Reddit stocks: what stocks are trending?
Joshua Warner August 2, 2021 11:57 AM
Reddit has become a hub for social-media driven traders and investors that have proven their ability to move the markets, injecting huge volatility into stocks like GameStop and AMC. But what stocks are grabbing attention on Reddit today?
Top Reddit stocks to watch
Below is a list of the top 10 most mentioned US stocks on the WallStreetBets thread on Reddit over the last 24 hours on August 2, 2021, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) have been excluded.
- Advanced Micro Devices
- AMC Entertainment
- Clover Health Investments
Square is a new entrant over the weekend that has shot straight to the top of the table of most-discussed stocks. This comes after Square and Afterpay announced a $29 billion all-stock merger, although it is not expected to close until early 2022.
Alibaba remains in play as investors grapple with the crackdown in China and ahead of its first quarter results tomorrow. Investors want clarity, but are unlikely to get much considering its CEO sent a letter out last week skirting the subject. Analysts are expecting revenue of RMB209,386 million in the first quarter compared to RMB153,751 million the year before. The net profit attributable to shareholders is anticipated to fall to RMB29,072 million from RMB47,591 million, with earnings per American depositary share (ADS) following lower to RMB9.81 from RMB17.36 the year before.
Robinhood is still under the spotlight following a far from perfect start to life as a publcy-traded business. Robinhood shares closed at just over $35 on Friday, below its $38 IPO price that was already set at the low-end of its target range.
AMC shares will continue to grab attention this week ahead of quarterly results next Monday, providing insight into how theatres have performed since reopening.
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The Reddit frenzy
Retail investors realised their potential power in early January 2021 when a loosely-coordinated strategy was formed on Reddit’s WallStreetBets chatroom to buy shares and out-of-money call options on stocks that were being targeted by short-sellers to push the price higher. The idea was to create a short-squeeze.
What is a short-squeeze?
A short-squeeze does what it says on the tin – it tries to squeeze short-sellers out of their positions. Short-sellers, mostly big institutional investors and hedge funds, bet that the price of a stock will fall but, as retail investors pile in and push the share price higher, they are forced to start buying the stock to try to limit their losses. The buying by the big players only fuels the share price higher.
David vs Goliath
The fact many of the stocks being targeted are fundamentally flawed or failing adds increased risk into an already volatile picture. GameStop is an out-of-favour retailer that sells physical video games during a time when games are mostly being bought online, while others like Blackberry are also laggards from the past.
With this in mind, it is unsurprising they were in the crosshairs of short-sellers that look for failing companies to bet against.
But why are retail investors banding together to buy shares in flawed companies? This disconnect is partly explained by a growing resentment among the smaller players in the market, which disagree with the idea of large institutions profiting from a company’s failure through short-selling practices, creating what has been described as a ‘David vs Goliath’ battle.
It is important to note that not all the most actively-discussed stocks on Reddit are struggling or being targeted by short-sellers. Many of the most mentioned stocks, like Apple, are simply popular among the community.
Reddit stocks and volatility
The stark movements in stocks like GameStop has demonstrated the power and influence that social media-driven investors and traders can have on the market, having injected severe volatility into several stocks. Volatility presents opportunities for traders, and it doesn’t get more volatile than Reddit stocks right now – even during a pandemic.
For example, we saw GameStop - the first heavily-shorted stock to be targeted by social media-driven investors - go from below $19 at the start of 2021 to a new record high of over $347 by January 27, and the share price has remained highly volatile ever since.
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