TOL - 8th Nov, 2024
Buy Hold Sell: Hunting for value among 5 of the ASX's most shorted stocks
Sometimes, the short sellers get it wrong. So, are there any opportunities among the most shorted ASX stocks? Find out in this episode.
Lithium darling Pilbara Minerals has overtaken Flight Centre as the most-shorted stock on the ASX. After what seems like years at the top of the list, the travel company has dropped down to the 30th most-shorted stock on the ASX - with a short interest of 5.75%.
Today, only two of the 10 most-shorted stocks are not miners - while out of the top 20, only seven stocks are not within the minerals and resources sectors. It's fair to say then that the market remains bearish on the outlook for many of these stocks - with lithium and uranium miners heavily featured in the list. You can check out the list of the 20 most shorted stocks on the ASX below.
| Number | Ticker | Name | Short Interest |
| 1 | ASX: PLS | PILBARA MINERALS | 19.22% |
| 2 | ASX: BOE | BOSS ENERGY | 15.38% |
| 3 | ASX: IEL | IDP EDUCATION | 14.82% |
| 4 | ASX: PDN | PALADIN ENERGY | 14.64% |
| 5 | ASX: SYR | SYRAH RESOURCES | 12.78% |
| 6 | ASX: LTR | LIONTOWN RESOURCES | 10.15% |
| 7 | ASX: LYC | LYNAS RARE EARTHS | 10.08% |
| 8 | ASX: MIN | MINERAL RESOURCES | 9.93% |
| 9 | ASX: DYL | DEEP YELLOW | 9.86% |
| 10 | ASX: DMP | DOMINO PIZZA ENTERPRISES | 9.14% |
| 11 | ASX: KAR | KAROON ENERGY | 8.69% |
| 12 | ASX: SYA | SAYONA MINING | 8.35% |
| 13 | ASX: ADT | ADRIATIC METALS CDI 1:1 | 7.98% |
| 14 | ASX: CTD | CORPORATE TRAVEL | 7.89% |
| 15 | ASX: CTT | CETTIRE | 7.83% |
| 16 | ASX: SGR | STAR ENTERTAINMENT GROUP | 7.72% |
| 17 | ASX: BGL | BELLEVUE GOLD | 7.56% |
| 18 | ASX: LIC | LIFESTYLE COMMUNITIES | 7.40% |
| 19 | ASX: SEK | SEEK | 7.12% |
| 20 | ASX: GMD | GENESIS MINERALS | 6.80% |
Data from shortman.com.au
So, is there any value among the most shorted stocks on the ASX? Or should investors be steering clear of these stocks?
To find out, Livewire's James Marlay was joined by Tribeca Investment Partners' Jun Bei Liu and ClearLife Capital's David Moberley.
They analyse three of the most heavily shorted stocks on the ASX - including Boss Energy, IDP Education and Seek - and each name a stock that they believe could see a short squeeze.
Note: This episode was recorded on Wednesday 6 November 2024. You can watch the video, listen to the podcast, or read an edited transcript below.
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Edited Transcript
James Marlay: Hi there, folks. And welcome to Buy Hold Sell, brought to you by Livewire Markets. My name's James Marlay. And today we're going to be looking at five of the most shorted stocks on the ASX. Have a bit of a hunt around to see if there is some value there. Here joining me on the show today I have Jun Bei Liu from Tribeca and Dave Moberley from ClearLife.
Jun Bei Liu, I'm going to start with you. Uranium player Boss Energy, it has a short interest of around 15%. Is it a buy, hold or a sell?
Boss Energy (ASX: BOE)
Jun Bei Liu (BUY): It's a buy. We've got a team of analysts looking at uranium very closely. And this business has gone through its challenges, a bit of production issues, a bit of management sell down. I think right now we are seeing uranium prices around the world being reasonably stable and pretty well-supported, and yet uranium equities haven't really come back. Hence, why we see such a high short interest. And we do think it's at a very high risk of being a short squeeze, which means that short sellers will have to buy back their shares in one go. And so we do see that risk as being quite material.
James Marlay: A buy from Jun Bei Liu. David, its shares are down 26% over the past 12 months. Buy, hold or sell on Boss Energy?
David Moberley (HOLD): Boss is a hold for us. We are very positive on uranium's supply-demand fundamentals. We like the commodity from a top-down view. We prefer to avoid commodity companies and that's another one that saw a bit of inside of selling. So we prefer other names in the space.IDP Education (ASX: IEL)
James Marlay: Okay, next up we're going to be talking about IDP Education. A stock I know you have followed for quite some time. A former darling, it's had a few stumbles, share price is down 39% for the year. Buy, hold or sell?
David Moberley (HOLD): It's a reluctant hold from us. I think there's really a strong medium-term opportunity for patient capital in that stock. However, short term they have significant headwinds. The regulatory push-back around international students globally has been quite strong and they're obviously impacted by that. But they still have a very strong market position in both high-stakes English language testing and student placement. So, patient capital buy, but short-term hold.James Marlay: Jun Bei Liu, 15% short position on IDP Education. Buy, hold or a sell?
Jun Bei Liu (SELL): I would sell it. I do agree with the long-term story, I think this company is in a good position and all that. But for the next 12 to 18 months, which could even be two years, its key markets are going through policies where they reduce student numbers. And now I know unless you're expecting some of these to come through, but on the way down, no one really can forecast operating deleverage properly. We've seen that again and again with every company. Where revenues fall quite a bit, the cost doesn't go down as much, especially with a company like IDP. And then the profit can evaporate. So, I think in that kind of environment, it's very, very hard to really know how much earnings downside there is simply because of the fixed cost base. I think it's just too challenging to hold it with that kind of revenue environment.Seek (ASX: SEK)
James Marlay: Okay, so that's a sell. All right, let's stay with technology. We're going to go to online classifieds, job ads - Seek, it's been a bit of a tough environment. Unemployment is pretty low still, it has a short interest of 7%. Buy, hold or a sell?
Jun Bei Liu (BUY): It's a buy. I think it has underperformed meaningfully against others such as REA or CAR Group. Clearly, its earnings were being downgraded because the job market and the Seek job index have been pretty weak. We are starting to see green shoots. And should that actually start to be consistent it'll be very positive. Should that continue its trend, I think this company absolutely will have quite a significant earnings upside. And aside from that, even based on the current forecast, this company is the cheapest it's ever been. So, I think with a 12-month view, this company has a far higher share price upside compared to the other classifieds.James Marlay: Okay. It's really lagged its peers, as Jun Bei said, in the tech index. Buy hold or a sell on Seek?
David Moberley (BUY): It's a buy from us as well. As Jun Bei highlights, we think it's probably the bottom of the cycle for the job ads on the Australian side of the business. One of the things we've been looking at is stripping out. They've got a VC fund there called the Seek Growth Fund. If you strip that out of the valuation, it's actually even more attractive from a valuation perspective. And if you're positive on private markets opening up and asset realisations, there could be further upside from that.James Marlay: Okay, we've asked both our guests to bring along a stock that's got a high short interest that they think the short sellers could have wrong and might need to scramble to cover. David, I'll start with you. What's the one that the short sellers are getting wrong?
Pilbara Minerals (ASX: PLS)
David Moberley: We're quite negative on lithium, but I would flag Pilbara as one that's got a bit of risk for a squeeze. 20% of the free float is shorted, with about 18 days to cover. Whilst lithium is negative at the moment, we are starting to see some signs of rationality come in. We've seen very high-cost mines starting to shut. And Pilbara's got a net cash balance sheet. It's quite a good quality mine, it's low cost and if I had a preference in the space, it'd be that one.James Marlay: Okay. Jun Bei, what about you? What's one that is heavily shorted that you think might have a better outlook? Could be a candidate for a squeeze?
Flight Centre (ASX: FLT)
Jun Bei Liu: You can't go past Flight Centre right now. I must say I might be digging a hole for myself because they've got an update coming soon. Flight Centre recently had a slight downgrade to its earnings outlook. The travel sector is slowing somewhat after many multiple years of boom. Now, it's still growing but not as much as what the consensus is expecting. So while the company hasn't really officially given guidance for 2025, they said they'll come through with their AGM. And I think with the share price down 30% in the last few weeks, that is well and truly priced in. This company is not expensive and consensus still has not expected the 2% target that they put out there. And should they get anywhere closer, there's quite a lot of upgrade. For the time being, it's a little bit weaker, but I'll be using it as a buying opportunity. I think the consumer's doing fine and travels doing alright. It's just slowing down some more and it's not an expensive consumer company.James Marlay: Okay, great. Thank you very much. Well, ladies and gentlemen, that's all we have time for today. I hope you enjoyed that episode of Buy, Hold, Sell. Remember, subscribe to the YouTube channel. We're adding fresh content just like this every single week.
Are there any heavily shorted stocks that you are buying today?
Let us know in the comments section below. What are the short sellers getting wrong?
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Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.
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Livewire Markets
Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.
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Livewire Markets
Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.
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