TL;DR
- Meme stocks refer to stocks that have gone viral with internet popularity.
- A meme stock’s value is rooted in social sentiment rather than solely on core economic or corporate indicators.
- There are rewards involved (like potentially monumental gains) as well as risks (like potentially bigger losses).
What makes a meme stock?
What makes Palantir a classic meme stock?
- Several narratives about Palantir are contributing to its price fluctuations. ...
- Sentiment-related data should be a valuable predictor of Palantir’s future value. ...
- Palanatir’s share price tends to follow swings in the direction and tone of short-term media sentiment.
What does meme stock mean?
What it does mean is that this is either the biggest buyable dip these stocks have seen since meme stocks became a thing, or it’s time to take what’s still on the table and rotate out into other corners of the market that are fertile for a second guerilla action.
What are meme stocks?
The last few days have been exciting for meme stock investors. With macroeconomic tensions easing slightly and some investors jumping back into aggressive plays, stocks like GameStop (GME) - Get GameStop Corp. Class A Report and AMC (AMC ...
What is meme stock?
What are meme stocks, and are they worth the investment?
- Bed Bath & Beyond. Bed Bath & Beyond has seen better days. ...
- Blackberry. This Canadian company is known for pioneering the smartphone, but it quickly went by the wayside when Apple ( NASDAQ:AAPL) revolutionized the space.
- Nokia. ...
- Palantir. ...
- Virgin Galactic. ...
Meme stocks like GameStop took off in 2021, and they're showing no signs of stopping. Learn about what meme stocks are, how they work, and if they're a good investment option for you
Nicholas has been a writer for the Motley Fool since 2015, covering companies primarily in the consumer goods and technology sectors. He is also the founder and president of Concinnus Financial, a Registered Investment Advisor based in Spokane, WA. He enjoys the outdoors up and down the West Coast with his wife and their Humane Society-rescued dog.
What are meme stocks, and are they worth the investment?
Meme stocks are a battleground. More traditional investors decry the lack of business fundamentals and strong performance to justify sharp surges in stock price.
Investing in meme stocks and ETFs
Even with meme stocks, the old adage, " Don't put all your eggs in one basket ," still rings true. The good news is that meme stocks come from all nooks and crannies of the stock market, so it's possible to build a diversified portfolio of holdings that can catch a tailwind from various places.
What is a meme stock?
A meme stock is a security that has seen an increase in trading volume after going viral on social media or an online forum. Meme stocks have become increasingly popular due to a Reddit page called WallStreetBets.
Why do meme stocks rise?
Meme stocks rise in popularity because of conversations held online. Due to internet virality, they tend to see rapid price spikes. Because the increased price is artificial and not the result of the company’s actual performance, these spikes are usually followed by an inevitable crash.
What does it mean to short a stock?
Short selling is when an investor—often an institutional investor like a hedge fund —borrows a stock and sells the shares with the intention of buying it back later to return. When someone shorts a stock, they’re betting the stock price will go down between the time they sell and repurchase the stock.
What is the early adopter phase of a stock?
Early Adopter Phase: A handful of investors believe a particular stock is undervalued and begin to buy in large quantities. The stock’s price slowly begins to increase. Middle Phase: People who are paying attention begin to notice the increase in volume. More individuals then start buying, and the stock’s price skyrockets.
Is Meme stock overvalued?
For this reason, these stocks often become overvalued, seeing drastic price increases in just a short amount of time. “Meme stocks are not a class of investments that’s covered in a textbook—they can be value or growth companies,” said Misty Lynch, financial advisor and certified financial planner with Beck Bode, in an email to The Balance.
Where to put your money instead of meme stocks
Though the idea of amassing crazy wealth overnight is obviously appealing, the reality is that the odds are heavily stacked against anyone trying to outsmart the market. The meme investors who walked away with a lot of money were arguably just very lucky. This kind of trading is ultimately not that much different than gambling.
If you do want to trade meme stocks
For those still itching to trade the next viral stock, invest only with money you can afford to lose. Before you invest, you should make sure you already have an emergency fund set aside, you’ve paid off your high-interest debt and you’re already contributing to a retirement account (and meeting any 401 (k) employer match, if applicable).
Should I Invest in Stocks?
First, you should develop an asset allocation based on your financial goals. Your asset allocation is your portfolio's blend of stocks, bonds, and cash. Most research suggests that setting up the right asset mix is more important than choosing great investments.
How Do I Pick Stocks?
At Morningstar, we take an owner-oriented approach to stock investing. When you buy a stock, think of yourself as a partial owner of the company. It's important to understand a company's fundamentals before purchasing its shares. We consider three basics when we think of buying shares:
Should I Buy Meme Stocks?
In general, stocks in this category are not what Morningstar considers to be a long-term investment. Instead, meme stocks should be considered from the viewpoint of a short-term trader willing to speculate on a stock's momentum up or down and--importantly--able to weather a significant loss.
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Ruth Saldanha does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies .
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What is a Meme Stock?
First off, a meme stock is simply a term used to describe any stock that experiences rapid price changes due to influences on social media.
What is a Short Squeeze?
We saw a huge short squeeze in January 2021 with the GameStop stock (GME). Basically retail investors (the everyday person on Reddit and Twitter) went head to head with hedge funds that were shorting GameStop.
List of Meme Stocks
GameStop and AMC aren’t the only securities considered in the ‘meme stock’ category.
How To Buy a Meme Stock
Before you go running off to buy one of these stocks, I think it’s important to answer the question first: Should I buy a meme stock?
Bottom Line on Meme Stocks
Investments into meme stocks, cryptocurrencies, precious metals, and other speculative commodities are usually driven by emotion and the fear of missing out. There’s nothing wrong with holding a small amount of speculative investments in your portfolio (3-5%).
What Are Meme Stocks?
A meme stock is a stock that has gone viral online and has attracted the attention of retail investors. These stocks are typically based more on hype than they are on the company’s actual valuation or performance. Instead, the value of these stocks increases because of forums on sites like Reddit.
Meme Stocks vs. Traditional Investing
The CFA Institute specifically defines a meme stock as a stock that has gained prominence on Reddit’s WallstreetBets discussion board. 1 Once a stock crosses a certain threshold, the CFA Institute notes the date and begins to track information about the stock and how it performs on the market. 1
The Meme Stock Cycle
Unlike long-term investment strategies, meme stocks operate on a more volatile cycle. Meme stocks tend to follow a similar pattern:
Key Takeaways of Meme Stocks
One of the positives of recent meme stock sensations is that it brought investing to the mainstream conversation. Now more than ever, people are talking about the stock market and educating themselves about investing.
How Does Meme Stock Work?
Meme stock’s popularity is solely due to the online hype. It has little to do with the business fundamentals, performance, or prospects, such as profitability Profitability Profitability refers to a company's ability to generate revenue and maximize profit above its expenditure and operational costs.
Meme Stock Cycle
The meme stocks cycle comprises four phases describing how investors evaluate, invest in, and use them:
Risks
Meme stocks are risky investments due to their tremendous volatility. The price fluctuates based on online forum discussions and the amount of excitement that the stocks generate.
Recommended Articles
This has been a guide to meme stocks and their meaning. Here we discuss how does meme stock work, along with cycle, examples, and risks. You may learn more about financing from the following articles –
What is meme culture?
The meme culture thrives on Twitter and Reddit specifically but is also shared in group messages. No one can define the term “meme” as it is used in various contexts, but in its purest form, a meme is an image or video that portrays a concept or idea.
What companies are posting record breaking quarters?
Companies like Amazon and Apple are posting record-breaking quarters. Yet, they receive no love from CNBC, Bloomberg, Forbes, CNN Money, or any other trusted media outlet. Instead, Gamestop, AMC, Clover Health, and Blackberry, to name a few, are skyrocketing as individual investors pour money into these stocks.
Do meme stocks have short interest?
The Stock Needs to Have Short Interest. The valuation around meme stocks is not derived from fundamental or technical analysis. In fact, most investors in meme stocks won’t acknowledge valuation as it is not part of their narrative or investing thesis.
Is meme stock a growth stock?
It is important to note that meme stocks should not be categorized as growth, dividend, or value stocks. Some equate meme stocks to gambling. That said, all meme stocks share similar characteristics: The valuation around meme stocks is not derived from fundamental or technical analysis.
Is it illegal to short squeeze a hedge fund?
It is not illegal for a group of investors to coordinate a short squeeze. Nothing is protecting a hedge fund’s position. That said, Wall Street has deep pockets, so investors should be on the lookout for regulation.
Is the rise of meme stocks disturbing?
The rise of meme stocks is nothing short of fascinating and disturbing. The pure chaos and buzz around meme stocks are what makes them exciting to watch and talk about.
