Short watch: Travel demand triggers some covering, tech still the favourite target for shorting

Market Index reviews some of the most crowded and rapidly rising short bets on the ASX.

Knowing which ASX stocks are being shorted can provide some useful insights and perspectives as to why investors are betting against certain companies.

Short sale data is four business days behind today's date as reporting isn't mandatory until three business days post trade. 

This article refers to open ASX short positions on Tuesday, 26 April 2022.

Top 15 most shorted

Top risers 

#1 Laramide Resources

Laramide (ASX: LAM) owns large development stage uranium projects in the US and Australia. Its shorts rose 4.45 percentage points to 7.39%.

Laramide is a very odd company. Its got a market cap of just $1.1m but $9m cash as at March 31.

The stock is also extremely illiquid. Its not often you see a stock trading with practically no buyers, massive spreads gaps in sellers and the share price trading above what the highest buyer is willing to sell for.

Source: Commsec (04/05)

#2 Block

Block (ASX: SQ2) shorts rose 0.98 percentage points to 6.15%.

Block has mostly been trading sideways since its CDIs listed on the ASX on January 20.

Though, its US-listing is down -36.6% year-to-date and -53% in the past 12 months.

The rise in shorts makes sense in the context of rising interest rates and the Fed's anticipated balance sheet normalisation, factors which poise headwinds against richly valued tech stocks.

The Nasdaq is in a lot of pain and according to Sundial Capital:

• More than 45% of stocks down -50%

• More than 22% of stocks down -75%

• More than 5% of stocks down -90%

After topping out earlier this year, it does feel like tech stocks could be in for a drawn out reality check.

#3 Bank of Queensland

Bank of Queensland (ASX: BOQ) shorts rose 0.93 percentage points to 3.96%.

The company stock sold-off -6.3% on April 14 after a mixed first-half earnings result.

The main driver of the decline was a 12 bps decline in net interest margins to 1.74%, impacted by customers switching from variable to lower margin fixed rate loans and an increase in liquid assets.

Bank of Queensland went ex-dividend on Wednesday for 22 cents per share, which more than covers the -2.28% decline.

Source: TradingView, Annotations by Market Index

Top fallers 

#1 Flight Centre

Flight Centre (ASX: FLT) shorts fell -0.97 percentage points to 17.26%.

Before the sharp reversal this week, Flight Centre rallied around 20% between April 12 and May 2. This was triggered by:

• A series of strong US airline earnings including United, Southwest and American Airlines

• Qantas expecting to return to profitability in FY23

The uptick in share price might have prompted some short covering.

#2 Temple & Webster Group

Temple & Webster (ASX: TPW) shorts fell -0.92 percentage points to 5.19%.

Temple & Webster is among several beaten up eCommerce names like Kogan (ASX: KGN), Booktopia (ASX: BKG) and MyDeal (ASX: MYD). The stock is down -53% year-to-date and -63% from last September all-time highs.

The short covering coincides with the small uptick in Temple & Webster shares on April 26 and 27, indicating a potential floor around the $5.90 level.

Source: TradingView, Annotations by Market Index

It looks like the shorts covered too soon given another -14.5% decline this week.

#3 Webjet

Webjet (ASX: WEB) shares fell -0.9 percentage points to 9.64%.

Likely the same catalyst and short covering as Flight Centre.