly bullish outlook for global lithium demand.
- Western Areas Ltd (ASX: WSA) has seen short interest rise slightly to 14.9%. Last week Goldman Sachs slapped a sell rating on the nickel producer, believing that nickel prices would have to rise significantly to justify its current share price.
- Domino's Pizza Enterprises Ltd. (ASX: DMP) has 14.2% of its shares held short. Investor sentiment has been largely negative since the pizza operator posted a full-year result that fell short of its guidance.
- Retail Food Group Limited (ASX: RFG) has 14% of its shares held short. Although it has high levels of short interest, with the food and beverage company's shares down 39% year-to-date I think they could be worth a look now.
- JB Hi-Fi Limited (ASX: JBH) has short interest of 13.8%. Investors may be targeting the retailer due to concerns over the impact an Amazon launch in Australia will have on its business.
- Select Harvests Limited (ASX: SHV) has 13.5% of its shares in the hands of short sellers. The almond producer has come under significant pressure after a disappointing decline in production volumes led to a 73% fall in its reported full-year net profit.
- Myer Holdings Ltd (ASX: MYR) has 13.4% of its shares held short. The department store operator will be one to watch in the coming weeks following news that Solomon Lew intends to contact shareholders ahead of its AGM.
- Healthscope Ltd (ASX: HSO) is a new entry in the top ten with short interest of 12.1%. Short sellers have been steadily increasing their exposure to the healthcare company after it cut its dividend and advised that it expects EBITDA to be flat in FY 2018.
