Investing in ContextLogic Requires a Cult-like Fanaticism to Trust

I have a few personal nicknames for our own Louis Navellier. Ferrari Louis. Mister InvestorPlace. But whatever you might call him — good, bad or indifferent — he is universally considered outspoken. So, when Navellier becomes more opinionated than usual, such as his take on ContextLogic (NASDAQ:WISH), people should listen. For WISH stock, I don’t remember him being so pessimistic about any other investment.

Even before he gets to the opening paragraph of his analysis, Navellier warns that the double whammy of a “dim turnaround prospects” and the exit of ContextLogic’s CEO contributed to WISH stock plummeting 91% from its highs. That was almost a 10 days ago. To no one’s surprise, the circumstance has worsened since then. Navellier explained:

So, what happened here? The “story” behind this stock crumbled. The company, which operates the Wish.com e-commerce platform “crushed it” during the pandemic, posting very impressive levels of revenue growth. But then, as 2021 played out, it became clear that it wouldn’t see the kind of success it saw in 2020.

Growth slowed down, then the situation got worse. Revenues declined, as it struggled following the start of the pandemic recovery. Last summer, the company announced its plans to turn around the ship. Yet with a long time horizon before results would possibly begin to improve, investors continued to abandon this ship.

 

Of course, I can launch into a diatribe against WISH stock but honestly, I would just be copying and pasting words that have already been posted ad nauseum. Still, I thought it very interesting that Navellier mentioned that “even insiders are making their exit.”

Not too long ago, he warned that insiders running for the exits represented a mass media fear tactic that’s keeping regular folks poor. What?

Exiting WISH Stock for a Reason

As my esteemed colleague put it, “The financial media likes to point out that billionaires like Elon Musk are selling a record amount of stock, insinuating that if the smart money is selling then a market correction may be imminent.”

Now, as Navellier reported, on the same day that CEO Piotr Szulczewski announced he was leaving the top role, other “members of the C-suite, plus board members, have been cashing out of shares.” Since WISH stock has plummeted fast and far from its peak, it’s natural to assume that insider selling and poor underlying share performances are correlated.

Is Navellier contradicting himself then, giving a set of reasons to believe in the broader bull market thesis while using the same arguments to blast WISH stock? Here’s where additional context matters.

He countered, “But as The Wall Street Journal recently pointed out that while some folks are selling stocks, companies are loading up on shares: Stock buybacks have breached an all-time record.” Of course, he’s absolutely right about that. Translation: if the investment has credibility, people — whether insiders or not — will buy it.

Unfortunately for WISH stock, in an ecosystem where other analysts mentioned that companies could be buying back more of their shares if they so choose, ContextLogic is going the other route. I can’t help but feel the insiders, the folks closest to the business, see the writing on the wall.

But somehow you the retail investor are supposed to believe another narrative?

Here’s the worst part about the executive-level dumping: the heightened activity to hit the exits is occurring even as WISH stock hemorrhages market value. Apparently few (if any) have the idea that at such rock-bottom rates, WISH could be a good speculative opportunity.

No wonder Navellier ranked this an “F.”

Use Your Common Sense

Obviously, it’s best not to trust anyone’s guidance who has a competing interest against yours. Whether you’re talking about real estate agents or used-car salespeople, you don’t ask questions like, will housing prices move higher? Is this car reliable?

Of course, the reflexive answer will be “yes.”

So, it’s when these interest-competing individuals tell you something that’s in your favor and against their interest that the assessment stands out even more. To be sure, no ContextLogic executive will brutalize WISH stock. But with the bearish insider transactions, it appears actions speak much louder than words.

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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