3 High-Risk Stocks Primed for Shorting

June 25, 8:00 am

As a financial journalist with a keen eye on alternative data, I continually scan the market horizon for signals that betray a company's underlying performance. Today, I'm highlighting three stocks where alternative data points to brewing trouble, potentially presenting lucrative shorting opportunities for the well-informed investor.

Kirkland's: A Home Decor Retailer Losing its Luster

Once a charming destination for home decor enthusiasts, Kirkland's appears to be facing a decline that's reflected in its social media disengagement and shrinking digital footprint. Trading at $1.76 per share, with a minor uptick of 1.1% in recent days, the company's decreasing Twitter and Instagram followings, coupled with reduced job postings and a notable dip in year-over-year revenue, paint a grim picture. The dwindling web traffic and a month-over-month decline in Facebook fans further dampen the company's prospects. Moreover, a consistently low business outlook reported by employees suggests an eroding internal confidence, buttressing the case for a potential short position.

ContextLogic: A Waning E-commerce Player

ContextLogic, the company behind the e-commerce platform Wish, is on shaky ground. The stock has seen a 9.2% decline to currently stand at $5.65 per share. The slipping grip on mobile app downloads and social media traction indicates eroding consumer and market confidence. Insiders selling shares is often a red flag, and when combined with a stark year-over-year revenue fall, it suggests that the market's hope for a turnaround may be misplaced. Given these bearish signals, ContextLogic may be primed for investors looking to profit from downward momentum.

Sinclair Broadcast Group: Struggles Behind the Screen

Sinclair Broadcast Group represents another potential short. Despite an apparent 4% rise in stock price over the past days, now at $11.30 per share, the company is not without its challenges. The media conglomerate's decreasing Instagram following and job postings could be indicative of operational and growth issues. When a company's employees harbor a worrisome business outlook, it seldom bodes well for its stock's performance. Like the other two candidates, declining web traffic adds to the case for considering Sinclair Broadcast Group as a shorting candidate.

While shorting stocks carries inherent risks and requires meticulous analysis, the alternative data suggests that Kirkland’s, ContextLogic, and Sinclair Broadcast Group could be facing headwinds strong enough to consider them as shorting opportunities. As with any investment strategy, due diligence and caution cannot be overstated.

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