What makes a ‘Meme Stock’ a ‘Meme Stock’?
- More hype than substance. As the narratives build, so does the demand for the stock in these companies. ...
- Volatile price movements. Demand for ‘Meme Stocks' is driven more by emotion than rational analysis. ...
- Demand by Robinhood users. Sharing is the gasoline that powers a Meme’s engine. ...
- Doubled their value within the past 3 years. ...
What will be the next big meme stock?
While GameStop’s reign as king of the meme stocks doesn’t seem like it’s likely to end anytime soon, the r/WallStreetBets crowd on Reddit is always looking for the next big thing ... which tracks stock ticker mentions in the forum.
What meme stocks are trending?
Video game retailer GameStop was the original Reddit meme stock. GameStop entered 2021 as one of the most heavily shorted stocks in the entire market. WallStreetBets traders recognized the opportunity and piled into GameStop, sending the stock soaring from less than $15 to as high as $483 per share in the opening weeks of 2021.
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.
How to follow meme stocks?
The stock is trading at seven times its price at the start of last year. Other meme stocks have fared worse, with favored retailers especially lagging the broader market. Higher interest rates often correlate with lower valuations for riskier assets, with investors fleeing meme stocks, cryptocurrencies and the electric-vehicle sector.
What is considered a meme stock?
A meme stock refers to the shares of a company that have gained a cult-like following online and through social media platforms.
How do stocks become meme stocks?
Meme stocks have been 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.
What is a new meme stock?
Meme stocks are the shares of companies that have seen a recent surge in viral activity, which is usually fuelled by online social media platforms such as Reddit and Twitter. The buzz over a particular stock prompts retail traders to buy the stock with the knowledge that its share price will likely rise.
Is Robinhood a meme stock?
The so-called meme stock phenomenon had been born, and some said it would mark a permanent power shift on Wall Street. Robinhood played a major role in the meme stock phenomenon, and it's still dealing with the fallout.
Is GameStop a meme stock?
GameStop is the mother of all meme stocks. In fact, it was the stock that kicked off the whole meme frenzy. For most of 2020, GameStop was trading for less than $5 per share, and it looked like the COVID pandemic would destroy the retailer for good. But then Ryan Cohen, the founder of Chewy (CHWY) - Get Chewy Inc.
Is Tesla a meme stock?
MEME holds familiar meme stocks such as Gamestop, AMC and Bed, Bath & Beyond, and it also holds a few stocks some wouldn't think to call meme stocks, such as Tesla and Peloton.
Is NIO a meme stock?
Meme Stocks: Nio (NIO) Even among electric vehicle (EV) stocks, Lucid Group (NASDAQ:LCID) was arguably more of a meme play than this China-based maker of EVs.
Is Nvidia a meme stock?
In November 2021, I called Nvidia (NASDAQ:NVDA) a meme stock overvalued by 50 percent for the next ten years. It is now down 40 percent from its peak and has performed much worse than the S&P 500.
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.
What makes a meme stock?
A large social following: The word ‘meme’ itself is far from new and can be traced as far back as ancient Greek, where it meant ‘imitated,’ although it was made popular by Richard Dawkins in his book, The Selfish Gene.
What does it mean?
Recent weeks have seen the meme stock phenomenon return, with more stocks involved now, with more retail investors following online, and with these stocks posting share price returns well above broader indexes. However, the focus on smaller and riskier companies and their huge share price volatility means investors need to be very careful.
Meme stocks are here to stay
The rise of the retail investor was initially written off as a lockdown-driven one-off. We disagree, for the following reasons:
What is meme stock?
A meme stock is any stock that sees increased popularity or awareness based on social media discussions. One platform in particular is at the center of the meme stock rallies: WallStreetBets on Reddit.
Why are meme stocks popular?
Many meme stocks are popularized because they’re heavily shorted, which can play into the stock’s performance as well. One peak does not necessarily mean there will be more, but it’s possible.
What are the rewards of meme stocks?
The rewards of meme stocks. Meme stocks hold potential for big gains. When large amounts of retail investors band together, the upswings can be dramatic. It’s also a symbol of market democratization, something that everyday investors have been working toward for decades.
What is social sentiment indicator?
There’s a social sentiment indicator in the stock market that helps investors determine how a particular company is performing in terms of popularity. The indicator requires data from social media and businesses to build the charts. In theory, the results give insight into how a stock might perform.
Where does corporate value come from?
For privately held companies, corporate value stems from the bottom line. For public companies, much of their value comes from market capitalization. Shares are worth what people are willing to pay for them (aka market value). Social sentiment is at the core of this.
Is volatility higher in meme stocks?
Volatility tends to be higher with meme stocks. When large numbers of people buy into a stock (which you can tell from the stock’s trading volume), there are also a large number of people who could exit their positions in the short term. Meme stocks tend to maintain their peak for a limited time.
Is meme stock immune to risk?
Meme stocks aren’t immune. Because meme stocks depend on social popularity rather than company performance, they have their own set of risks and rewards. Bear in mind that these risks and rewards generally impact the retail investor segment (aka anyone who trades as an individual investor in the general public).
It's definitely possible to make a fortune off meme stocks. But should you attempt it?
Kailey has been writing about personal finance since 2013. She does her best to keep it interesting and jumps at any opportunity to learn something new.
Key Points
Meme stock share prices aren't based on the company's underlying value, but on social media interest.
A step-by-step guide to becoming a meme stock millionaire
The first step to getting rich off meme stocks is to choose the right company to invest in, ideally before too many other investors drive up its price. A lot of meme stocks have first risen to popularity on Reddit, but not all the stocks you'll find mentioned there have taken off like GameStop and AMC.
What are some alternatives to investing in meme stocks?
If you want to grow your wealth over the long term, there are plenty of safer ways to do that. A great option for most investors is an index fund. These are bundles of stocks that are designed to mimic a popular market index, like the S&P 500.
