In investing terms, longing a stock essentially means buying a stock, with the hopes of it become higher to make a profit. The opposite can be said for shorting a stock which means selling a stock with the expectation of the price can become lower.
However, longing a stock isn’t the only way to make a profit.
Short selling too, can achieve the same purpose.
A brief explanation of short selling:
Short selling essentially means you borrow a stock, with the expectation to buy it back at a lower price in order to make a profit. The profit is realized when the stock is bought back at a lower price and returned. Borrowing of stock occurs through brokerages.
In terms of transaction volume, there is also short sell volume. Short sell volume of a stock is the total number of shares short sold in the entire market during a given period of time. This does not include any CFD shorts.
Heavy short selling may indicate bearishness, but it does not necessarily mean stock price will fall. That being said, short sell volume is merely an indicator, albeit an important one. It is also important to note the usefulness of the short sell volume indicator is only when used as a ratio with total volume.
Let’s take a closer look at which are the top 4 stocks with the highest ratio of short sell volume to total volume in 2017.
Taking the top spot is Noble Group. In our previous post about the top 3 stocks with the worst returns in 2017, Noble Group took the top spot with a -88% returns for 2017. It’s short sell volume to total volume ratio is at 45.61%.
An article on short selling published by Bloomberg briefly mentioned that Noble’s price plunge was caused by activist shorts, namely Iceberg Research.
As much have been said about Noble in the previous post, we shall move on to the next stock.
The second most shorted stock in 2017 is HPH Trust (SGD) at 39.3%.
Hutchison Port Holdings Trust is a Singapore-based container port business trust listed in 2011. It’s the world’s first publicly traded container port business trust.
HPH Trust’s portfolio consists of controlling interests in world class deep-water container port assets located in two of the world’s busiest container port cities by throughput – Hong Kong and Shenzhen. It is managed by Hutchison Port Holdings Management Pte. Limited.
For 2017, HPH Trust fell by 12.7%. The short sell volume was exceptionally high in the beginning of the year. The bears won for HPH’s case.
The 3rd most shorted stock in the Singapore Exchange is Golden Agri-Resources at 33.42%.
Golden Agri-Resources Ltd is a palm oil plantation company listed in 1999. The Company is engaged as an investment holding company. Its primary activities include cultivating and harvesting oil palm trees, processing fresh fruit bunches (FFB) into crude palm oil (CPO) and palm kernel (PK), refining CPO into industrial and consumer products, as well as merchandising palm products across the world.
In 2017, the stock price fell 14% and short sell volume was high throughout the middle of the year and but eventually decreased near the later part of the year. For Golden-Agri’s case, the bears clearly won.
The 4th stock with the highest short sell volume ratio is Suntec REIT.
Suntec Real Estate Investment Trust is a Singapore-based company, which is engaged in investing in income producing real estate and real estate related assets, which are used for commercial purposes, with the primary objective of achieving returns from rental income and for long-term capital growth. The Company operates in three segments: retail, office and convention.
Suntec REIT had a high short sell volume ratio of 29.16% throughout 2017. In the middle of the year, short sell volume spiked but it did not affect the prices as much.
For the entire year, Suntec REIT actually gave a return of 30%, despite having high short selling volume ratio.
From this case, it can be said that short selling volume is an indicator that should not be used by solely to determine the direction of share prices. In other words, it means if “other people” are selling because they expect prices to go lower, it’s possible that prices will not follow suit.
Short selling volume, like total volume, should only be used as a rough reference to gauge pressures on price.
More importantly, it should be utilised as a ratio to total volume.
How to access and use Short Sell Volume indicator on our charts:
- Click “Indicators” tab.
- Select “Short Sell Volumes”.
- Enjoy and remember to use it as a ratio to total volume!
*Hint: mouseover total volume to see absolute value.
If you like this article, we’ve got more. Here’s an invitation to join our community and network of investors who’re actively sharing. It’s free and most importantly, these investors are out to help one another to get better investing outcomes.
Disclaimer: All research reports are of the analysts’ personal opinions and do not in any way reflect InvestingNote’s official opinion. InvestingNote does not issue a buy or sell recommendation on any security, and any research paper published by The Signal Blog is purely for informative purposes. This research is based on current public information, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates and forecasts contained herein are as of the date hereof and are subject to change without prior notification. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual InvestingNote users. InvestingNote users should consider whether the information in this research is reliable, and suitable for their particular circumstances and, if appropriate, seek professional advice. The price and value of investments referred to in this research and the investment income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.