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 a good idea 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) continues to be Australia's most shorted share with 19.7% of its shares held short. Short interest in the graphite producer has fallen notably week-on-week, which could be an indication that some short sellers are moving on now.
- JB Hi-Fi Limited (ASX: JBH) has seen yet another increase in short interest and is closing in fast on Syrah Resources. Its short interest now stands at 19.1%. Short sellers may be targeting the retailer due to increasing competition and a weak performance from its Good Guys brand.
- Domino's Pizza Enterprises Ltd (ASX: DMP) has seen its short interest remain steady week-on-week at 15.1%. Short sellers are expecting Domino's to fall short of its earnings guidance when it reports its FY 2018 results in August.
- Galaxy Resources Limited (ASX: GXY) has 14% of its shares held short this week, down slightly week-on-week. Short interest could be on the decline after the lithium miner delivered a strong result last week.
- Orocobre Limited (ASX: ORE) has seen its short interest fall week-on-week to 13.1%. The lithium miners have been under pressure this year amid concerns that prices of the battery making ingredient could tumble.
- Myer Holdings Ltd (ASX: MYR) has seen its short interest slide slightly to 12.1%. Many investors appear to have lost faith in the struggling department store operator's turnaround plan.
- Inghams Group Ltd (ASX: ING) has short interest of 11.9%. The surprise exit of the poultry company's CEO and several negative broker notes may have weighed on investor sentiment. Earlier this month UBS downgraded its shares to a sell rating with a $3.40 price target.
- Vocus Group Ltd (ASX: VOC) has seen its short interest slide once again to 11.9%. Some short sellers may believe the telco company's shares have bottomed now.
- Metcash Limited (ASX: MTS) has seen its short interest ease week-on-week to 11.3%. The wholesale distributor's shares have come under significant pressure due to the expected loss of the Drakes SA supply contract.
- Greencross Limited (ASX: GXL) has re-entered the top ten with short interest of 10.9%. Concerns over the success of its in-store veterinary clinic rollout have weighed on investor sentiment in recent months.
