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.
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) has retained the unwanted honour of being the most shorted share on the Australian share market with 21% of its shares held short. Graphite production and price concerns have weighed heavily on investor sentiment for at least 12 months.
- JB Hi-Fi Limited (ASX: JBH) is closing in fast on Syrah with another increase in short interest. It currently stands at 17.9%, its highest level in recent memory. Short sellers may have their eyes on the retailer due to a housing market slowdown, increased competition in the appliance market, and a surprise underperformance from its Good Guys brand.
- Domino's Pizza Enterprises Ltd (ASX: DMP) has seen its short interest rebound slightly week-on-week to 15.3%. A couple of broker downgrades last week voiced concerns over its Japanese business and the impact it could have on its full-year results.
- Galaxy Resources Limited (ASX: GXY) has 14.5% of its shares held short this week. Lithium miners surged higher late last week after a note out of Goldman Sachs claimed that concerns over a lithium oversupply are unfounded.
- Orocobre Limited (ASX: ORE) has short interest of 12.9%, up slightly week-on-week. Short sellers have been targeting Orocobre and its lithium peers due to concerns over future prices of the battery-making ingredient. But if Goldman Sachs is correct, they may be in danger of making losses on these trades.
- Vocus Group Ltd (ASX: VOC) has seen its short interest remain flat at 12.3%. Investors are becoming increasingly bearish on the telco sector due to heightened competition and narrowing margins.
- Myer Holdings Ltd (ASX: MYR) has seen its short interest remain steady at 12.1%. Short sellers have been targeting the department store operator after its turnaround strategy failed to deliver any meaningful results.
- Australian Agricultural Company Ltd (ASX: AAC) has 11.5% of its shares held short, down slightly week-on-week. The agribusiness company has had a year to forget in FY 2018 and short sellers don't appear to expect things to improve any time soon.
- Metcash Limited (ASX: MTS) has entered the top ten this week with a sharp rise in short interest to 11.3%. The potential loss of the Drakes SA supply contract has hit the company and investor sentiment hard.
- Greencross Limited (ASX: GXL) has seen its short interest rise slightly to 11.1%. Concerns over its in-store veterinary clinic roll out strategy recently led to Deutsche Bank slapping a sell rating and $3.70 price target on its shares.
