Every Monday I like to start the week with a look at ASIC's short position report to find out which shares are being targeted by short sellers. A short seller borrows 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. Because of this I think it is prudent for investors to keep a close eye on short interest levels.
According to data provided by ASIC, here are the 10 most shorted shares on the ASX this week:
- Syrah Resources Ltd (ASX: SYR) is once again the most shorted share on the Australian share market with short interest of 21.3%. Short sellers appear to be targeting Syrah due to the fears that its Balama project won't command as high prices as expected for its graphite.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest rise week-on-week again to 16.8%. Short sellers have been increasing their positions after the retailer downgraded its full-year profit guidance due to a weak performance from its Good Guys business.
- Domino's Pizza Enterprises Ltd. (ASX: DMP) has seen its short interest fall significantly week-on-week to 16.3%. Sentiment appears to have improved since its US parent reported a strong quarterly result.
- Galaxy Resources Limited (ASX: GXY) has 14.7% of its shares held short, down week-on-week. News that the lithium miner is looking into strategic options for its Sal de Vida operation has gone down well with the market.
- Nanosonics Ltd (ASX: NAN) has seen its short interest rise again to 13.1%. Short interest continues to rise despite news that the infection control specialist's trophon2 device has been granted FDA clearance.
- Vocus Group Ltd (ASX: VOC) has seen short interest fall slightly to 12.2%. The telco company has been a hugely disappointing performer over the last two years and short sellers don't appear to expect that to change any time soon.
- Myer Holdings Ltd (ASX: MYR) has seen its short interest rise to 11.7%. Short interest has risen despite news that three directors bought shares on-market following the appointment of a new CEO.
- Orocobre Limited (ASX: ORE) has seen short interest rise to 11.5%. Unfavourable weather conditions in Argentina recently led to a surprise production downgrade by the lithium miner.
- Retail Food Group Limited (ASX: RFG) has 11.4% of its shares held short. Despite the embattled food and beverage company's shares trading within sight of a multi-year low, some short sellers appear to believe they can go lower.
- Australian Agricultural Company Ltd (ASX: AAC) has entered the top ten with short interest of 11.2%. The cattle producer recently released a market update which revealed operating EBITDA guidance of $12 million to $16 million in FY 2018. This compares with FY 2017 operating EBITDA of $45 million.
