What Is the Next Big Meme Stock to Buy? Our 3 Top Picks
GameStop was a dying video game retailer, one of the last ones standing. GameStop stock had a 140% short interest, making it highly susceptible to a short squeeze, akin to lighting a match in a kerosene-soaked warehouse. However, that victory was short-lived as meme stocks deflated as quickly as they inflated during the bear market 2022. As the smoke clears and the stock market recovers in 2023, retail traders wonder what the next meme stock will be that spawns another meme stock mania.
However, the stock fell steeply following the company’s announcement of the plan. Then, in January 2021, the short squeeze that The Roaring Kitty had suggested took place in earnest, with the price of GME shares exploding to nearly $500 amid a frenzy of short-covering and panic buying. Meme stocks, however, didn’t truly emerge until the year 2020 via the Reddit forum r/wallstreetbets. Unlike its predecessors and other investing message boards, WallStreetBets became known for its unconventional and often irreverent tone. In this and other forums that have popped up since, users work together to identify target stocks and then promote them, while also putting their own money to work.
A high short interest can potentially lead to a short squeeze down the road, especially if the business does well and proves the naysayers wrong. In any case, I’d certainly recommend considering buying MSFT stock now . I’ve been interested in the shares for some time, and I may pull the trigger on it soon. All indications are that the GME fan base remains as strong as ever.
The meme stock movement unofficially started in the summer of 2020, when most people were stuck at home during the first few months of the pandemic. Looking to turn some of that extra free time into money, many people turned to the stock market and social media for ideas. While it is possible to make money with meme stocks, it is an extremely risky venture. 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. When online investors understood the short positions against GameStop, people took it on as a Robin Hood-like adventure (often using the trading app Robinhood to do so).
Which stock will be the next GameStop?
The sorts of short squeezes and parabolic moves that have proliferated really defied the rules of theoretical finance. Seeing some of these rallies play out, by the shares of companies with dubious fundamentals, has been remarkable. But lesser-known investing subreddits can be plagued by manipulators like spammers and bots. The former are “bagholders” who made an ill-timed purchase and repeatedly post about a stock to boost its price so they can sell it higher, Rehl said. The eye-popping gains have inspired legions of hopeful successors to the original meme stocks, and sifting through the noise of online stock manipulation has never been harder. “The big risk with the meme stock investing is that it’s all based on the whims of the crowd,” he adds.
That said, it’s clear that certain stocks have gained a cult-like following on social media channels. The trading volume of these stocks has been huge, largely due to retail investors who are looking for quick wins. Whether as a result of stock purchases or options bets, meme stocks have rallied impressively on heavy volumes over the past year.
- WallStreetBets users quickly identified other downtrodden stocks with heavy short interest to boost.
- It would take almost six full days for short-sellers to cover their positions, based on this three-month volume data.
- Investing in a single stock usually carries more risk than investing the same amount of money in several different stocks.
- As Reddit goes public, Johnson sees Reddit’s offer for users to invest early as an olive branch.
- Other meme stocks emerged after GameStop, some with varying degrees of success.
From there, the number of retail investors buying shares and call options snowballed, driving up the price. The price increase drove out some short sellers early on as it attracted various big-name investors and public figures, such as Elon Musk and venture capitalist Chamath Palihapitiya. The best meme stocks to buy are usually beaten-down companies with a small market cap and a high percentage of shares sold short.
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The SoFi Social 50 ETF (SFYF) and VanEck Social Sentiment ETF (BUZZ) are similar — they track stocks with positive sentiment among traders and social media users, and thus have substantial exposure to meme stocks. oanda forex broker review 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.
Roundhill Investments came out with a meme stock-focused ETF in December of 2021 under the ticker symbol ‘MEME’. MEME features an equal-weighted portfolio of 25 stocks velocity trade based on social media popularity and market sentiment. The top 25 such firms are included in the portfolio, which is re-examined and rebalanced twice a month.
A Meme Stock Glossary
Meme stocks must have a high short interest to spark a short squeeze. Meme stocks should have social media buzz, a huge rising volume and a small float. Meme stocks became all the rage among retail investors during the COVID-19 pandemic. Meme stocks are created when a company’s shares catch fire with individual investors on social media platforms such as Reddit and quickly skyrocket in price. But, as many traditional investors and analysts point out, these viral stocks can be very risky since they rely on high interest from small investors to sustain the stock prices’ liftoff “to the moon.” Simply put, meme stocks skyrocket in price in a short period (often hours or days) because of a sudden surge in interest online or on social media and subsequent buying among small individual investors.
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Meme stock activity was given a great boost from bored individuals stuck at home during COVID-19 lockdowns combined with zero-commission brokerage apps like Robinhood. The Robinhood app saw overwhelming trading volume in meme stocks at times, causing multiple trade delays, outages, and platform crashes. This led to user outrage along with class action lawsuits as well as regulatory fines and restitution of approximately $70 million. Another common feature of meme stocks is high short interest, which means many other investors are betting the stock will fail.
Investing in a single stock usually carries more risk than investing the same amount of money in several different stocks. Diversification across multiple investments helps buoy your portfolio in case one investment sinks. One reason retail investors are bound to like Intercept is its volatility. Intercept’s beta is north of 1.5, which etoro review means that, on average, it moves more than 50% more than the broader market. For example, if the benchmark S&P 500 rises 1%, we would expect to see Intercept up more than 1.5%. In 2022, Bed Bath & Beyond announced intentions to sell 12 million shares in a secondary offering as meme stock promoters pumped the value of its stock.
The company, or the “consultants,” also sells cosmetics and travel container products. The company has seen declining sales and has pushed back its 10-K report, and received a non-compliance listing notice from the New York Stock Exchange on June 7, 2023. All this seems like very bearish news, so its short interest rose to 27%.
To have a short interest over 100% means there are illegal naked shorts. The float was also relatively small, at just over 56 million shares. Many astute retail traders figured if GME shares were to rally, it could cause a crazy short squeeze as the overcrowded short side would be forced to cover to avoid taking large losses. The answer is tough because the environment that made meme stocks viable no longer exists.
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