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 down the line and profiting from the difference.
As it is a high-risk strategy with the potential for unlimited 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) remains the most shorted share on the ASX with short interest of 19%. However, this is a sizeable drop from last week and could be a sign that sentiment is shifting for the graphite miner. Last week a note out of Credit Suisse revealed that it has an outperform rating and $6.60 price target on its shares.
- Domino's Pizza Enterprises Ltd (ASX: DMP) has seen its short interest fall slightly week-on-week to 16.2%. Although many in the market expect Domino's to miss its guidance again this year, there hasn't been a downgrade out of the pizza chain operator yet and the end of the financial year is rapidly approaching.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest remain flat at 15.8%. Short sellers appear to expect the underperformance of its Good Guys business in a highly competitive market to weigh heavily on its results.
- Galaxy Resources Limited (ASX: GXY) has 14.5% of its shares held short, down slightly week-on-week. Opinion continues to be divided on the future direction of lithium prices.
- Myer Holdings Ltd (ASX: MYR) has seen its short interest rise again to 12.8%. The department store operator released its latest quarterly results this month and posted yet another decline in sales.
- Nanosonics Ltd (ASX: NAN) has seen its short interest rise slightly to 12.4%. A weaker than expected half-year result and a nosebleed valuation appears to have brought the infection control specialist onto the radar of short sellers.
- Vocus Group Ltd (ASX: VOC) has seen short interest fall again to 11.8%. The appointment of a new and experienced CEO may have led to improvements in investor sentiment.
- Australian Agricultural Company Ltd (ASX: AAC) has seen short interest rise again to 11.5%. Last week the agribusiness company posted a statutory EBITDA loss of $35.3 million for FY 2018, compared with $133.2 million profit in FY 2017.
- Orocobre Limited (ASX: ORE) has seen short interest fall to 11.3%. Last month's full-year production downgrade due to unfavourable weather conditions has weighed on the lithium miner's shares.
- InvoCare Limited (ASX: IVC) is a new entry in the top ten with short interest of 11.1%. Short sellers appear to be targeting the funeral company due to its premium valuation and lack of earnings growth.
