A brief examination of the list of most shorted stocks and potential reasons behind their significant short selling activity.
You can view a full list of short positions on Australian stocks HERE
Pilbara Minerals (ASX:PLS)
Lithium price falling, PLS biggest Lithium exposure on the ASX, liquid stock allows for significant short positions to be taken.
Syrah Resources (ASX:SYR)
Graphite price challenged due to significant supply of synthetic graphite coming from China. Some miners have ceased production as they are not profitable at this price.
Core Lithium (ASX:CXO)
High cost lithium miner now unprofitable at the current lithium price.
Deep Yellow (ASX:DYL)
Uranium miner, rising share price, rising commodity price. Shorters would be losing money currently. I would say they are betting on a number of scenarios:
- The Uranium price falling
- Production challenges for DYL – they don’t produce anything yet and the lead-up to production is one of the riskiest times for a mining company.
- DYL needing to raise more funds – BOE and PEN are uranium miners that recently tapped the market.
- DYL being overvalued and the market at some point coming to agree. Even if DYL does what it says with the Uranium price elevated, it currently looks very expensive.
- DYL could simply be a position in a pair trade with another Uranium stock (or basket of stocks).
Sayona Mining (ASX:SYA)
Lithium price falling
IDP Education (ASX:IEL)
Short sellers might be betting that industry regulation changes will hinder the growth of IEL, a company that has historically traded at multiples requiring sustained significant growth. So far they seem to be right but IEL has proven itself to be a very strong company and will be an interesting one to watch when they next report their results.
Genesis Minerals (ASX:GMD)
Roll up gold stock that shorters could be betting will fall for a few reasons:
- They’ve been highly acquisitive. This can tend to be a risky strategy. It also implies they may not have finished expansion by acquisition and might need to raise additional dilutive capital from the market.
- Gold price to fall / Australia dollar to rise.
Shorters are for the most part losing on this one right now. Still plenty to play out though, time will tell.
Flight Centre (ASX:FLT)
Has always attracted significant short interest. I suspect some of this interest is due to pairs trade scenarios, where short sellers are betting that it will be outperformed by other travel companies. It could also be a bet on a slowing world economy and less discretionary spending. Until now though, FLT has been doing very well post Covid.
Peninsula Energy (ASX:PEN)
Uranium stock that recently raised more capital. Shorters are winning so far.
Liontown Resources (ASX:LTR)
Falling lithium price, failed takeover bid. A bonanza for the shorters somewhat at the expense of Gina Reinhardt and retail investors.
Weebit Nano (ASX:WBT)
A stock with a lot of promise that to date has not delivered anything financial. With its massive valuation, this appears to be a textbook short trade, while retail investors have been enticed and hold onto hope. Of course, many longer-term retail investors have done well holding this company.
Disclaimer: This information is provided purely for educational purposes. It takes no account of an individual’s personal financial circumstances and hence can in no way constitute financial advice. The above data may be subject to errors or inconsistencies for which the author takes no liability. It is imperative that all investors do their own research or if they need advice, seek it from a qualified financial adviser.
Part 2 of 2 SHORT SELLING: The ASX most shorted stocks