Warning: These 4 shares are being heavily shorted

Shorts are lifting bets against Perpetual Limited (ASX: PPT) and Webjet.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Every now and then it's worth taking a look at ASIC's list of what companies on the local market are being heavily shorted or not. Professional investors won't bet heavily on a stock price going down for nothing, so even if they turn out to be wrong it's worth considering what's motivating their bets. 

Let's take a look at four businesses below that according to ASIC have a fair bit of their outstanding shares shorted as at October 8 2019.

Webjet Limited (ASX: WEB) has 6.5% of its scrip shorted which is probably a result of shorters betting the Thomas Cook bankruptcy is going to hit Webjet harder than management are letting on.

It also got into a fight with its auditor recently over its financial reporting related to the original Thomas Cook deal. Recently, Flight Centre Travel Group Ltd (ASX: FLT) also warned over soft leisure travel conditions in Australia. Overall, we can see why short interest is increasing. 

The a2 Milk Company Ltd (ASX: A2M) has 7.1% of its scrip shorted, which is about as high as I can remember. Shares trade on a high valuation and the new CEO has a disappointing track record of selling her own shares. China is also an unpredictable market that may also be encouraging short sellers. 

Reliance Worldwide Corporation (ASX: RWC) is the plumbing supplies business that has a mixed track record as a public business that includes missing an early profit forecast. It also recently completed a $1.2 billion acquisition of UK plumbing supplies business John Guest. While these kind of huge acquisitions can be exciting for investors, if it turns out Reliance paid too much the stock could slide. 

Perpetual Limited (ASX: PPT) has 9% of its stock shorted, which is about as high as I can remember. The fund manager recently reported $1.8 billion of net outflows for the September quarter to leave total FUM at $26.6 billion. Operating leverage works both ways for fund managers and while Perpetual has the option to cut staff costs this may hurt the top line further. 

Tom Richardson owns shares of A2 Milk and Webjet Ltd.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Reliance Worldwide Limited. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Reliance Worldwide Limited and Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why DroneShield, Gentrack, Metals X, and Northern Star shares are tumbling today

These shares are ending the week in the red. But why?

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Broker Notes

Morgans says these ASX can rise 30% to 50%

The broker has good things to say about these shares.

Read more »

Two businessmen look out at the city from the top of a tall building.
Broker Notes

2 ASX REITs to buy in July: expert

Is it time to consider ASX REITs?

Read more »