When you have nearly 3 billion monthly active users, some things are bound to go wrong. As the adage goes, you can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time. That certainly applies to Facebook (NASDAQ:FB) and its latest scandal, which could have ripple effects for stocks to sell.
According to a devastating exposé by the Wall Street Journal, its review of internal corporate documents — which encompassed research reports, online employee discussions and drafts of presentations to senior management — demonstrated that Facebook knew about its platform’s inability to mitigate dangerous or harmful behaviors on the network.
Nevertheless, the social media giant basically ignored the problems, which presents an intriguing backdrop for stocks to sell.
Much of the aforementioned market-related narrative stems from the scandal’s moral implications. As you’re well aware, American society has become much more attuned to the subtle (and not so subtle) inequities in this country.
Of course, not everybody agrees with the focus on addressing social wrongs. However, from a business perspective, not having your pulse on the nation’s shifting mores could impart economic consequences. That’s the crux of the possible negative catalyst for stocks to sell.
While Facebook has endured several controversies before — and as Bloomberg pointed out recently, none of them have decisively sunk FB stock — this time could be different.
If it weren’t for whistleblower Frances Haugen, Facebook may have continued to get away with its deliberate ignorance. As Intelligencer suggested, that could anger various public communities such as moms fed up with social media’s unchecked influence. Just the thought of it could incentivize certain stocks to sell.
To be fair, though, a large segment of the population will not agree with Facebook and big tech becoming more punitive toward objectionable content and online behaviors, primarily because they are the creators or consumers of such. Therefore, investors should be aware of which possible stocks to sell — and which stocks to buy.
- Twitter (NYSE:TWTR)
- Snap (NYSE:SNAP)
- ViacomCBS (NASDAQ:VIAC)
- Domino’s Pizza (NYSE:DPZ)
- Smith & Wesson Brands (NASDAQ:SWBI)
- Axon Enterprise (NASDAQ:AXON)
- Raytheon (NYSE:RTX)
- Polyus (OCTMKTS:OPYGY)
A quick word before we dive in: these stocks to sell (or buy) are based solely on the broader implications of the Facebook scandal. You should be aware that there could be little to no impact from the controversy and if there is, it might not deliver anticipated results. Therefore, you should be careful about engaging the below ideas.
Stocks to Sell: Twitter (TWTR)
To be clear, the Facebook scandal is — as far as I’m aware — limited to just Facebook. Nevertheless, it’s possible that this specific corporate crisis could impugn other social media networks.
If so, you might want to reconsider your exposure to rival Twitter.
On one hand, without Haugen blowing the whistle, the situation at Facebook may have continued unabated as management adopted a very cynical approach to its problems: basically, if no one complains, just keep moving.
Now that this ploy has been exposed, social critics might question the sincerity of related businesses.
On the other hand, companies like Twitter will likely attempt to crack down on objectionable content on their platforms. However, what’s objectionable to one person may be different to another. Thus, the social media industry risks overshooting its censorship initiatives, angering opposition communities. Therefore, TWTR might be one of the stocks to sell simply on the basis of collateral damage.
Speaking of collateral damage, you might want to focus your watch list of stocks to sell on the other popular social media platform Snap.
Known for its quirky Snapchat interface that’s particularly appealing to young adults, the app in a way is the anti-Facebook. But when it comes to addressing dangerous behavior on its network, it suffers the same problems.
For instance, during the Euro 2020 final which was played earlier this year, several people across social media platforms (including Snapchat) directed their disturbingly racist vitriol at Black English players who missed their penalty kicks.
In response, Snapchat released a statement declaring that it “put a lot of work into designing a platform that prevents the opportunity for hate speech or abuse to spread.”
As with Twitter, Snap has nothing to do with Facebook’s controversy. However, you can reasonably assume that all mainstream social media platforms are on notice to clean up their act. But this cleaning up could make their networks more stifling censorship-wise, which could hurt the bottom line.
Stocks to Sell: ViacomCBS (VIAC)
If concerned moms start to form a coalition against the influence of social media and big tech, it could spell serious trouble for Facebook.
That’s the argument Scott Galloway forwarded in a sit down with Intelligencer, who noted that parents fed up with their children getting killed by drunk drivers formed Mothers Against Drunk Driving. Despite opposition from the alcohol lobby, MADD itself became a powerful political force.
Galloway reasoned that the same could happen with social media. It’s not just about the odious racist comments that float around various platforms. Rather, twisted people often use social media to bully others, causing great emotional distress. As it turns out, Facebook doesn’t care — and others (until now) might not care either.
But they will if advocacy groups begin criticizing Facebook and the legions of companies that advertise on the social network. If it gets down to that, you might want to consider putting ViacomCBS — a top advertiser on Facebook — on your list of possible stocks to sell.
With traditional content firms desperately struggling for relevance, getting mired in a scandal like this could be extremely painful.
Stocks to Sell: Domino’s Pizza (DPZ)
If the Facebook scandal succeeds in creating substantial anger — and that’s a debatable point, you should realize — then the companies that advertise the most on its network should be concerned.
Moreover, such fears would only accelerate for companies that feature products that are easy for customers to boycott, such as Domino’s Pizza.
I haven’t had a Domino’s Pizza in a while so I don’t have much of a personal take. From what I remember, the company’s products have improved tremendously. At the same time, I also remember that its pizzas were nothing groundbreaking — and that is truly the problem if the scandal escalates. Consumers have myriad options, especially in the small business realm.
To be honest, I don’t think Domino’s executives are staying up late at night fretting over its longstanding close relationship with Facebook. Nevertheless, if enough of a backlash erupts, consumers might avoid Domino’s temporarily, only to realize that the competition offers tastier products.
Either way, this is a distraction Domino’s doesn’t need. And at worst, DPZ could be one of the stocks to sell.
Stocks to Buy: Smith & Wesson Brands (SWBI)
Although the temptation amid a major scandal is to think mitigation tactics via stocks to sell, the reality is that this is a nuanced issue.
Sure, it’s the popular thing to condemn those with objectionable ideologies. But here’s another harsh reality: people with distasteful views are people too and they also have wallets.
Therefore, a case can be made that a future crackdown on freedom of expression by social media giants and big tech could result in a Pyrrhic victory. Sure, mainstream American may feel good about itself regarding the suppression of unpleasant opinions, but that might embolden the affected to seek companies that won’t cast judgment.
It might be a stretch, but I can’t help but feel if you’re thinking about stocks to buy off the Facebook scandal, firearms manufacturer Smith & Wesson Brands might become a beneficiary.
I don’t know how many times I’ve seen posts on social media declare that the Second Amendment protects the first. With such strong enthusiasm on the opposing right, SWBI is a name to watch closely.
Axon Enterprise (AXON)
Back in December 2020, Governing.com opined that it took decades for political polarization to reach the magnitude it did at the time of publication.
With various social issues and a widening wealth gap sparking intense friction between communities, it was difficult to imagine how the country could begin to reconcile. Little did we know what would happen a few weeks later.
I’m not going to get into the details of the January incident as feelings are still raw, but what’s clear is that in an environment of ideological views becoming more extreme, no one occupational demographic is sacrosanct — and that includes law enforcement.
While conservatives often robustly support police officers, that endorsement goes away when said officers are tasked with controlling right-wing demonstrations that turn violent.
Therefore, if the Facebook scandal results in more censorship and thus more bad blood, you can expect shares of Axon Enterprise to swing higher. Best known for its non-lethal weapons systems and police body camera, Axon is on the frontlines when our politics turn physically aggressive.
Unfortunately, that’s been happening too frequently, making AXON cynically one of the stocks to buy.
Ordinarily, a Facebook scandal isn’t going to impact a major defense contractor like Raytheon and it might not happen this time around. So, please rest assured that I haven’t completely lost my mind.
At the same time, I’m not trying to throw something out of left field for the heck of it. RTX could genuinely become one of the stocks to buy on this controversy if the stars align correctly.
As I mentioned earlier, the main contrarian thesis is that due to the exposé, Facebook and other influencing agents will take genuine efforts to cracking down on offensive or otherwise objectionable content. Doing so, however, risks offending those with mere conservative views caught in the crossfire, along with the folks deliberately wreaking havoc.
Under this scenario, right-wing elements could easily become radicalized to the point of physical violence just like that situation that happened in Washington, D.C. earlier this year. Perhaps the best way to disperse such crowds before they step over the line is to deploy Raytheon’s active denial system.
Admittedly, it’s a far-fetched idea for stocks to buy but we certainly live in unusual times.
Stocks to Buy: Polyus (OPYGY)
Russian gold mining firm Polyus is easily my most “out there” idea for stocks to buy on the Facebook scandal. Just bear with me, though, and by the end of this quick write-up, you might appreciate why I put this company here, even if you have no intention of buying shares.
Throughout former President Trump’s administration, one of the oddities that political observers noticed about Republicans is their sudden positive pivot toward Russia.
Remember, we’re talking about the party of “Mr. Gorbachev, tear down this wall!”
Now, the political descendants of that great American President Ronald Reagan seemingly have nothing but high praise for Russian President Vladimir Putin.
Therefore, it wouldn’t surprise me in the least that if big tech starts censoring offensive speech in earnest, those are on the far-right will adopt a “WWPD” stance — what would Putin do? Well, he probably wouldn’t take any garbage from “lefties.”
Now, an allegedly real Putin response — such as eliminating opposition journalists — is frowned upon in the U.S. The next best thing is to invest out of spite. Polyus serves two purposes in one for the right-wing: a culturally homogenous management team and an underlying asset that counteracts the “evil” greenback.
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.