Short and Caught: Short Now, Buy Later as the BNPL sector sits firmly in Shorties’ sights

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Flight Centre remains most shorted stock on the ASX but its position has slightly improved
Kicked around BNPL, rate sensitive and health stocks also targeted by short sellers
Not good news for lithium and gold stocks with strong short positions heading into August

Market players are looking to short sell lithium, gold and BNPL sector stocks on the ASX, along with rate sensitive and healthcare companies. We’ve got all the details in this instalment of Short & Caught, where Stockhead recaps the ASX stocks that are the most shorted and have had the greatest increase in short interest right now.

How does shorting work?

Shorting works by selling stocks you do not actually own in the hope of buying them back at a lower price. Investors are in effect betting they will fall.

Because shorting is restricted under Australian law, any substantial shorting of stocks is worth knowing about, even if you only trade long.

Stockhead has utilised the number of short positions as a percentage of total shares on issue. The most shorted ASX stocks all have 5.5 per cent or more.

Code	Company	Short positions	Shares on issue	% short positions
FLT	FLIGHT CENTRE TRAVEL ORDINARY	31,011,967	199,813,185	15.52%
BET	BETMAKERS TECH GROUP ORDINARY	108,206,395	904,456,199	11.96%
NAN	NANOSONICS LIMITED ORDINARY	34,883,508	301,835,129	11.56%
SQ2	BLOCK CDI 1:1 NYSE	4,368,797	38,077,304	11.47%
LKE	LAKE RESOURCES ORDINARY	145,029,278	1,389,709,906	10.44%
EML	EML PAYMENTS LTD ORDINARY	35,490,794	373,462,815	9.50%
RRL	REGIS RESOURCES ORDINARY	68,199,758	754,977,388	9.03%
ZIP	ZIP CO LTD.. ORDINARY	57,125,073	687,936,061	8.30%
PNV	POLYNOVO LIMITED ORDINARY	54,542,325	661,688,044	8.24%
KGN	KOGAN.COM LTD ORDINARY	8,756,560	106,927,603	8.19%
MSB	MESOBLAST LIMITED ORDINARY	53,207,934	650,454,551	8.18%
CCX	CITY CHIC COLLECTIVE ORDINARY	17,941,005	231,920,086	7.74%
ING	INGHAMS GROUP ORDINARY	28,746,559	371,679,601	7.73%
CXO	CORE LITHIUM ORDINARY	126,910,826	1,733,215,716	7.32%
IEL	IDP EDUCATION LTD ORDINARY	20,190,954	278,336,211	7.25%
PDN	PALADIN ENERGY LTD ORDINARY	207,809,628	2,977,779,002	6.98%
VUL	VULCAN ENERGY ORDINARY	9,861,245	143,335,301	6.88%
WEB	WEBJET LIMITED ORDINARY	26,061,504	380,851,484	6.84%
BGL	BELLEVUE GOLD LTD ORDINARY	69,791,687	1,031,431,826	6.77%
CUV	CLINUVEL PHARMACEUT. ORDINARY	3,339,874	49,410,338	6.76%
PNI	PINNACLE INVESTMENT ORDINARY	13,478,273	199,560,297	6.75%
SBM	ST BARBARA LIMITED ORDINARY	51,638,474	815,734,768	6.33%
ADH	ADAIRS LIMITED ORDINARY	10,801,799	171,316,433	6.31%
PBH	POINTSBET HOLDINGS ORDINARY	19,227,456	305,161,577	6.30%
TPW	TEMPLE & WEBSTER LTD ORDINARY	7,571,968	120,514,583	6.28%
MP1	MEGAPORT LIMITED ORDINARY	9,679,594	157,974,016	6.13%
OBL	OMNI BRIDGEWAY LTD ORD US PROHIBITED	16,258,544	268,639,670	6.05%
NEA	NEARMAP LTD ORDINARY	29,583,202	500,054,764	5.92%
92E	92ENERGY ORDINARY	4,842,789	81,878,696	5.91%
DEG	DE GREY MINING ORDINARY	82,803,340	1,410,232,647	5.87%
BOQ	BANK OF QUEENSLAND. ORDINARY	37,681,018	647,357,479	5.82%
AMA	AMA GROUP LIMITED ORDINARY	59,948,053	1,066,368,183	5.62%
NHC	NEW HOPE CORPORATION ORDINARY	45,784,444	832,357,082	5.50%
IMU	IMUGENE LIMITED ORDINARY	321,824,217	5,866,519,610	5.49%
FFX	FIREFINCH LTD ORDINARY	62,756,345	1,181,243,221	5.31%
SYR	SYRAH RESOURCES ORDINARY	35,306,526	669,442,809	5.27%
PME	PRO MEDICUS LIMITED ORDINARY	5,335,808	104,320,631	5.11%
JBH	JB HI-FI LIMITED ORDINARY	5,581,809	109,333,981	5.11%
MFG	MAGELLAN FIN GRP LTD ORDINARY	9,400,944	185,088,874	5.08%
DYL	DEEP YELLOW LIMITED ORDINARY	19,547,710	387,374,725	5.05%

Flight Centre’s turbulence with short sellers

Flight Centre (ASX:FLT) founder and CEO Graham Turner must be getting tired of hearing the travel company remains the most shorted stock on the ASX.

After remaining the most shorted stock on the ASX in FY22, Flight Centre is still hitting turbulence with short sellers (never get tired of that line) into FY23. However, its short position has slightly improved from last month where it was at more than 16%.

As Stockhead’s Christian “I’m not expert on shorts ….but if you need an observation” Edwards noted:

“Flight Centre and a few other travel names have been screaming short me for what seems an eternity, and they face headwinds still.

“But at least for this week, CEO Graham ‘Skroo’ Turner’s FLT, has gotten a bit back on the sellers, lifting FY 22 guidance and sending the share price higher.”

Yep, Flight Centre is up 2.51% this week after amending its FY22 market guidance following a solid rebound in travel demand globally late in the year.

Lithium and gold stocks not feeling love

Not so good news for the speculative lithium sector or even gold stocks, with the precious metal seen as a traditional hedge against inflation.

Lake Resources (ASX:LKE) and Vulcan Energy (ASX:VUL) have increased short positions from last time, where their positions were 8.2% and 6.13% respectively.

But very near-term producer Core Lithium (ASX:CXO) is faring slightly better this month, down from 7.65%.

And gold producer Regis Resources (ASX:RRL) has seen its short position rise from 8.41% at the start of July, despite its share price rising more than 22% in the past month.

As Stockhead’s Reuben Adams pointed out gold hit a three-week high at the end of July on weak USD and the US Federal Reserve’s latest decision.

The price of the precious metal held steady around $US1,720/oz ahead of the Fed’s second consecutive 0.75 percentage point interest rate increase.

And Reuben also noted Regis, which multi-billionaire Andrew Forest launched and then abandoned a raid on, reported a strong June quarter and outlook.

While not on the most shorted list in August, coming in with 5.27% of its stock in short position is Syrah Resources (ASX:SYR), seeing a slight increase from 5.17% in July. The Mozambique focused graphite miner has been a favourite among short sellers over the years, frequently earning a place on the ASX most shorted stocks list.

Kicked around BNPL stocks a target

And we can’t not mention the two BNPL stocks Block Inc (ASX:SQ2) and Zip Co (ASX:ZIP) that have been made it to the top shorted stocks on the ASX.

As Reuben (making a strong appearance in this article) so aptly described, “the BNPL sector had been getting its arse kicked all year” but enjoyed a renaissance in July.

But Christian reckons shorting BNPL might still be a solid bet.

“Oh, um Block or Square or Rhombus, or whatever it is they’re calling the business that ate Afterpay, is a company whose creative peak was expressed in a meaningless rebrand and its purchase of the most bloated BNPL at its most bloated possible price,” he says.

“A company like Block has so much more self-inflicted damage to explore.”

Health sector not so healthy for shorties

Health stocks were also targeted by short sellers and have been throughout FY22, despite the sector being one of the best performers in July. The S&P ASX 200 healthcare index (ASX:XJO) has risen more than 8% in the past month.

Nanosonics (ASX:NAN), Polynovo (ASX:PNV) both have slightly fewer short positions compared to our last column but Mesoblast (ASX:MSB) has seen its positions lift.

Rate sensitive stocks make list

Short traders are lifting bets that pandemic-era sharemarket darlings will fall in value as surging inflation and falling household wealth impacts earnings.

The worsening macroeconomic indicators have many companies updating profit forecasts for 2023, with short sellers betting they risk missing guidance.

Among consumer discretionary stocks on the hit list of short sellers are City Chic Collective (ASX:CCX), Kogan (ASX:KGN), Temple & Webster (ASX:TPW) and Adairs (ASX:ADH). (I’ll happily to do my part and go on a clothes and homewares buying spree to help boost earnings.)

Disclosure: The author held shares in Regis Resources at the time of writing this article.