2 Stocks To Short in July

Last week, the S&P 500 marked a 2.3% gain, bringing returns on the 1-month chart up to 1.35%. The majority of the gains were concentrated in traditionally defensive sectors, primarily healthcare and telecommunications.

And while both the performance on the benchmark index and investor sentiment have improved, the major pullback in certain overvalued sectors of the market shows no signs of abating.

The overall trajectory is still firmly bullish. However, it is abundantly clear that investors simply don’t have the risk tolerance for tickers that have outpaced their fundamentals, even those with exceptional growth prospects.

This represents a unique opportunity. Short selling stocks that fit the profile we’ve just mentioned could be a great way to benefit from those pullbacks.

With that being said, the opportunity is time-sensitive, and shorting a stock requires solid conviction based on a holistic fundamental case. That’s quite the tall order, but it can be done — all you have to do is turn to …

Stocks to Short Strategy

Our proprietary quant system ranks 4,600 stocks each day on the basis of 4,600 fundamental factors. That analysis is boiled down into an intuitive, approachable metric — a stock’s Zen Rating.

Only the top 5% of equities on any given day are given a Zen Rating of A, equivalent to a Strong Buy rating. At the other end of the spectrum, the bottom 5% of stocks are given a Zen Rating of F, equivalent to a Strong Sell rating.

By turning your attention to F-rated stocks, you’ve cut down the list of names to analyze to about 230. That’s a good start, but you can narrow the search down even further — by turning to one of our exclusive Zen Strategies.

Each of our 11 Zen Strategies is a 7-stock-strong portfolio — and each consists of carefully-selected equities. With recent market dynamics in mind, today, you’ll get to have a sneak peek at one of those portfolios — the Stocks to Short Strategy.

We’re already seeing some of the dynamics we’ve discussed begin to slowly play out — since the start of July, this portfolio has delivered a 2.35% return — far outpacing the S&P 500’s -0.27% loss in the same timeframe.

Let’s move on to the picks. Here are 2 stocks with lacking fundamentals that you should consider shorting in February…

Iren (IREN)

Our first pick is Iren, a $13.87 billion market cap data center company. The business originally focused on Bitcoin mining, but is now trying to pivot to AI cloud services. At present, IREN shares rank in the bottom 1% of all the equities we track.

Momentum is, essentially, the only rating where Iren scores even remotely decently; in the bottom 44%, to be exact. The stock is up by 11% on the 3-month chart, but that could soon change, as there’s also been an 18% drop in the past 7 days.

The overall fundamental picture is rather bleak. Bottom 9% for Value, bottom 7% for Safety, plus the bottom 5% for Financials. And as if that wasn’t enough, IREN also scores in the bottom 1% of all the stocks we track for both Growth and Sentiment. The overall picture is clear; an overvalued ticker with a weak balance sheet, lackluster growth prospects, and a total lack of smart money support.

There’s also a key catalyst at play here. Meta is planning to sell excess AI compute — the same thing Iren is selling. A push from hyperscalers would put immense pressure on companies like IREN, which is already faced with declining revenue and compressing margins. The business has also missed earnings expectations in the last 2 quarters, and for the next report, analysts are expecting a 50% reduction in EPS on a sequential basis.

Lastly, it’s important to take into consideration just how far the stock ran before these issues cropped up. IREN is still up about 150% compared to this time last year, so there’s still plenty of room for downside.

Lucid (LCID)

Our second pick, Lucid, is a tad different. The $2.37 billion company is a luxury EV manufacturer. LCID is in the bottom 1% of the stocks tracked by our system, and it’s also the worst-rated stock in the entire Auto industry, which has an Industry Rating of F.

First, a few words about recent price action. LCID shares are up almost 19% on the weekly chart. We’ll get back to that in a minute, along with recent catalysts. Before that, let’s take a look at the fundamentals.

In each category we track, LCID gets a D or F grade. Essentially, there is no category where it ranks above the bottom 20% of the market. Growth is the stock’s strongest suit, but even it clocks in at the bottom 18%, with Safety being a close second at the bottom 15%. Our smart money rating, Sentiment, places Lucid in the bottom 5% of the market; and most tellingly, the stock ranks in the bottom 1% for both Value and Financials. That’s pretty comprehensive, universal fundamental weakness across the board.

Now let’s get back to that 19% rally. It happened because the company expanded its robotaxi partnership with Uber. The deal, as it currently stands, is that Lucid will provide at least 35,000 vehicles, while Uber will increase its investments in the business.

The core issue with this is that the space is full of competitors who have a stronger history of executing. Lucid’s core competency is in luxury EVs, a market that’s in dire straits. On top of that, the business has missed EPS estimates by significant margins for 5 quarters in a row. LCID is down 70% on the 1-year chart, and while the Uber deal is a positive development, it does not seem significant enough to alter the long-term trajectory, so that 19% bump could soon be erased.

Interested In More Great Stock Picks?

The 2 stocks highlighted above are just a fraction of what you get from our proven Stocks to Short Strategy. 

That’s because each day our system recalibrates — and Zen Strategies members get access to the 7 top Buy the Dip stocks based on 115 different parameters that point to outperformance. 

See all Top 7 Stocks to Short here >

However, maybe you don’t do short selling. Perhaps you would like to see all 11 of our market beating strategies including Growth, Momentum, Technology, and our coveted AI Factor model. 

Each featuring the top 7 stocks.

Each featuring tremendous performance

We spell it all out in this timely presentation below that lives up to its name:

77 Best Stocks Now! > 

What to Do Next?

• 77 Best Stocks NOW! >
• Options Trading with the Zen Ratings >
• 2 New Stocks to Buy from Steve Reitmeister >

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