Here are 6 ASX Stocks That Are Shorted. Are the Shorters Right or Wrong?

There are always ASX stocks that are shorted by investors, willing to bet that a stock going down will continue to, or that a stock trending upward will correct itself. This is done by investors borrowing shares to sell at the current price, hoping to buy them back cheaper when their prices drop.

Short selling is like a mood ring for the market, showing us how skeptical or worried investors are. Those who short sell are often seen as the doubters, the ones who spot overpriced stocks or foresee trouble before it hits. The stocks they pick can give us insights into what might be going wrong with a company, a particular industry, or even the wider economy.

Are short sellers the smart skeptics or are they missing the mark?

 

6 ASX Stocks That Are Shorted. Are the Shorters Right or Wrong?

 

Boss Energy (ASX:BOE)

Boss is just one of several uranium stocks heavily shorted right now, but we’ll restrict our list to just one and select the ‘most shorted’ company, which Boss is with over 20% of its shares shorted.

Obviously Boss’ fate cannot be disassociated with the uranium industry dynamics. Investors had been hopeful that the world could turn to nuclear power as an alternative to coal-fired power that doesn’t have the price tag that wind, solar and hydro energy does. Plus, we have to source energy for AI somewhere. Barrenjoey has estimated that there is a 20m pound supply deficit now and this will grow to 25m by 2030 – and even that assumes mine supply would grow by 50m pounds.

But the past several months have been bad for the market. Peter Dutton’s nuclear plan appears to be unpopular with voters, and whatever happens come election day, it’ll take some time to get his proposed nuclear reactors built and in action. The US uranium industry will be hit by Trump’s tariffs given it imports significantly from Canada.

Turning specifically to Boss, it has the Honeymoon project in South Australia that restarted in FY25. Boss has guided to 850,000lbs production for the year. However, the company has had commissioning challenges, and it could be hit by tariffs in a way that its peers with projects in America (like Peninsula Energy) will not. Boss has tried to diversify, taking a 30% stake in the Alta Mesa project in south Texas, but it won’t derive as much upside given it has a minority stake.

 

IDP Education (ASX: IEL)

IDP Education, known for its language testing and student placement services, is on the radar of short sellers who currently hold a 10% short interest in the company. The recent tightening of student visa regulations in crucial markets has already dented the company’s performance, and things could get worse before they get better. On July 1 2024, the government substantially increased visa application fees (to A$1600), which are non-refundable if unsuccessful and are multiple times several competing countries’ equivalent fees (Canada’s is only ~A$185 for instance). There is also talk of students needing to sit an entry exam to get through. This is fuelling a bearish outlook among investors.

Despite these hurdles, there are signs that the market might be underestimating IDP Education’s strength. The company’s potential for growth remains robust, buoyed by the ever-growing global demand for higher education and language proficiency tests. Additionally, a vote of confidence comes from within the company itself, with non-executive director Tracey Horton buying shares amid the downturn. This insider purchase might signal a strong belief in the company’s enduring value.

While the market’s wary response to the regulatory changes is understandable, it could well be an overreaction. As the dust settles and IDP Education adjusts to these new rules, there’s a good chance the company’s stock will rally. This makes the current short positions potentially risky, especially if market sentiment takes a positive turn. Nonetheless, it will likely take both sides of Australian politics to take a U-Turn in their attitudes towards foreign students, and this could take a while…we’re talking after the federal election.

 

Mineral Resources (ASX:MIN)

It is easy to kick a company when it is down and this is what happened to Mineral Resources. Ever since Chris Ellison declared at his company’s post-FY23 AGM in November 2023,’ The past 12 months have been the most productive in MinRes’ history’, it appears that statement was a kiss of death.

Several problems including weak iron ore and lithium prices, concerns about whether or not it can access critical minerals subsidies in the US as well as its debt balance, came home to roost. The company’s underlying net profit was only a fifth of FY23, at $158m, while its underlying earnings fell by 40% to just over $1bn. It decided not to pay a dividend for the first time in a decade. The only thing that spared Min Res’ group revenue from declining was its Mining Services Business. Adding insult to injury, Chris Ellison fell on his sword, agreeing to stand down ‘in the next 12 months’ after allegations of financial misconduct.

As we concluded our most recent article on Min Res with (from March 2025), we think investors should wait to see who the successor CEO will be, and second if lithium prices recover – not to 2021 levels, but above current ;levels that render many projects unprofitable.

 

Liontown (ASX:LTR)

From rags to riches to…rags again? Liontown discovered and bought the Kathleen Valley Lithium project into production. Kathleen Valley is one of the most significant new, long-life lithium projects being constructed anywhere in the world. It has a current Mineral Resource Estimate of 156Mt at 1.4% lithium. Over 80% of this is Measured or Indicated.

As with Mineral Resources, the trouble with this company is that its margins are being squeezed by subpar lithium prices. The company is making a bold bet by increasing its production at the same time other mines (like Mt Cattlin and Pilgangoora) are ramping down production. Investors think LTR will get squeezed further in doing so, but LTR reckons demand will rebound and it’ll serve as a key supplier. Time will tell who will be right and who’ll be wrong.

 

Lifestyle Communities (ASX:LIC)

Lifestyle Communities is one of the few property stocks that operate retirement facilities. Instead of selling parcels of land and moving on, the company only sells the house and offers long term leases on the land. The communities, which are all in Victoria, are aimed at over 55s who are retired or semi-retired and offer low maintenance living with resort-style facilities.

Obviously this demographic isn’t faring so well with the cost of living – or at least whose who would need to turn to ‘land leases’ in retirement. Construction supply chain issues impacted the company. Media reports of unethical behaviour in new home settlements haven’t helped either. Plus, after more than 2 decades after founding the company, James Kelly announced he was standing away in October last year.

 

Polynovo (ASX:PNV)

PolyNovo is a biotech company behind a technology called NovoSorb. NovoSorb aids recovery in ailments where the body may struggle to rebuild its own cells, particularly severe burns. It is a 2mm thick biodegradable polymer foam wound scaffolding that provides faster and better results compared to skin grafts or lattice products. It provides a home for cells to migrate and disrupts the ability of collagen protein fibres to form knots and bundles.

PolyNovo had a solid FY24, recording $92m in NovoSorb sales which was over 50% higher than in FY23. Notwithstanding that it has been FDA approved and commercially launched, it is conducting further clinical trials to allow for the expansion of its product portfolio and the consequential increasing of total addressable markets.

However, the company is trading at a very high P/E – up there with the highest among large cap ASX stocks – and perhaps what goes up must come down.

 

Going against the odds?

Short selling is like playing in the high stakes table—it can lead to big wins but also comes with its fair share of risks. While the skepticism towards these stocks is based on real concerns, it’s crucial to dig deeper into their long-term prospects and basic strengths.

It’s important to remember that short interest isn’t a surefire predictor of a stock’s future trajectory. Sure, short sellers might get it right now and then, but the market is always shifting, and today’s losers could be tomorrow’s winners. Each of these companies has the potential to turn things around and reward those investors who dare to go against the grain.

But of course, there is also the risk that things could turn even more pear shaped than they already are, and the ‘long’ investors’ losses would be short sellers’ gains.

 

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