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Conventional wisdom is that "rising water raises all boats," but that's not always the case.
In fact, not a single one of the four stocks we've targeted as being ripe for a fall has gone along for the ride despite the fact that the S&P 500 tacked on 8.8% last month and the Dow moved higher by 9.15% over the same time frame.
All four of the companies I told you were ripe for failure are down double digits since I brought them to your attention as short candidates: Zoe's Kitchen Inc. (NYSE: ZOES), Twitter Inc. (NYSE: TWTR), GoPro Inc. (Nasdaq: GPRO), and Shake Shack Inc. (NYSE: SHAK).
Today I want to briefly check in on each and, of course, tell you how to position your money. It's not too late to get on board, and you haven't missed the trade.
These stocks still have plenty of downside ahead.
Here's what you need to know about how to play the situation.
Stocks to Short No. 1: Twitter Inc. (NYSE: TWTR)
Twitter reported Q3 2015 earnings last Thursday, and they were just bad enough to finally open up analysts' eyes to the reality we've been discussing for months at Total Wealth.
The company still posted an after tax loss of $132 million, its Q4 projections are lackluster at best, and the company added only 4 million users even as U.S. user growth remained almost totally flat in Q3. The cost of "ad-engagement" fell 39% year over year.
For once, headlines were almost on point as the stock took a 13% hit in after-hours trading:
…What If the Twitter Growth Everyone Is Hoping for Never Comes? – Fortune
…Twitter Investors have a New Worry About Twitter's Ad Revenue, and the Stock is Getting Creamed – Business Insider
…Twitter Tumbles After Warning – San Jose Mercury News
At the risk of sounding like a broken record, "hope" is not a viable investment strategy and never has been. Much of Twitter's appeal – I would say all – was based on nothing more than hope the stock would march to social media dominance and, hopefully, figure out a way to monetize 300 million users along the way. That simply isn't happening.
No matter which way you cut it, Twitter is still fundamentally flawed because it can be replaced at the click of a mouse. More than a billion people have tried the company and left.
All the "hope" in the world won't help Twitter if it cannot transform the users it does manage to keep into a viable revenue stream – an existential threat to the company I called attention to back in January that's still valid today.
I didn't hear anything from Twitter's C-suite during the last call that makes me think the company will succeed. Heck, there wasn't even anything to get excited about, at least not to me anyway.
If you acted on my Jan. 23 recommendation, congratulations on the double-digit profits you've had the chance to capture. If you're just joining us, it's not too late to get in on the trade.
I think Twitter's on borrowed time.
Stocks to Short No. 2: Shake Shack Inc. (NYSE: SHAK)
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean, and he's also the founding editor of Straight Line Profits, a service devoted to revealing the "dark side" of Wall Street... In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.