While meme stocks aren't performing at the heights GameStop did in 2020, they are once again having a moment. Despite not being favored by analysts and often reporting discouraging earnings, these companies have the love of Reddit's ardent WallStreetBets investors.
If you missed the first wave of the meme stocks movement somehow, here's a brief explanation. In 2020, fueled primarily by activity on the subreddit r/wallstreetbets, several stocks began trading well above their valuation. Whether out of love for the brand behind the stock or a desire to stick it to hedge funds (and sometimes both), the following is a list of the most popular meme stocks to date.
GME is the meme that launched a thousand meme stocks (or at least a handful more). At the start of the COVID-19 pandemic in March of 2020, the majority of America's white-collar workers had transitioned to working from home or found themselves out of work. Whether correlation or causation, the period also saw a spike in the use of retail trading platforms like Robinhood.
The reasons the WSB community honed in on GME stock en masse are varied, but for many the goal was to cause a short squeeze on hedge funds. Due to the company's flagging performance, many institutional investors had adopted short positions on the stock. The WSB community bought up outstanding shares of GameStop, driving the price well beyond what fundamental analysis would predict. As a result, many investors who held short positions found themselves needing to cover their positions to avoid further losses or were forced into margin calls.
Many of the hedge funds who had shorted GME lost billions. Collectively, they reported $6 billion in losses, with Melvin Capital being one of the hardest hit. As a result of the squeeze, the company lost more than half of its portfolio in January 2021.
AMC Theatres (AMC)
AMC was another heavily shorted stock in 2020. Due to the pandemic forcing the majority of theaters around the world to shut down for the remainder of the year, it seemed like a no-brainer to take a short position on the stock. However, hedge funds couldn't have accounted for the WSB mania.
While the 2021 AMC gamma squeeze wasn't quite as large or attention grabbing as GME's, it definitely brought a world of hurt to some short sellers, and may be poised for a second, smaller squeeze in 2022. Positive earnings, coupled with AMC's continued favor with WSB's "apes" could prove that the brave few who continue to hold short positions on the stock have made some unlucky bets.
Bed Bath & Beyond (BBBY)
The retail home store rounds out the top three list of WSB's favorite meme stocks, again liked most likely for its short squeeze potential. With short interest up 34.5 percent in July from the previous report, it seems Reddit's self-described apes hope they can force a Bed Bath & Beyond short squeeze. The stock saw a considerable spike in after-hours trading leading into the week of Aug. 8, though nowhere near its height in January 2021.
Though never as popular as the big three, Blackberry had a few moments in the height of the meme stock craze. The Canadian company has moved away from producing phones, focusing instead on cybersecurity solutions for mobile users, rather than hardware. The move hasn't impressed analysts, making it a prime target for a short. The short interest on BB stock was 32.56 million shares as of July 2021, but the valuation of the short float was nearly three times that 12 months prior, which was when WSB traders took the most interest in the stock.
Tesla's "meme" status is as controversial as its CEO, Elon Musk. While technically rated as overvalued by many analysts, it's one of the top-rated growth stocks in the automotive sector and it's certainly not in decline the way many beloved meme stocks are. However, the cult of personality that follows Musk definitely makes TSLA a favorite stock among retail investors who frequent WSB.
Virgin Galactic (SPCE)
Sir Richard Branson's commercial space flight company doesn't get nearly as much attention at Jeff Bezos' Blue Origin and Musk's SpaceX, both of which are still privately held. Virgin Galactic stock recently reached an all-time low after the company reported it had to delay a commercial launch and would be selling off more shares. That said, Virgin Galactic is the only space travel stock currently available to retail investors, and a short interest ratio of 6.0 suggests it could be an attractive candidate for a short squeeze.