Contestants turn in terrific short-selling performance

I am impressed.

Contestants in my annual Short Sellers Don’t Have Horns competition scored terrific results in the 2024-25 running of the contest. Short selling is a technique to profit from a stock’s decline. The goal in the contest is to pick a stock that will collapse.

Of 16 contestants in the latest running, 12 achieved a gain — in other words, the price of their targeted stocks dropped. Nine achieved a gain of 50% or more.

The four people who had losses weren’t down by much. Three of them picked Trump Media & Technology Group Co. (DJT) as the stock most likely to flop. It didn’t, rising 5.7%.

Two people tied for first as the stock they picked — Mullen Automotive Inc. (MULN) — went bankrupt and the stock price hit zero. For a short seller, that’s a 100% gain.

Sam strikes again

One winner was the stock analyst known in this column only as “Sam” because he doesn’t have permission from his company to be identified by name in print. Sam took first place in the 2022-23 contest and second place last year. Now, he’s back in first.

A recent college graduate when he first entered the contest, Sam became an analyst for an East Coast investment firm and is starting a new job as an analyst for a New York City hedge fund.

As shorts, he currently likes “in-vogue consumer brands that are faddish.” For example, he predicts hard times for Pop Mart International Group Ltd. (PMRTY), the Chinese company that makes the popular Labubu dolls. The market values Pop Mart at $46 billion, which is 49 times earnings and 15 times revenue.

Another example is Sanrio Co. Ltd. (SNROY), the Japanese company that produces and licenses Hello Kitty merchandise. Sam notes that last year was Hello Kitty’s 50th anniversary, as a result of which sales of Hello Kitty merchandise rose — temporarily, he believes.

“It was on everything from frisbees to soy sauce,” he says. Sanrio stock currently sells for 37 times earnings.

Green victory

The other winner, David Green of Newmarket, Ontario, Canada, said the “constant stream of reverse splits” was a danger sign that caused him to pick Mullen Automotive as his short in the contest.

In a reverse split, a company reduces the number of shares outstanding, which mathematically increases the price of each share. This can sometimes enable a company to meet stock-exchange listing requirements.

Green is chief executive of Greenmar Energy Inc. I couldn’t reach him for an interview.

MacDonald second

Keith MacDonald, a retired travel agent in Williamsburg, Va., took second place. He had a 99.7% gain on his short sale of T2 biosystems (TTOO). (That is a gain on paper only. McDonald doesn’t short stocks in real life.)

He picked T2 for a few reasons. It had done a reverse split in 2023. Its annual revenue was declining. And it had considerably more debt than cash.

Asked what he thinks is too pricey now, MacDonald says, “I believe the entire market is very overvalued.”

DiFlorio third

Scoring a 98.7% gain, James DiFlorio of Allentown took third place. He is a forensic scientist, analyzing drug samples for the Pennsylvania State Police.

DiFlorio’s short pick a year ago was Reshape Lifesciences (RSLS), a medical device company focused on weight loss. This company, too, had engineered a reverse stock split. And DiFlorio was skeptical about its “Lap-Band” and “Reshape Vest” weight-loss procedures.

You can play

Everyone is invited to enter my 23rd annual Short Sellers Don’t Have Horns contest.

The rules are simple. Pick a U.S.-traded stock you think will decline a lot from Oct. 3, 2025, to Sept. 11, 2026. You are not required to sell the stock short with real money, but you may if you wish.

The first-place finisher gets a prize that has something to do with the word “short.” Past prizes have included music by pianist Bobby Short, a strawberry shortcake and a book of short stories. Second and third place carry no prize but glory.

To enter, please submit the following:

• Your name

• Home city

• Your occupation

• Phone number (including weekend number)

• Name and stock symbol of the stock you think will bomb

• A brief statement of the reason you expect the stock to fall

Entries may be emailed to jdorfman@dorfman value.com or mailed to John Dorfman, Dorfman Value Investments, Suite 1900, 101 Federal St., Boston, MA 02110. They must be postmarked or time-stamped by midnight Oct. 5.

Disclosure: I have no positions, long or short, for myself or clients, in the stocks discussed today.