If you’ve spent any time on the internet over the past few years, you’re probably familiar with memes – funny social media posts that quickly go viral. The concept of meme stocks has entered investment vernacular over the past few years. Simply put, these are trendy stocks that tend to be popular with millennials. Today we’ll discuss the best meme stocks on the market and how to invest.
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What Are Meme Stocks?
Meme stocks are a unique concept that have come to prominence in the last decade or so. The term is a reference to a specific type of viral social media post.
A meme stock is a stock that becomes trendy at a very quick pace. Investors tend to buy them based on hype and emotion, instead of logic and financial statistics. These companies often become popular because they have the potential to innovate in the future, as opposed to doing something
Meme stocks tend to experience a lot of volatility. Their value can shoot up quickly when something exciting happens with the company. However, traders tend to panic and sell the stock with little provocation.
Millennials love meme stocks, and tend to be the demographic that drives their fluctuations. This generation have recently become much more active investors due to online commission free investment platforms like WeBull. Established firms like Charles Schwab and TD Ameritrade have also added online investment tools in recent years.
Online platforms have made it much easier to make quick investment decisions. This has had a huge effect on the way people build their portfolios, and has led to the prominence of meme stocks.
These meme stocks have been further perpetuated by social media platforms like Twitter and Reddit. Online hype can drive some people to purchase a stock without fully researching its financials.
These stocks tend to fluctuate as a result of public sentiment. However, savvy investors can still make money by trading these meme stocks – it’s all a matter of timing.
The Reddit And Gamestop Debacle Explained
Meme stocks have shot into the public eye this week as a group of Redditors decided to essentially bet against the market – with shocking results. Gamestop stock had the most dramatic gains this week, but stocks like AMC and BlackBerry also saw huge spikes.
Hedge funds had been betting against struggling companies like Gamestop and AMC this year, assuming that their stock price would go down. Young day traders on Reddit decided to purchase these stocks en masse, resulting in a huge stock surge. Short sellers were also forced to buy these stocks to cover their bids, which pushed share prices even further.
Many of these Reddit investors were using Robinhood, an investment app that caters to Millennial and Gen Z investors. As Gamestop and AMC stocks shares started skyrocketing, Robinhood made the decision to temporarily stop purchase orders for them. This immediately caught the attention of lawmakers from both parties, such as Alexandria Ocasio-Cortez, Ted Cruz, and Rashida Tlaib, who all called for an investigation into market manipulation.
While hedge funds will likely lose billions of dollars in this move, many young investors won big. Only time will tell what will happen with these meme stocks, but for right now, investors shouldn’t discount the power of Reddit.
Hot Meme Stocks Right Now
GameStop (NYSE: GME)
GameStop has become the ultimate meme stock practically overnight. This chain of video game stores has locations throughout the US, Canada, New Zealand, Australia, and Europe.
While video games are more popular than ever right now, this company has been struggling for several years. Platforms like Steam, Playstation Network, XBox Live, and more have made it easy for consumers to buy their favorite games online. Add in a global pandemic, and GameStop’s revenue has continued to drop.
The Reddit short squeeze pushed GameStop’s stock up by over 300 percent in the space of just a few days. At its highest point, the stock traded for $469 per share.
Robinhood has stopped purchase orders for GameStop temporarily, although other platforms like WeBull are allowing them again after a brief shutdown. Some people have theorized that powerful hedge fund managers are pressuring Robinhood to prohibit purchases and force a sell-off, which would help them mitigate their losses.
However, retail GameStop investors seem intent on holding so far. While the stock is extremely volatile, it remains around $325 per share after hours on January 28th. Of course, this could all change over the next couple days, so investors are in for a wild ride.
AMC Entertainment Holdings Inc. (NYSE: AMC)
AMC is another stock that generated a huge amount of buzz as a result of the Reddit short squeeze. The company runs a large chain of movie theaters, which have struggled throughout the pandemic.
This is another stock that hedge funds were planning to short, as their share prices had been on a continuous downtrend for the last several years. However, Redditors targeted the stock for their short squeeze. This drove the price up from approximately $2 per share at the beginning of January to a peak of nearly $20 per share on January 27th.
Robinhood has limited trades of AMC as well, although many other platforms are supporting them. Investors don’t seem as keen on holding AMC as they do GameStock. Share prices have already dropped back down to $8.63, just a day after their peak. This is another stock that day trades should keep an eye on during this volatile time.
Best Meme Stocks To Buy
Tesla (NASDAQ: TSLA)
Tesla is arguably one of the most well-known meme stocks out there. Celebrity entrepreneur Elon Musk has a way of pushing this company into the limelight – and it’s reflected in their share price. Investors have flocked to Tesla this year, resulting in massive share growth.
Tesla makes electric vehicles and other clean energy technology. Climate change is becoming an increasingly pressing global problem. Consumers have reacted with huge demand for emissions-free vehicles.
Most other car companies saw their stock price dive as a result of the pandemic. This wasn’t the case for Tesla. Their shares have skyrocketed this year. The S&P 500 added them to their index in December 2020, driving even more growth.
Tesla’s shares are up exponentially even in a tough period for the stock market. Despite the hype, you’ll want to be cautious when adding this company to your portfolio, as it may be overvalued.
The best strategy here is to wait for a dip in their stock price. With all of their innovative technology and iconic cars, there’s still plenty of hope for future growth with this company.
Advanced Micro Devices (NASDAQ: AMD)
Advanced Micro Devices makes computer processors that are essential for the production of smartphones, laptops, and other electronic devices.
While AMD’s share prices had been on the way up for a long time, they saw a huge spike in mid-2020. Many people started to realize just how important these electronics were to our daily lives.
Like many other meme stocks, AMD’s shares have fluctuated since their initial spike over the summer. Thier price to earnings ratio indicates that this stock is on the expensive side.
However, AMD has seen excellent revenue performance this year. Their yearly revenue has grown by nearly a third when compared to 2019. Much of this is due to higher demand for gaming devices. With more people staying home this year, many have turned to video games as an escape.
While AMD has experienced the explosive growth of a meme stock, it could actually serve as a great long term portfolio addition. This is because they continually update their processors to keep up with demand and technology. Because of this, their stock could easily continue to grow over time.
BioNTech (NASDAQ: BNTX)
The coronavirus pandemic completely changed the world in 2020. There has been huge demand for a vaccine that could help life return to normal. Many biotech and pharmaceutical companies that worked on vaccines saw their stocks go up dramatically as a result.
BioNTech is a German company that worked with Pfizer to develop a COVID-19 vaccine. This vaccine has been the most successful one so far to hit the market. The United Kingdom authorized the vaccine for emergency use in December 2020. 15 other countries followed suit.
It’s likely that many other countries will authorize this vaccine in the coming months. Over 4 million people have received the first dose of the vaccine around the world.
The BioNTech stock has received enough hype this year that it would definitely qualify as a meme stock. However, there’s real potential to back up that hype.
It’s likely that millions more people will take this vaccine in the next few months. Countries around the globe are making huge orders. With that in mind, it’s hard to believe we have seen the last of this stock.
In fact, now might be the best time to buy. The BioNTech stock just saw a slight dip, so Wall Street investors can get in now for great returns later on.
Meme Stocks: Final Thoughts
Meme stocks may seem like they are all hype, but that doesn’t mean you should count them out. The key is to check the company’s financials before buying any shares to make sure they have long term potential.
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