All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q reporting period. With millions of people stuck inside their homes, many of whom were now without work, they increasingly turned to investing (and more specifically, day trading) as a way to spend their free time and attempt to make money. Their first major target was the meme stock Gamestop, which skyrocketed more than 20x in value between 2020 and 2021, reaching a market cap of over $22 billion. To skip our detailed discussion of the history of meme stocks, click to go straight to the 5 Best Meme Stocks To Buy Now.
Retail investors have started moving back into equities, buying a net $5.6 billion worth of stocks in January as major U.S. indices reached fresh record highs. While institutional investors are taking profits, retail traders are returning to the market, and reports indicate they remain optimistic overall. This happened due to the sudden widespread online discussion, notably on social media platforms and forums such as Reddit.
As a result, meme stocks can become overvalued relative to fundamental technical analysis. More traditional investors decry the lack of business fundamentals and strong performance to justify sharp surges in stock price. On the other hand, as individual investors point out, given enough support from the masses, a climbing stock price (regardless of current fundamentals) can eventually equate to a stronger business. This comes from renewed consumer interest, along with a rebounding share price or the raising of fresh cash through capital markets when the stock price rises. After the GameStop incident, some hedge funds suffered significant financial losses, while some retail investors made millions. Other meme stocks emerged after GameStop, some with varying degrees of success.
Rather, speculation and a stampede by retail investors resulted in a tremendous rally by GME stock which was unexpected by most. While some thought that the meme stock craze would be short-lived, the phenomenon remains in force months later. Meme stock communities pumped the brick-and-mortar retailer Bed Bath & Beyond (BBBY) to extreme levels in the summer of 2022 when it was up 314% for a short period before crashing back down. Some meme stocks did not fare as well as others, even with the occasional short squeeze.
Meme stocks are so-named because ideas about them spread rapidly on social media and web forums. Meme stocks also see communities built around them that promote the hype and elaborate on the original meme, inventing specific terms and symbols to accompany the stock. GameStop, among the first meme stocks, is a prime example of how the retail investor community identified a highly shorted stock and used a short squeeze to work in their favor. The main victims of the squeeze ended up being a handful of hedge funds, some of which were forced to shut down due to heavy losses. As a result, the meme stock concept adopted a David vs. Goliath or Robin Hood connotation of taking from the rich Wall Street elite and rewarding the small retail investor.
Looking to turn some of that extra free time into money, many people turned to the stock market and social media for ideas. That makes now the perfect time for retail investors to hunt for a meme stocks list today and uncover the next meme stock to buy. In general, many of the meme stocks that saw sky-high stock prices in 2021 have come down quite a bit in 2022, sometimes to below where they started. Others, notably GameStop, remain elevated, although still far lower than the all-time highs. Memes began to take the form of humorous social media posts and viral videos with the advent of the internet.
Pros of meme stocks
So if you sell the stock you borrowed for $10, and then its price rises to $50, you’re responsible for those shares, meaning you’re on the hook for that $40 you owe the broker. Those early meme pioneers, who often found their next meme stock on Reddit, caught the market completely by surprise and were wildly successful as a result. While GameStop was the first successful meme stock, it was not the only one.
Hedge funds are types of investments that pool money together from wealthy investors, and short selling is when you borrow shares from a broker and immediately sell them with the hope that the stock price will fall. If it does, you can repurchase the shares at the lower price, return them to the brokerage and keep the difference as profit. Many retailer investors became interested in Nokia because of the high number of its https://www.forexbox.info/ shares that were being sold short by institutional investors and hedge funds. Ultimately, a short seller may run out of available funds to hold on to the short and will be forced to buy back the shares at a higher price and close out the position. If many shorts are forced to cover at once, it adds additional upward pressure on the stock’s price as they are all forced to buy the stock and cover at ever higher prices.
- Typically, larger institutional investors have overlooked these companies due to uncertain fundamentals.
- With the internet, chat rooms and discussion boards devoted to investing and promoting stocks also arose.
- The Robinhood app saw overwhelming trading volume in meme stocks at times, causing multiple trade delays, outages, and platform crashes.
- The word “meme,” from the ancient Greek word “mimema” — meaning imitation — is used to describe information that is imitated and often spread via pop culture references on social media.
Palantir has concentrated exposure working for government entities, but it’s quickly working to expand further into the private sector. Its (free cash flow was negative $1.8 billion in Q1 of 2023. Rivian needs to get itself to breakeven before its cash and short-term investment balance ($11.2 billion at the end of March 2023) dries up. Rivian is currently in the midst of “production hell,” a phrase coined by Tesla CEO Elon Musk when his company was trying to ramp up factory production to stem cash losses. Rivian has had hiccups getting its R1T electric truck out the door, but it’s making progress. Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page.
Red Alert: Why Rivian Stock Is Another EV ‘No Go’
Meme stock investing relies on trying to time the market, which humans, even those professionally trained, are notoriously bad at. It also depends on knowing which stocks will pop and which won’t — which is essentially impossible. Single https://www.dowjonesanalysis.com/ stock ETFs have also recently been introduced, which provide leveraged long or short positions on a single stock. Only a small number of these have been approved for trading so far, but do include some meme stocks like Tesla and NVIDIA.
Meme stocks often happened to be hard to borrow, with a high short-interest ratio. GameStop followed suit in 2021, raising nearly $1.7 billion via a secondary offering of 8.5 million additional shares at an average price of more than $200 per share. Stavros Tousios, MBA, is the founder and chief analyst at Markets Untold.
Best Meme Stocks To Buy Now
That said, the number of retail investors who are interested in Microsoft and other mega-cap stocks is likely to increase meaningfully. That’s because, as stocks’ valuations come down, the share prices of many companies, including Microsoft, have fallen meaningfully, making these names more attractive to many retail investors. Meme stocks lure investors with the promise of potentially big returns in little time. Bear in mind that meme stocks can be especially volatile, so plan accordingly and be prepared to continue investing more over time. If you’re not interested in building and managing your own portfolio of meme stocks but still want some exposure to the movement, there are some ETF solutions to help.
In November 2020, it became public knowledge Cohen owned a 10% share in the company. By closing two days later, the value doubled; an 8x increase from the price at the time of Cohen’s and Gill’s previous posts. For those looking for the next big meme stock, there are certain stocks worth watching. Here are three top meme stocks I think are worthy of being kept on watchs list right now, even for investors who don’t necessarily want to step into the fray now. Even with meme stocks, the old adage, “Don’t put all your eggs in one basket,” still rings true.
Best Options Trading Brokers and Platforms
Accordingly, for speculators looking for a top-tier meme stock on which to speculate, GameStop remains the king right now. I believe that the meme stock rallies we’ve seen play out in recent years aren’t likely to become commonplace. While an ETF such as MEME may be less risky than holding one singular stock, it’s still made up of high-risk investments https://www.topforexnews.org/ that could just as easily plummet as skyrocket. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.
Add a Comment