I’ve earned a lot since the 2022 bear market began. I did this by shorting shares of overvalued companies. These companies are clearly set to fail. It’s easy to spot these firms. They have unrealistic goals, tough competition, big challenges, poor products, bad management, or a mix of these. Picking the right stocks to sell is risky, but it can be profitable if you choose the right targets.
Knowing which targets to choose is equally part science and art. My approach involves looking at both the company’s fundamentals and price trends to uncover high return opportunities.
So here are three stocks I think are perfect for short selling. I believe they could fall by 75% or more.
Mullen Automotive (MULN)
Electric vehicle maker Mullen Automotive (NASDAQ:MULN) has a questionable business model and recently greatly increased its share count. On the share count front, the EV maker hiked its total number of shares outstanding to about 548 million from roughly 100 million. Moreover, according to another InvestorPlace columnist, Thomas Yeung, the automaker is likely to be thrown off the Nasdaq exchange in September, further decreasing its attractiveness to investors.
On the business model front, Mullen’s EVs reportedly “depend heavily on Chinese tech and design.” Two of the U.S. EV makers that I covered in the past–Ayro (NASDAQ:AYRO) and Electrameccanica Vehicles (NASDAQ:SOLO)– ran into huge problems with the Chinese-made EVs that they attempted to import to the U.S. Consequently, investors should be concerned about the quality of Mullen’s EVs.
And as I’ve noted in the past, Mullen has very little cash at its disposal , and its CEO, David Michery, has a questionable past.
Given all of these points, I view MULN as one of the best stocks to short sell at this point.
GameStop (GME)
GameStop (NYSE:GME) sells video games in physical stores. But most video games are now sold online. This is hurting GameStop. The retailer recently decided to mostly stop trying to boost its e-commerce business. This move took away its only real chance for growth and the only thing that could have helped GME stock.
On top of this, GameStop’s first-quarter financial results were worse than expected. The company also fired its CEO, Matthew Furlong. He was the fifth CEO in five years.
Investment bank Jeffries reacted to the news by lambasting what it sees as the company’s “lack of consistent strategic vision” Even more bearish was another investment bank, Wedbush, which contended “that GameStop is doomed.”
I believe that the disclosure by the company that Chairman Ryan Cohen has raised his stake in the firm is actually a bearish sign. That’s because, after Cohen similarly disclosed a bullish position in Bed, Bath and Beyond (OTC:BBBYQ) last year, he unloaded all of his investments i nthe name, and it eventually went bankrupt.
Lucid Group (LCID)
The bad news continues to roll in for Lucid Group (NASDAQ:LCID) and LCID stock. Most recently, the company reported that it had delivered only 1,406 EVs in the first quarter, well below the 1,835 EVs that analysts, on average, had expected.
Meanwhile, Bloomberg reported that Lucid was going to obtain about $3 billion from investors. However, the capital raise is likely to dilute the owners of LCID stock.
Moreover, the automaker continues to face extremely tough competition in the luxury EV space, and there’s no sign that its weak brand name has significantly improve.
LCID stock has an enterprise value of $12.4 billion, or a huge 16 times its sales in the 12-month period that ended in March, making the name greatly overvalued at its current levels. This it makes it one of those high-value stocks to short sell.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
