The 2021 rush for heavily shorted “memes stocks” accomplished at least one thing where the longest bull market had failed: It brought young retail investors into the fold.
Individuals who had missed the winning race on Wall Street for more than a decade have jumped into stocks this year, attracted by a trading fad that has prompted hundreds of thousands of investors to buy into old-school companies in trouble like movie chain AMC Entertainment and video game retailer GameStop as both have become fodder for online chat rooms.
A company “would sort of end up in a discussion on Reddit and be the star of the ball,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group in Fairfield, New Jersey.
Remote working in the pandemic era and stimulus checks helped get the party started. Stuck at home with cash in hand, newbie investors flooded social media platforms to urge others to buy shares in AMC, GameStop and other companies whose prospects seemed grim by traditional standards of business. ‘evaluation of actions such as profitability, debt and profit growth.
On the decline for a decade, GameStop shares suddenly, soaring to $ 347 from $ 39 in a single week as retail investors – boosted by Gen Z that allow users to trade stocks for free – flocking to the markets.
“This is one of those things that became evident very early in the year: the ability of Wall Street discussion forums to find heavily shorted stocks that could very well have a future or be scaled up. – and GameStop was the illustration, “he added. Art Hogan, chief market strategist at National Securities, told CBS MoneyWatch.
The deadlock between hedge funds and regular investors making an offer to GameStop to counter or “squeeze” hedge funds selling it short, or betting the price would drop by a certain date, has prompted some brokerage firms to stop trading at GameStop and dozens of other small-scale businesses with steep price swings. Report social media outrage and the scrutiny of Congress and regulations, the latter continuing into the New Year.
Robinhood: the definitive stock of memes?
“The extreme volatility of memes stocks in January 2021 tested the capacity and resilience of our securities markets in a way few people could have predicted,” the Securities and Exchange Commission found in April. At the same time, memes stock trading during this time highlighted an important feature of the US securities markets in the 21st century: wide participation.
The meme stock frenzy even caused Robinhood to become a meme stock once it went public last summer., pushing the company’s shares up 50% to close at just over $ 70 in August, despite thehovering over this and other trading apps. On Twitter, people rejoiced at the idea of buying the definitive stock of memes: “How do you rate 500 million anxious teenagers, mostly lonely men?” asked for a poster.
Further proof of the impact of social media, shares of Ford Motor, the current Reddit frontrunner, recently overtook Tesla and ended the year with shares of the Detroit automaker up nearly 140% to around 21 $.
The meme-induced roller coaster ride recently had Avis Budget actions taking a sudden and surprising leap. Newly favored by retail investors, shares of the car rental company rose 58% in November and are now up over 450% for the year to over $ 200.
Even more astonishing end-of-year wins are still counted by AMC and GameStop. AMC is up over 1,200% since Jan. 1 to $ 28 per share and has a total market value of $ 15 billion; GameStop is up a more modest 725% to around $ 150 and valued at almost $ 12 billion.
“Even actions meme” can go down
But the trajectory has not been a one-way jump for all, Hogan noted. “At the end of Q3 or early Q4, we got to the point where valuations seemed to matter – even memes’ stocks aren’t skyrocketing. That’s the new reality they’re facing. “, did he declare. “It feels like the Army of Memes Stockists has already had their first glimpse of reality when the fundamentals come into play.”
Boockvar agrees, saying fundamental equity analysis will take center stage, “rather than ‘who’s short’ and ‘is that a trend. “”
Bed Bath & Beyond has given up on its gains after garnering some interest from the meme stock crowd, and its stock is now down almost 18% year-to-date to around 14.50 $. Shares of the retailer climbed to $ 24 in November amid a surge in mentions on Reddit, CNBC reported.
Hometown International, the operator of a small New Jersey deli that generated $ 13,976 in sales in 2020, reached a market cap of $ 113 million in February. The penny stock was delisted by the off-market OTCQB in April after it caught the attention of prominent hedge fund manager David Einhorn.
“The biggest shareholder is also the CEO / CFO / Treasurer and a manager, who also happens to be the wrestling trainer for the nearby Deli High School,” Einhorn’s Greenlight Capital wrote in an April letter to clients. “The pastrami must be amazing.”
The hot rallies and massive sell-offs that define stocks even appear to be increasingly simmering as Wall Street heads into 2022. Future volatility may well depend on the dominant role retail investors continue to play – and if there is. will have enough liquidity on the other side of their short-term trades to play against.
“The little crowd was burnt by it; it was wiped out. So there isn’t a big short crowd to turn around,” Boockvar said.
Boockvar believes those leading the movement of memes stocks will move on, whether it’s the latest hot cryptocurrency games or something else. “In the history of the markets, there is always a speculative madness that ignites, it is just human nature.”