Election season is upon us once again. While nothing has been officially sewn up just yet, it appears that President Joe Biden and former President Donald Trump are overwhelming favorites to secure their parties’ nominations once again. Assuming this comes to pass, it will set up a rematch of the 2020 presidential election.
As of this writing, betting odds have Trump at about a 44% chance to win the presidency. Biden has about 33% odds of winning. And bettors have assigned a combined 23% chance that the winner will be someone other than Biden or Trump.
All this to say that at this time, Trump appears to have a slight advantage heading into this election season. But it’s far from a sure thing. As such, it’s time to start thinking about stocks that would get walloped in the event that Trump loses the election this November.
Rumble (RUM)
Rumble (NASDAQ:RUM) is a video-hosting platform primarily used by conservative political and cultural figures. It serves as a safe haven for folks that get banned off of other more mainstream sites such as YouTube or Twitch.
There appears to be significant demand for a censorship-resistant video platform which is more supportive of conservative voices. However, this is likely to be a niche site rather than one which will serve all audiences and types of content.
And given the overtly political nature of much of Rumble’s content, it has struggled to attract high-quality mainstream advertisers. To that point, Rumble continues to report large losses amid slower than expected revenue growth; last quarter’s $18 million of revenues fell far short of analyst expectations for $25 million. RUM stock will likely remain volatile up until election day but fade out after that as people turn their attention away from politics.
Phunware (PHUN)
Phunware (NASDAQ:PHUN) is a small company focused on social media networking. Shares have been closely tied to former President Trump’s fortunes; PHUN stock has been rising and falling with every election result so far this year.
This comes because Phunware was the developer of an app that the 2020 Trump presidential campaign used for managing its supporters and fundraising effort.
That campaign, however, has long since come and gone. There’s less indication of what Phunware is up to nowadays. Phunware’s revenues have slumped and the company is losing significant sums of money. The company has engaged in repeated capital raises to keep the lights on.
PHUN stock was down to just 7 cents per share recently before the election primary season started up again. Given the lack of momentum in Phunware’s underlying business, the stock is likely to fade again if the Trump election campaign comes up short.
BRC Inc. (BRCC)
BRC Inc. (NYSE:BRCC) operates Black Rifle Coffee Company.
Black Rifle Coffee is primarily a direct-to-consumer platform selling coffee, coffee accessories, and apparel. It operates various social media channels such as podcasts and lifestyle blogs to build its brand. In addition, it is also building out some physical coffee shop locations.
On paper, Black Rifle Coffee Company could be described as a culturally-conservative alternative to Starbucks (NASDAQ:SBUX).
However, Black Rifle doesn’t have the same omnipresent network of physical locations as Starbucks to reinforce its brand. The company is mostly a product of internet excitement and activism and that could easily go by the wayside if Trump’s election campaign can’t cross the finish line.
Digital World Acquisition Corp. (DWAC)
Digital World Acquisition Corp. (NASDAQ:DWAC) is a SPAC that has long been seeking to merge with former President Trump’s social network, Truth Social.
X, the social media network formerly known as Twitter, banned Trump from its platform following the events of January 6th. In response, Trump launched his Truth Social platform as an alternative that would allow conservatives to post freely without censorship.
Truth Social has had limited success; a lot of people are on the platform to see Trump’s musings, but there is little indication that the platform has taken off in any organic way beyond that. In addition, these sorts of platforms are hard to monetize, as Elon Musk’s adventures in running X have shown.
As if that isn’t complicated enough, keep in mind that Digital World Acquisition hasn’t concluded its planned acquisition of Truth Social yet. This adds another risk to the equation; if the planned deal doesn’t come to fruition, DWAC stock would face considerable downside. DWAC stock has rallied on Trump’s recent caucus victories, but those gains could be fleeting.
Geo Group (GEO)
Geo Group (NYSE:GEO) is a private prison operator. The firm used to run as a real estate investment trust (REIT) and pay large dividends.
However, Geo’s fortunes faded in recent years as both the federal government and various state governments have sought to reduce their dependence on private prisons. In 2021, Geo converted from a REIT to a C-Corp and stopped paying dividends as a result of its large debtload and financial struggles.
Traders are bidding up GEO stock on hopes of a Trump victory in November. The thinking goes that if Trump wins, there will be a crackdown on undocumented migrants at the border. Many of the people apprehended, in theory, would be locked up in Geo facilities leading to a surge in revenues for the company.
In addition to this morally ambiguous business model, there are other potential flaws in this plan. For one, Congress is attempting to pass a bipartisan border reform policy now which might invalidate the whole Geo thesis before it gets off the ground. And needless to say, if Trump loses, it seems unlikely that the government would start locking up undocumented migrants in vast numbers next year.
Geo historically has struggled as the broader trend is still away from private incarceration. Short interest here is massive as bears are understandably expecting GEO stock to collapse once the border situation is resolved.
PSQ Holdings (PSQH)
PSQ Holdings (NYSE:PSQH) operates a company called PublicSquare which operates what is effectively an e-commerce platform for companies with conservative social values.
Sometimes, political or cultural figures with controversial or offensive opinions will get banned from major e-commerce and payments platforms. In theory, a company like PublicSquare could offer a censorship-resistant ecosystem for online commerce.
To-date, however, PSQ has had limited traction with consumers. It generated just $2 million in revenues last quarter. The company’s EveryLife diapers and wipes brand hasn’t yet taken the world by storm. Traders have linked PSQ to popular media figures such as Tucker Carlson, but until this chatter turns into actual revenues and profits, PSQH stock is a sell.
Axon Enterprise (AXON)
Axon Enterprise (NASDAQ:AXON) used to be known as TASER International. As that name would suggest, Axon is a company that makes less-lethal weaponry for law enforcement officials.
In recent years, Axon has pivoted toward software and security services. But at its core, this is still a company that is outfitting police departments with gear. AXON stock has rocketed over the past few years due to the popularity of body cameras for collecting video data and evidence.
And now, with Trump’s rise in the polls, traders are gravitating to AXON stock as a winner in a “law and order” presidency. However, that is already baked into the stock and then some with shares trading at an eye-popping 60 times forward earnings. It’s hard to see much upside here even if Trump wins, and if he loses, look out below.
On the date of publication, Ian Bezek 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.