Which ASX stocks are shorters targeting and covering this week: Discretionary and Resources

Welcome back to the Short Seller Series, where we recap the most shorted stocks on the ASX as well as those experiencing notable rises, or falls, in short interest over the past week.

Short selling data is four days behind today's date because reporting is not mandatory until three business days after the trade. The data below refers to short interest changes for stocks between 13-19 June.

Most shorted stocks

What’s changed

• IDP Education rises to #1 from #2. The stock sold off 20.8% between 26 May and 1 June after Canada opened up its market to rivals for visa English language testing. After a brief bounce, the stock is now down 11% in the last seven sessions.

• Lendlease rises to #6 from #7. On Sunday, the company completed a PLLACes (Presold Lendlease Apartments Cashflows) transaction. UBS estimates US$550 million would be received and preserves project profit and reduces balance sheet pressures. On Tuesday, the investment bank reaffirmed a BUY rating with a $10.30 target price. The property developer was also selected to redevelop Melbourne’s Queen Victoria Market – A renewal project valued at $1.7 billion. Lendlease price action has been volatile over the past month but it’ll be interesting to see whether or not the two recent developments triggers some covering from shorts. 

Lendlease 3-month price chart (Source: Market Index)

Where are shorters going?

The below table observes the stocks with the highest percentage change in short interest compared to the prior week.

AGL is a name that might stand out, with short interest beginning to tick up after its monstrous 65% from March lows. Earlier this month, the company guided to FY24 net profit of between $580 million and $780 million, up from its prior guidance of between $255 and $285 million. 

High gas prices and power purchase agreement prices are pointing to a strong near-term outlook for the utilities provider. But brokers are beginning to see limited price upside after such a share price re-rate. Across 10 sell-side brokers, the average price target sits at $10.40. The stock is also down around 3.0% from 22 June highs.

AGL 12-month price chart (Source: Market Index)

Syrah Resources’ short interest has grown to almost 7% meaning it is now the 15th most shorted stock on the ASX. The stock is around breakeven in the past month and is down almost 60% year-to-date amid higher-than-expected production costs and weak graphite prices. A Fastmarkets report from 30 May highlights the sluggish demand side:

• “The market is very quiet now. One client from Japan sent out inquiries the other day, but we haven’t heard any feedback after providing the quotation. Buyers tend to test the market, but the buying appetite is low,” a trader in China said.

• “It is difficult for spherical graphite producers to make profits these days. Many producers tend to cut production with uncertain restart schedules,” a producer source in China said.

Syrah Resources 12-month price chart (Source: Market Index) 

Where are shorts covering?

Short interest in Megaport has hit levels not seen since July 2022. Between April 2022 and March 2023, its short interest was always around 9-11%. The AI hype has helped the stock trade around 9% higher year-to-date and up 19% in the last 12 months.

Megaport 12-month price chart (Source: Market Index)

Short interest in Pilbara Minerals climbed to highs of 7.7% on 9 June – a level not seen since the previous lithium bear market in 2018-20. Shorts are beginning to unwind amid the recent resurgence in both lithium spot prices and the stock itself. Earlier this week, PLS briefly rallied to a five-month high.

Pilbara Minerals 12-month price chart (Source: Market Index)