Short-Selling Spotlight: 2 Vulnerable Stocks in Today's Market

March 25, 8:01 am

As the market ebbs and flows with economic tides, investors continually seek out not just opportunities to buy, but also when appropriate, stocks that may present a short-selling advantage. Today, we delve into two stocks that based on a synthesis of alternative data and fundamental analysis, might be poised for a potential decline, making them candidates for short-selling. For the uninitiated, short-selling is a strategy where investors borrow shares of a stock they believe will decrease in price, with the intention of selling them and then repurchasing them at a lower price.

Kirkland's: A Decorative Decline?

First on our radar is Kirkland's, a specialty retailer of home decor. Over recent days, Kirkland's has seen its stock take a slump, with a 4% decrease, currently trading at $2.50 per share. Peering into alternative data, the scenario for Kirkland's appears rather bleak, with a consistent downturn in some key off-market indicators. The company's digital presence is dwindling, reflected by a long-term decrease in Twitter and Instagram followers.

This faltering online traction correlates with a year-over-year drop in revenue, suggesting a deeper struggle to maintain consumer interest and sales growth. Most troubling, however, may be the internal sentiment, as a low business outlook voiced by employees could suggest challenges in operational morale and performance. Coupled with a month-over-month drop in Facebook fans and web traffic, these elements come together to spell out a potentially continuing struggle for Kirkland's, potentially making its stock ripe for a short.

Funko: Pop Culture to Pop Bubble?

The next company in question is Funko, known for its pop culture collectibles. Funko's share value has dipped by 4.7%, currently valued at $6.34. Alternative data signals are flashing warning signs here as well: a year-over-year drop in revenue hints at a fundamental malaise, while a sustained decrease in social media followers (both on Twitter and Instagram) suggests a waning brand engagement.

A diminishing trend in job posts may indicate a company tightening its belt, a sentiment echoed by the shrinking numbers of mobile app downloads. Perhaps most telling is the insider selling, often a marker of reduced confidence in a company's near-term prospects by those who know it best. The overall low business outlook from the employees further diminishes the appeal of Funko's shares. All things considered, Funko might be transitioning from a collector's item to a collector's dilemma, potentially marking its stock as another candidate for a short position.

Whether due to declining digital presence, internal company sentiment, or financial fundamentals, both Kirkland's and Funko present compelling cases for consideration as short-selling opportunities. For those looking to capitalize on downward trends, these stocks may offer a canvas for potential profit in an otherwise uncertain market landscape. However, it's important to remember that short selling, while potentially lucrative, comes with high risk and potential for significant losses if the market does not move as anticipated. Investors should perform their due diligence and consider the risk-reward ratio before engaging in any short-selling activity.

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