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:
- Syrah Resources Ltd (ASX: SYR) remains the most shorted ASX share with short interest of 20%. Short sellers appear concerned about a potential oversupply of graphite.
- Independence Group NL (ASX: IGO) has short interest of 17%. Production delays at its key Nova operation last year appear to have weighed on investor sentiment.
- Domino's Pizza Enterprises Ltd. (ASX: DMP) has short interest of 16.6%. Short interest in the pizza operator continues to rise ahead of earnings season.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest remain flat at 15.8%. Morgan Stanley may have recently upgraded it to an overweight rating, but that hasn't put short sellers off.
- Healthscope Ltd (ASX: HSO) has short interest of 13.4%. A disappointing FY 2017 and soft outlook appear to be the reason for this negative sentiment.
- Retail Food Group Limited (ASX: RFG) has short interest of 12.5%. Short sellers continue to target the embattled food and beverage company despite its incredible share price decline over the last 12 months.
- Flight Centre Travel Group Ltd (ASX: FLT) has 9.9% of its shares held short. Despite this, last week the travel company's shares rose to a 52-week high following a broker upgrade.
- HT&E Ltd (ASX: HT1) has short interest of 9.7%. Short sellers are targeting the outdoor advertising company due to the loss of its Yarra Trams contract. Management expects the loss to hit EBITDA by approximately $15 million.
- APN Outdoor Group Ltd (ASX: APO) has 9.5% of its shares held short. Short sellers appear concerned that competition is heating up greatly in the industry after JC Decaux won the Yarra Trams contract HT&E had held for six years.
- Myer Holdings Ltd (ASX: MYR) has short interest of 8.9%. The department store operator has been a real favourite with short sellers during the last 12 months due to the lack of progress being made by its turnaround plan.
