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What are Meme stocks and how to invest in them

What are Meme stocks and how to invest in them


Mem Stocks

The term “meme stocks” has been around for a long time, but it wasn’t until early 2021 that it became really popular. In search engines, the key frequency is 600-700 queries per month – this is a lot. Previously, meme shares were considered securities worth a few cents. Through collusion, investors raised the stock quotes for a short time, which then no less sharply returned to their previous level.

Since winter-spring, the format has changed a bit. Now the value of shares does not always play the first role, the principle is more important. It all started with GameStop stock. The Whales considered the company overvalued, which greatly upset its fans. A conspiracy of small investors on Reddit lifted the company’s stock by 134% in a single trading session, causing hedge funds to lose about $6 billion in losses. Unlike the classic pump, the subsequent dump did not return quotes to the initial level – as a result of the flash mob, GameStop shares eventually rose in price.

Meme actions – entertainment of modern youth

The one-time promotion at GameStop and several other companies has not ended. In June, the scale of investment in meme stocks became even greater.

  1. clover health. Founded in 2013, the company is a provider of health insurance programs. On June 8, in 2 days the value of the company rose by 35% and 82%, respectively. The subsequent rollback lasted 3-5 days, but all the same, the securities are now worth more than the initial level.
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clover-health

On the same day, ContextLogic’s securities also rose by 50%.

ContextLogic

The only difference is that they remained at the level of highs, although analysts note that there were no reasons for a sharp increase in quotations.

  1. Clevland Cliffs. On June 9, securities of a metallurgy company joined the list of meme shares, which rose in price by 14.55%. There is an opinion that the company is undervalued – it shows strong financial results, there is an increase in world steel prices. Therefore, perhaps, in such an original way, investors decided to help her. True, not for long.

  1. Orphazyme. On June 10, the shares of the biotech company became the first meme shares in Europe. In one day, the company’s shares rose by 1387%, then fell by 30%.

The attack of Reddit users on this paper is interesting in two ways. First, she was pumped twice. And the second time the sharp growth was even greater than the first. In classic pampa strategies, the same paper is rarely raised twice. Secondly, Goldman Sachs took part in the second pump. According to Danish law, a company must report to the regulator if one of the shareholders has acquired more than 5% of the shares. So one of the world’s largest investment banks got on the list, which first increased the share of biotech securities in the portfolio, then reduced it.

  1. Wendy’s. Fast food restaurant chains were the least fortunate. After the June 8 pump, its papers fell below their initial level by the end of the month.
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Analysts warn: it is not necessary to follow the trend. If you understand that the growth of quotes has no fundamental justification and is an abnormal percentage, then the security will most likely fall in price in a few days. Those who wish can join the group on Reddit.

About Eric R. Brinkley

CEO Fxbotreview.com Algotrader. Blogger. I write interesting content, do content with you, and also maintain a website with independent reviews of forex software. Trading robots, Indicators etc..

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