- Retail traders changing tack as cost of living bites
- Once popular meme stock stars have plunged this year
- GameStop has lost more than half of 2021 peaks
So-called ‘meme’ stocks, such as GameStop (GME:NYSE), AMC Entertainment (AMC:NYSE) and Bed Bath & Beyond (BBBY:NASDAQ), are becoming ‘pump and dump’ bets as retail traders react to record high inflation and a possible recession, claims one analyst.
Edward Moya, a senior market analyst at US broker OANDA, says that ordinary investors have turned to short-term market tactics as they grapple with the soaring cost of living.
‘Millennials and Generation Z people are buying houses, have a ton of student loans to pay back, and cannot afford to be loose with their financial investments,’ said Moya, but ‘with so much pessimism around Wall Street, a lot of young people are not expecting the stock market to provide as many opportunities for long-term bullish bets,’ he said.
The analyst says that this represents a see-change from the initial meme stock mania of early 2021, when retail traders used social media to co-ordinate against hedge funds which had built large short selling bets against several meme stocks.
‘Before where people were saying they’re going to hold GameStop forever or AMC forever, now it’s more of a targeted strategic bet.’
GAMESTOP STOCK PROFITS HAVE VANISHED
Video game company GameStop was one of the first to attract retail traders, who organised on the Reddit social media platform and caused the stock to soar. The traders gained a lot of attention because they caused Wall Street institutional investors, many short-selling hedge funds, to lose millions of dollars.
Short selling is borrowing a stock through a broker with the expectation the price will fall. When it does, the buyer returns it and profits from the difference between the first price and the second, lower price.
Investing in certain meme stocks created the opportunity to make a lot of money in 2021 for those able to time their trades, but for many investors the profits potential of meme stocks has evaporated. GameStop stock has fallen 30% to date in 2022 and is down more than 50% from $63 highs last year.
Bed Bath & Beyond, AMC and Blackberry (BB:NYSE), popular picks during the peak of meme mania have performed even worse, down between 50% and 75% in 2022.
