Short Selling

The 5 most-shorted Australian stocks this year

Wed 19 Apr 23, 10:24am (AEDT)
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Key Points

  • Lithium plays dominated the top 10 most shorted stocks at the start of the year, with four names on the list - hardly a surprise given the volatility in lithium spot prices so far.
  • The impact of tougher market conditions on discretionary spending was a feature for a number of the companies included in the list, ranging from betting, travel and retail shopping.
  • Technology also makes an appearance in the shorts, a sector that has been hit hard in the last year.

Investors take out short positions on companies when they believe the price of their shares is set to fall. In volatile markets, you might expect the names on a list of shorts to vary somewhat but the most-shorted stocks in Australia this year have remained largely consistent.

In this wire, we’ll take a look at the five most shorted stocks in Australia this year and what their prospects are going forward - despite many short sellers betting big on their short-term downfalls.

The data used in this article is sourced from ASIC's short positions report table and covers 3 January 2023 to 11 April 2023. I averaged the daily % of total products in issue reported as short positions to determine which stocks were most shorted for the year to date.

The most shorted stocks

5. CORE LITHIUM (ASX: CXO)

Average % of Total Product on Issue Reported as Short Positions - 9.52%

Lithium plays were a market favourite in 2022, less so in 2023 off the back of falls in prices.

A recent report from UBS noted short-term weakness in lithium spot prices off the back of weaker Chinese demand but argued the longer-term prospects were still favourable. Lithium, after all, still plays a significant role in the green energy transition, particularly for use in electric vehicles.

In a report dated 18 April, it stated “We continue to see a growing deficit later this decade. Our review of the currently slated supply response suggests higher prices are required.” The firm had revised its forecasts upwards based on supply, Chinese lepidolite production, consensus forecasts and industry participant feedback.

Core Lithium has a number of lithium projects in the Northern Territory and South Australia, with the Finniss Project a key focus. The project sits within the Bynoe Pegmatite Field and covers over 500km2 of granted tenements. It hosts 15 million tonnes (Mt) at 1.3% lithium oxide (Li20). This represents a high quality. As with Sayona Mining, Macquarie holds an outperform rating on Core Lithium. Core Lithium is highly subject to movements in spot prices for lithium and Macquarie view this as a key risk to earnings and valuation. In a report on 14 April, Macquarie also noted that Core Lithium has yet to commence production on the Finniss project and there were risks to capital and operating cost assumptions.

CXO ASX Chart 1 year performance
1 year Share price performance CXO v ASX200. Source: Market Index, 17 April 2023

4. SAYONA MINING (ASX: SYA)

Average % of Total Product on Issue Reported as Short Positions - 9.52%

Another lithium play for the top five. Keen eyed readers may notice it has the same average as Core Lithium - going out decimal points, the average is 9.517% for Sayona compared to 9.515% for Core Lithium.

Sayona is an emerging lithium producer with projects in Quebec, Canada and the Pilbara in Australia. Its Australian operations also include gold.

It recently announced a major resource expansion of its Moblan Lithium Project in Quebec which represents one of North America’s single largest lithium resources. Off the back of this announcement, Macquarie revised its earnings forecasts for 2024 and 2025 upwards. It holds an outperform rating on Sayona.

1 year Share price performance SYA v ASX200. Source: Market Index, 17 April 2023
1 year Share price performance SYA v ASX200. Source: Market Index, 17 April 2023

3. MEGAPORT (ASX: MP1)

Average % of Total Product on Issue Reported as Short Positions - 10.02%

Megaport offers Network as a Service (NaaS) solutions for companies on cloud connections. In the latest reports in February, it delivered a key profitability measure of EBITDA positive, up 147% on the year previous.

Like other technology stocks that are yet to be profitable, Megaport has been heavily punished.

In its recent Equity Outlook for Q2 2023, Morningstar viewed the company as undervalued and on the cusp of generating cash.

“Megaport should continue to benefit from increasing global reliance on data traffic. With its software-defined network offering, it facilitates connections between data centres and/or premises for enterprises to integrate their architecture and connect to cloud providers,” said analysts Roy van Keulen and Shaun Ler.

1 year Share price performance MP1 v ASX200. Source: Market Index, 17 April 2023
1 year Share price performance MP1 v ASX200. Source: Market Index, 17 April 2023

2. BETMAKERS (ASX: BET)

Average % of Total Product on Issue Reported as Short Positions - 10.74%

Betmakers provides backend technology for bookmakers and has seen substantial falls in share value. The company has had a tough start to the year, with substantial shareholder Tom Waterhouse selling $4.6 million of his shares in March. Prior to the sales, Waterhouse was the third largest shareholder.

At the start of April, it announced a partnership with The Stronach Groups 1/ST Content to distribute its Global Race Network’s race meetings through international wagering markets, including the UK and Ireland via SKy Sports Racing from 1 May 2023.

The business is not currently profitable though some analysts suggest it may actually turn a profit this year.

 year Share price performance BET v ASX200. Source: Market Index, 17 April 2023
1 year Share price performance BET v ASX200. Source: Market Index, 17 April 2023

And the most shorted...

1. FLIGHT CENTRE (ASX: FLT)

Average % of Total Product on Issue Reported as Short Positions - 12.50%

Flight Centre has consistently topped the list so far for 2023 (and has been on the most-shorted list for some time now). The company rallied strongly in the first quarter off the back of pent-up travel demand. The global slowdown has yet to hit travel demand.

Post Flight Centre's reports in February, Michael Jenneke, Portfolio Manager for Australian Equities at Credit-Suisse Wealth Management, viewed the overall prospects for the travel industry as positive.

“On the risk side, a significant economic downturn or recession could pose recovery risks in both corporate and leisure travel demand. How this translates at the FLT level is that the company is still recovering, so if there were setbacks to the demand recovery, that would raise its risk profile,” he said.

In an April report on Global Travel Trends from Macquarie, it tipped Flight Centre to outperform in coming months as it continues to benefit from stronger than expected consumer spending in its leisure businesses and recovery in its corporate segment is outpacing its peers.

1 year Share price performance FLT v ASX200. Source: Market Index, 17 April 2023
1 year Share price performance FLT v ASX200. Source: Market Index, 17 April 2023

How shorting positions have changed for the top five since the start of the year

% of total product in issue reported as short positions 11 April 2023
Source: ASIC. Data 3 January 2023 - 11 April 2023.

And the rest of the top 10 for your reference

6. ZIP Co (ASX: ZIP)

Average % of Total Product on Issue Reported as Short Positions - 8.26%

7. Liontown Resources (ASX: LTR)

Average % of Total Product on Issue Reported as Short Positions - 7.33%

8. Pointsbet Holdings (ASX: PBH)

Average % of Total Product on Issue Reported as Short Positions - 7.02%

9. Lake Resources (ASX: LKE)

Average % of Total Product on Issue Reported as Short Positions - 6.94%

10. NextDC (ASX: NXT)

Average % of Total Product on Issue Reported as Short Positions - 6.90%

This article was first published for Livewire Markets on Wednesday, 17 April 2023.

 

Written By

Sara Allen

Content Editor

Sara is a Content Editor at Livewire Markets and Market Index. She is a passionate writer and reader with more than a decade of experience specific to finance and investments. Sara's background has included working at ETF Securities, BT Financial Group and Macquarie Group. She also holds a degree in psychology which drives a continued fascination with how human behaviour drives and is driven by investments and market activity.

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