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The Meme Stock Revolution
Meme stocks remain very popular among retail investors. The concept caught fire during the pandemic, but it’s a trend that has persisted. A company’s stocks may increase in price when a limited number of investors spread the word about it on social media sites. Investors and analysts who focus on traditional investment methods think hot stocks are risky because they rely on many small investors to keep them from losing value.
The Best Meme Stocks to Buy
Selecting the best meme stocks to buy can become a bit of a hassle. These are the stocks that are the most popular or talked about on Reddit. Although meme stocks have cultivated a reputation of being very risky, you have to treat each company based on its merits. When it comes to investing, the mindset of each investor can have an influence. That is one of the most important factors when deciding which meme stocks are good for your portfolio.
Considering these factors, here are seven meme stocks making a lot of noise on r/WallStreetBets:
- Amazon (NASDAQ:AMZN)
- Meta Platforms (NASDAQ:FB)
- Tesla (NASDAQ:TSLA)
- Apple (NASDAQ:AAPL)
- Snowflake (NYSE:SNOW)
- Palantir (NYSE:PLTR)
- SPDR S&P 500 ETF Trust (NYSEARCA:SPY)
Amazon (AMZN)
Amazon is one of the most popular online retailers in the United States, and it is also a great investment opportunity for investors.
Jeff Bezos founded Amazon in the early 90s. He knew that customers wanted to buy online, 24/7, and from anyone worldwide without restriction. The tech giant has been seen as a disruptive force in many industries since then. It started with books, then expanded to many other products, including electronics, clothing and toys.
The online retail and cloud services giant rarely puts a foot wrong. It was no different in Q4. Amazon reported earnings that exceeded expectations after strong revenue from its cloud unit and its investment in electric vehicle (EV) automaker Rivian Automotive (NASDAQ:RIVN). Amazon’s advertising business has caught on and is generating large revenues. The company is rapidly expanding, which could be why r/WallStreetBets is also taking a keen interest in this mega-cap stock.
Meta Platforms (FB)
Facebook and Instagram parent company Meta Platforms did not have a great earnings season. It’s a rare blip for Meta, formerly known as Facebook, which is usually seen as a safe performer. FB shares dropped 26% after the company announced changes to Apple’s privacy policy would decrease Meta’s revenue by about $10 billion in 2022.
However, the enthusiasm on Reddit might be related to something else. Meta’s investment in the metaverse in 2021 cost them $10 billion, but few prospects have more potential. Metaverses will be a huge part of Web 3.0, the next generation of the web. It is more decentralized and participatory with user-generated content, peer-to-peer networks and open data. Additionally, it has many new technologies and open-source platforms to improve the traditional web.
Tesla (TSLA)
Tesla and its CEO, Elon Musk, are a well-known topic on social media. Musk is an influential public figure, and as such, he’s always been good at capturing attention. Therefore, it is no surprise Tesla is one of the preeminent meme stocks in the world at the moment.
Analysts were expecting Tesla to deliver 267,000 vehicles in the final quarter of 2022. But the company ended up delivering 308,500 vehicles. However, Tesla’s stock price took a beating after Musk announced the company was delaying new product launches until 2023. He said its humanoid robot is Tesla’s most important current project.
Tesla shares have been performing poorly for the last few months. However, it is not new to r/WallStreetBets traders who have followed Musk’s eccentric comments throughout the last few years.
Apple (AAPL)
Apple is a world-renowned company that has been around for decades. It’s one of the largest companies globally and has a lot of potential to grow in the future. With an impressive list of innovative products and services — including the iPhone, iPad and Mac — Apple is influential.
It is also known for generating revenue from more than just hardware sales. The company has successfully monetized services like iCloud storage and Apple TV Plus subscriptions.
Apple became the first company with a $3 trillion market cap at the start of the year. It managed to earn more than $34 billion in net income, despite the difficulties they have been facing as of late. As Apple’s hardware sales have slowed, it has been able to offset some of that decline with growth in the services department.
Snowflake (SNOW)
Snowflake is a data storage and analytics service users can access in the cloud. It offers an economical solution for enterprises looking to store and analyze their data outside of their on-premise systems, which are limited in scale and often costlier. The company’s goal is to help its customers manage their data more effectively and efficiently by providing them with a scalable platform for storage and analytics.
High-growth companies are common among lists of meme stocks. Like a software giant, the company’s success relies heavily on the quality of its reported earnings for the month. A slip-up can trigger a considerable correction in the share price. However, Snowflake is a very exciting business. If you are a risk-tolerant investor, then it’s a great value play.
Palantir (PLTR)
Palantir provides big data analytics, data integration and predictive analytics. It was founded in 2004 by Alex Karp and Peter Thiel. The company has a very strong focus on security and defense, but the business has grown to include commercial clients in the private sector.
Many organizations use Palantir’s software to analyze large amounts of data, especially law enforcement and government intelligence applications. Fast growth and high potential make this one of the most interesting investments for your portfolio. Are you in the market for a high-growth option? If so, this is an ideal choice.
SPDR S&P 500 ETF Trust (SPY)
SPDR S&P 500 ETF Trust is an exchange-traded fund that tracks the S&P 500 index. It has been around for more than two decades and is one of the largest ETFs globally. People buy it as an investment vehicle to gain exposure to U.S. stock markets or protection. SPY was created in 1993 by State Street Global Advisors.
SPY is probably the safest investment you can have in the current environment. We see this new investment trend means Redditors are likely to invest in companies with different profiles. This gives investors an idea of the patterns of meme stock traders.
What Are Good Meme Stocks?
A select few stocks gain sudden popularity on the internet, rally in price and produce high trading volume. It depends on your perspective. While some people who traded on Reddit did make a lot of money in a short amount of time, the risk that you may lose everything is high.
Good meme stocks can still pop over the year, but do not have the operating models of the best meme stocks. Despite the idea of striking it rich overnight being enticing, it is highly unlikely. A lot of young investors got lucky with their meme investments. However, you cannot expect to win the lottery again and again.
Without further ado, these are some good meme stocks:
GameStop (GME)
The old video game retailer, GameStop, has been very active in the market lately. r/WallStreetBets traders invested heavily in GameStop in early 2021, making investors that shorted the stock regret their decision.
Despite the many benefits of GME, retail investors cannot justify trading at such sky-high prices given its financials. GameStop has enough capital and managerial experience to evolve, but it will take a long time for this process to be complete.
So far in 2022, the stock continues to fall despite GameStop’s losses growing and revenue still lagging behind pre-pandemic totals. Reddit traders might hope for a repeat of 2021, but the chances are slim.
AMC Entertainment (AMC)
Apart from GameStop, AMC is the other big name among meme stocks. The movie theater chain reported preliminary fourth-quarter results on Feb. 1. They were better than expected, so the stock briefly went up.
Yes, it looks like the last quarter was good despite one big film having a big impact on box office sales. It’s not unusual for superhero blockbusters to drive the results in this industry. However, it is a little unusual just how quickly the success of Spider-Man: No Way Home came and went with no real blockbuster to follow it up. Therefore, as streaming becomes more prevalent, AMC is a risky prospect.
Lucid Motors (LCID)
Lucid Motors aims to be the first of its kind in the luxury EV market. The Air Dream Edition gives you the longest range ever rated by the Environmental Protection Agency (EPA). Lucid Motors’ CEO and CTO has said the Air would be comparable to Tesla’s model S.
However, it is only a good meme stock because of its recent missteps. Lucid is cutting its production forecasts for this year by 40%, and its stock has fallen as a result. It will also delay its second vehicle, the sport-utility vehicle (SUV) called Gravity. The original plan was for it to release in 2023, but it’s switching things up and releasing it in the first half of 2024.
Due to these factors, even the most bullish investors are getting a bit squeamish regarding this one. Regardless, LCID stock remains a highly-discussed play on the Reddit forums.
Are Meme Stocks Good Investments?
Meme stocks are not good investments because they are very volatile. Traders will find them useful to scalp profits. But investors that have a longer investment horizon will find it tough to keep up with the latest news regarding these stocks.
I know how tempting it is to buy a stock just because you’ve read about someone who did, but don’t let yourself spend more than you can afford to lose. Before investing, you also need to make sure you have an emergency fund and you’ve paid off your high-interest debt. You will always be able to fall back on your savings, so you won’t have to worry about making the wrong decision.
Are Meme Stocks Value Stocks?
Yes, certain meme stocks can be categorized as value stocks. The selloff in tech stocks has been a key driver of their popularity. That makes companies like Meta and Apple very attractive at the moment. These are mature enterprises with several business lines. Due to their diversified interest and sharp price correction, several companies on the list are now value stocks.
Are Meme Stocks Growth Stocks?
Some meme stocks, like Snowflake and Palantir, are growth stocks. Traditionally, investors only chose to invest in stocks with fast-growing revenues and earnings. These include technology firms such as Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Apple and Amazon. However, these companies have been active for a long time. Although they regularly beat analyst estimates, they are not high-growth stocks like Palantir, which often reports triple-digit revenue growth. Most Reddit investors are interested in growth stocks; therefore, you can find many of them among meme stocks.
When Are the Best Times to Buy Meme Stocks?
The best times to buy meme stocks is when the short ratio is high. The shorter the ratio, the more shares accumulated on borrowed positions. Once this ratio has reached a certain threshold, you can generally assume there has been significant accumulation among investors that believe the price will fall.
A few years ago, there was an inflow of new retail traders with a lot of cash coming from federal stimulus payments and new trading sites like Robinhood (NASDAQ:HOOD). These services were going for free and gave the idea it would be easy to profit by shorting stocks. The trading community is anticipating a rally in shares that may present an opportunity for investors to buy these stocks at lower prices.
These new investors formed communities on social media sites such as Reddit to talk about not only their desire to strike it rich, but also how they can take down “the man.” These are hedge funds that had bet against the stocks these investors targeted.
Meme Stocks ETFs
The Roundhill MEME ETF (NYSEARCA:MEME) began trading on December 8, 2021. The ETF is designed to track the Solactive Roundhill Meme Stock Index and includes companies with 25 equities that are likely to catch the interest of active retail traders. Index screens are used to monitor social media and short interest.
In a broader perspective, considering the breadth of industries meme stocks can cover, you will find many of the names on this list in prominent ETFs. For example, Redditors love tech stocks. Therefore, you will get a lot of exposure to these companies if you invest in Technology Select Sector SPDR Fund (NYSEARCA:XLK) and Vanguard Information Technology ETF (NYSEARCA:VGT), as an example.
Which Meme Stocks Pay Dividends?
Apart from SPDR S&P 500 ETF Trust, no meme stocks currently pay dividends. Dividend stocks are often considered a safe investment strategy that provides long-term benefits. Investors can expect to receive regular payments from these companies over time. This includes companies such as Microsoft (NASDAQ:MSFT), Exxon Mobil (NYSE:XOM) and Johnson & Johnson (NYSE:JNJ).
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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