if you’re wondering why CAT is down 4.6% today below its $4 support level it might have something to do with this AFR article on short selling of ASX tech stocks. This could create a buying opportunity for the long term? https://www.afr.com/markets/equity-markets/short-sellers-are-targeting-asx-tech-stocks-on-distorted-prices-20260114-p5ntvc
Here are a few excerpts from the article:
“Short sellers are ramping up their bets against technology stocks on the ASX amid toppy valuations and lingering inflation concerns in Australia that have left the possibility of an interest rate hike on the table.
While technology companies are typically more sensitive to higher borrowing costs, Plato Asset Management’s David Allen said the main driver behind the growing short interest was the limited number of growth companies listed on the ASX.
In other words, local investors looking to ride the global tech rally have chased a handful of perceived winners, such as buy now, pay later group Zip; Catapult; WiseTech Global; and DroneShield, which has inflated share prices.
“Australia has a shortage of genuine growth companies and this is creating, frankly, distorted valuations in the domestic technology sector,” Allen said.
“With too much capital chasing too few opportunities, scarcity is driving prices well beyond fundamentals. This is why you see this increased short interest across the sector.”
Allen, who runs Plato’s $3 billion Global Alpha Fund, noted that just three local tech companies grew revenue by more than 20 per cent in the past year. The hedge fund initiated a short position – that is a bet that the share price will fall – on sports analytics company Catapult in December. The stock has fallen nearly 20 per cent since then.”
“Similarly, short interest in Catapult has tripled since late November, from 1.25 per cent to 3.82 per cent. This comes after the stock price doubled last year to a high of $7.72 in late October. It’s now buying $4.13 and has a forward PE ratio of 57.14.”
Disc: Took a nibble today
