Most wise investors consider the stock market a long game — buy and hold shares from reputable companies and see gains over time. But the rise in retail investors and apps like Robinhood have revealed a new demographic of retail day traders, and they’re out in full force on Reddit.
The Reddit thread Wall Street Bets has caught the eye of analysts after a flurry of activity from the community around GameStop (NYSE: GME). Shares have spiked multiple times in recent days after the group focused on the stock; GameStop closed Friday with gains of 50%; as of publication the stock was up another 18%.
Two investing groups seen as major shortsellers, Melvin Capital (which reportedly handles over $12 billion) and Citron Research, had been betting against GameStop stock — until this “army of options traders,” as Forexlive called r/WallStreetBets, banded together to move the market. The community started with 400,000 users at the beginning of 2019 and now boasts 2 million users.
The commenters on r/WallStreetBets – a “subreddit” on the social internet forum Reddit, populated by “Redditors” – seek out, and bet on, mid-size companies with valuations in the billion-dollar range with some name recognition and, it would seem, a fan base.
It’s working out well for some members of the thread linked here, many of whom are looking to cash in on their bets and then move on.
Not everyone on the GameStop train is seeking to sell immediately though. Check out this wholesome video of an investor with modest funds looking to learn from the big guys at WSB.
But should you bet on this group of gamblers – proud “degenerates,” according to ForexLive? Before you wade into the incredibly NSFW (and often offensive) subreddit, let’s take a look at some of their recent picks and how they panned out.
Best Buy (NYSE: BBY)
Beyond GameStop, Best Buy is one of the most talked about stocks on the subreddit. Best Buy spiked Friday along with GameStop, but then dipped mid-Monday morning. One r/WallStreetBets user saw a $10,000 gain overnight after essentially gaming Best Buy stock – shares were up 66.53%. But it’s not exactly an innovative pick, either. Back in December, experts at Motley Fool called BBY a “buy now,” citing its “demonstrated ability to drive top-line growth” and “one of the few appealing brick-and-mortar retailers to invest in.” As retail investors from WBR keep putting their money into the iconic tech brand, overpowering the shorts, we can look for it to keep rising.
Palantir Technologies (NYSE: PLTR)
Palantir Technologies represents another pick where Redditors and the pros (mostly) agree. This data analytics company co-founded by PayPal co-founder Peter Thiel hasn’t yet released annual sales figures for 2020, but is projecting approximately $1.07 billion in revenue for the year, which means the stock is currently valued at 45 times sales. Although Motley Fool experts say this could be “way overvalued,” other pros label Palantir as a buy-and-hold right now. Or, as the folks on Reddit say, “buy the dip.”
Palantir breaks the mold of many of WSB’s picks, as it’s not a highly recognizable brand name. In fact, as a high-tech government defense contractor, some of its investors aren’t even sure what the company does… beyond making them money on the market.
Blackberry (NYSE: BB)
Following the YOLO tag at WSB gives insight into the stocks that Redditors are going “all-in” on – and Blackberry ranks right behind GameStop as one of their top picks. There seems to be a timely reason to go all-in on the tech manufacturer. Motley Fool reports that BlackBerry settled a patent dispute with Facebook last week and the stock continues to rise.
Let’s hope it all works out for this Redditor who claims he bet everything on GameStop and BlackBerry.
Nokia (NYSE: NOK)
Trading just under $5 Nokia is one of the most affordable stocks touted on the subreddit, with a recognizable name and a nostalgic history for GenXers who may remember the company’s first generation of chunky cell phones. The buzz on the subreddit has volume significantly higher than average, with close to 47 million shares traded according to InvestorsObserver. For those just jumping into Wall Street Bets, this could be a good place to start.
AMC (NYSE: AMC)
It may seem foolish to bet on a movie theater company in the midst of a pandemic when most entertainment companies are struggling. But Redditors make a strong case for AMC, including the possibility that Disney will buy out the company, “Hollywood will not allow amc to fail,” and the possibility that the movie theater chain could get into streaming services. Plus, people may still want the movie theater experience after living without for a year.
While some Redditors are going all-in on AMC, pros at sites like InvestorPlace are calling it a “no buy” for the long term. Time will tell.
Bed, Bath & Beyond (NASDAQ: BBBY)
Redditors on Wall Street Bets seem to be divided on this one, but those who are making a buy call have solid points, such as new management and undervaluation. “They are trading at 1/3 of sales,” Redditor “MadeTheAccountForWSB” wrote yesterday in a post that’s full of unkind language, so if you check it out, be warned.
What do the pros think? Motley Fool says the “potential rewards outweigh its risk.” However, whether the brick-and-mortar home goods retailer can execute a successful turnaround with an omnichannel marketing push and more focused offerings remains to be seen.
Virgin Galactic Holdings Inc. (NYSE: SPCE)
A few Redditors are calling SPCE a “buy now,” although there is very little talk of WSB members going all-in, as of yet. The spaceflight company headed by Richard Branson has been in the news lately for a few successful test flights. But it was only the VMS Eve mothership aircraft, not the suborbital space plane, that flew successfully last week. The two crafts do not have the same purpose, or even use the same technology, so the test flights really don’t indicate that Virgin is any closer to getting to space. The stock dipped this morning. It’s possible that if enough WSB Redditors buy the dip, it will close high.
And What About GameStop (NYSE: GME)?
Ultimately, it’s still important to look at the long-term prospects of any company. For those who are “all-in” on GameStop, they aren’t really betting on Wall Street, so to speak. They are betting on billionaire GameStop investor and Chewy founder Ryan Cohen to catch lightning in a bottle once again and revitalize the brick-and-mortar video game retailer through esports, an increased e-commerce presence, and other initiatives that speak to today’s market.
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