In Short & Caught, Stockhead recaps the 20 most shorted ASX stocks.

 

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 Price Market Cap Short Positions % of Shorts Sector
WEB Webjet 4.98 $1.7B 44,908,956 13.25% Consumer
TGR Tassal 3.41 $720.7M 25,888,043 12.25% Consumer
NST Northern Star 12.09 $9.0B 85,592,743 11.55% Resources
SDA Speedcast 0.79 $189.3M 22,234,098 9.27% Telecommunications
MSB Mesoblast 2.56 $1.5B 51,581,547 8.78% Health
ING Inghams 3.61 $1.3B 32,036,418 8.62% Consumer
WSA Western Areas 2.52 $693.2M 22,565,848 8.20% Resources
AVH Avita Medical 7.08 $153.1M 5,320,581 7.95% Health
MTS Metcash 3.54 $3.6B 75,561,728 7.39% Consumer
MYR Myer 0.32 $258.7M 59,498,117 7.24% Consumer
SSM Service Stream 1.7 $698.6M 29,636,127 7.23% Industrial
FNP Freedom 3.01 $834.0M 19,242,182 6.94% Consumer
FLT Flight Centre 14.88 $3.0B 13,699,746 6.88% Consumer
IVC InvoCare 11.64 $1.7B 9,882,895 6.86% Health
RSG Resolute 0.69 $761.6M 75,466,887 6.84% Resources
A2M A2 Milk 10.2 $7.6B 50,726,825 6.83% Consumer
EML EML Payments 4.27 $1.5B 23,415,982 6.47% Tech
EOS Electro Optic Systems 5.29 $791.2M 8,926,500 5.97% Tech
NEA Nearmap 2.33 $1.2B 28,380,259 5.76% Tech
ALK Alkane 0.815 $485.2M 32,724,577 5.50% Resources

 

Most shorted ASX stocks

Travel agent Webjet (ASX:WEB) has 13.25 per cent of its shares shorted. Also on the list is its peer Flight Centre (ASX:FLT).

You’d be hard pressed to find industries harder hit by COVID-19 than travel and tourism with demand all but wiped out and continuing to be pent up by snap closures of Australian state borders.

But the companies and their industries have put their hopes in a vaccine to bring things back to pre-COVID norms at least in Australia. Analysts have also noted COVID-19 gave travel agencies the chance to rationalise their brick and mortar branch network.

Taking out the second and third positions on the list of most shorted ASX stocks are seafood company Tassal (ASX:TGR) and gold miner Northern Star Resources (ASX:NST).

The latter company is a curious member of the list as it is one of the best performing stocks in the last decade and is currently merging with fellow gold miner Saracen Mineral Holdings (ASX:SAR).

The deal will create a new top-10 global gold company worth $16 billion and targeting production of 2 million ounces of gold.

Another gold stock on the list is the smaller Alkane (ASX:ALK) which in 2019 came across an incredible hit at its Boda prospect in NSW — 502m at 0.48 grams per tonne (g/t) gold and 0.2 per cent copper, 211m from surface.

It is continuing to explore the prospect and has continued to report results but hasn’t been able to re-generate excitement in its investors.
 

Shorted stocks facing adversity

Back to shorted companies undergoing operational adversity and A2 Milk (ASX:A2M) is also on the list.

The company initially shrugged off the impact of COVID-19 but was hit when one of its biggest corporate daigou customers was impacted by Melbourne’s lockdown last year.

Avita Medical (ASX:AVH) is another long term success story hit by COVID-19. It took off in 2018 and 19 after winning FDA approvals and gaining sales in the US but it came slowing down when COVID-19 hit.

One stock you might have expected to gain from COVID but hasn’t is funeral company InvoCare (ASX:IVC)the death numbers feared from COVID-19 haven’t eventuated and it was hit by restrictions on funerals. It too has been heavily shorted.