Two Election Losers: Fox Corp and Twitter

It is feeling like investors are just beginning to wake up to a worry I have been highlighting for weeks on these pages, but still are not nearly cautious enough. That simply is that we could be looking at a second round of lockdowns in many regions of the country, even if they did not work the first time around while causing economic activity to implode. Many countries in Europe, like England, France and Germany, have already implemented harsh restrictions on business activities and social gatherings in response to a second surge of Covid-19 cases Here in the States, Chicago just announced a month of new restrictions starting Monday. 'Chicagoans are urged to stay home except for work, school or essential needs and to avoid nonessential travel. They are also advised to not gather with anyone outside of their household, including for Thanksgiving.' In New York, the governor is now limiting social gatherings, even for Thanksgiving, to 10 people in private residences, a week after hundreds of thousands celebrated the outcome of the presidential election in the streets of the Big Apple. One of the members of the President Elect's Covid-19 task force has openly advocated for a new four to six week lockdown to 'control' the pandemic even as an effective vaccine seems only months away. Speaking of the elections. There have been myriad articles on the winners and losers as far as sectors and stocks are concerned. Many have articulated that China and alternative energy are two obvious winners from a likely change in the administration. The energy sector seems to be one of the consensus losers from the election results. In today's column, I offer up two companies I think that severely impacted their business models this election season which could pressure their stocks going forward. Fox Corp seems to be one obvious example. The network appears to have decided to throw away the three decades of the work it has done to establish itself as the main news source for the population that considers itself conservative or center right this election season by morphing into CNN Lite. Doing so has caused an NBA like exodus for many of its core customers. Fox fell over 6% in trading yesterday on fears that the current POTUS could establish a rival network once he leaves office. Whether that happens or not, ratings for many programs on the network appear to be falling significantly already. I think this development is in the early innings as I believe the network permanently alienated much of their core audience who are/will turn to OANN or Newsmax for their version of the news going forward. I don't think this is priced into the stock of FOX even after yesterday's hiccup. Twitter is another name I would be wary of here. The company has actively censored myriad conservative voices this election season and flat out suppressed some stories like those around Hunter Biden's laptop. This has been like manna from heaven for new rival Parler. More importantly, this 'editing' of content directly puts Twitter in violation of the liability protection as part of section 230 which has shielded social media entities from the time of their establishment. I would not be surprised if the new Congress pushes hard to revoke or limit that protection in the coming years which might be an unappreciated risk to Twitter and its shareholders. The shares were off some 20% from recent highs but still have doubled off their March meltdown lows. If I had this name, I would be sorely tempted to cash in some profits here.

Two Election Losers: Fox Corp and Twitter

I'd be wary of both of these stocks.

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