GME
Sizing up the Wall Street Bets phenomenon of retail trading
- Here at Seeking Alpha, and for all of our readership, Wall Street
Breakfast is colloquially referred to as "WSB," but a different type of
WSB has been taking the market by the storm in recent weeks. What we're
referring to is Wall Street Bets - the Reddit forum dedicated to "making
money and being amused while doing it." The r/wallstreetbets subreddit
and
their army of day traders have been responsible for outsized moves in
recent weeks for heavily shorted stocks like GameStop (NYSE:GME), Bed
Bath & Beyond (NASDAQ:BBBY) and AMC Entertainment (NYSE:AMC) . The
community will choose individual stocks and run them up as a group,
triggering a short squeeze and sending shares even higher. In
today's "WSB"
premarket movement: KOSS+48%; GME+20%; AMC+17%; CLVS+9%.
- *Thought bubble:* Not all of the targeted buying campaigns are about
busting the shorts. Some of the stocks the WSB crew are swiping for have
been highlighted for their low valutions like BlackBerry (NYSE:BB) or
Palantir (NYSE:PLTR), but for the average trader, there has been more of
an emphasis on flows over fundamentals. In fact, fundamentals may have
gone
out the window a long time ago, as the retail investor becomes a more
powerful collective force than the professional investor. Just think of
Tesla, whose market cap tops the nine largest automakers combined, but
makes a fraction of their cars and annual profits.
- Could a Reddit forum bring the house down? As entertaining as these
moves are, they're only a sideshow. The ones that should be most alarmed
are the ill-equipped financial professionals that could be disrupted by
the
populist forces. Once upon a time, short-selling firms would unveil a new
position to great anticipation (think Citron), but from now on that may
just signal a massive incoming short squeeze. Some advice to the shorts:
Stop crowding into the same trades.
- *Takeaway:* Retail trading is definitely changing the way markets
function, but what really seems to matter is that we now have a stock
picker's market for the first time since the dot-com bubble. That means
stocks may be less sensitive to the broader economy than they used to be,
while the professionals need to pay attention to a new generation of
investors that entered the scene after the rise of commission-free
trading.
Instead of following many of the upgrades and downgrades on Wall Street,
they're doing their own research on platforms like Seeking Alpha, and
signaling a new era to the DIY investing atmosphere.
|Today, 5:20 AM|22 Comments
Sizing up the Wall Street Bets phenomenon of retail trading
- Here at Seeking Alpha, and for all of our readership, Wall Street
Breakfast is colloquially referred to as "WSB," but a different type of
WSB has been taking the market by the storm in recent weeks. What we're
referring to is Wall Street Bets - the Reddit forum dedicated to "making
money and being amused while doing it." The r/wallstreetbets subreddit
and
their army of day traders have been responsible for outsized moves in
recent weeks for heavily shorted stocks like GameStop (NYSE:GME), Bed
Bath & Beyond (NASDAQ:BBBY) and AMC Entertainment (NYSE:AMC) . The
community will choose individual stocks and run them up as a group,
triggering a short squeeze and sending shares even higher. In
today's "WSB"
premarket movement: KOSS+48%; GME+20%; AMC+17%; CLVS+9%.
- *Thought bubble:* Not all of the targeted buying campaigns are about
busting the shorts. Some of the stocks the WSB crew are swiping for have
been highlighted for their low valutions like BlackBerry (NYSE:BB) or
Palantir (NYSE:PLTR), but for the average trader, there has been more of
an emphasis on flows over fundamentals. In fact, fundamentals may have
gone
out the window a long time ago, as the retail investor becomes a more
powerful collective force than the professional investor. Just think of
Tesla, whose market cap tops the nine largest automakers combined, but
makes a fraction of their cars and annual profits.
- Could a Reddit forum bring the house down? As entertaining as these
moves are, they're only a sideshow. The ones that should be most alarmed
are the ill-equipped financial professionals that could be disrupted by
the
populist forces. Once upon a time, short-selling firms would unveil a new
position to great anticipation (think Citron), but from now on that may
just signal a massive incoming short squeeze. Some advice to the shorts:
Stop crowding into the same trades.
- *Takeaway:* Retail trading is definitely changing the way markets
function, but what really seems to matter is that we now have a stock
picker's market for the first time since the dot-com bubble. That means
stocks may be less sensitive to the broader economy than they used to be,
while the professionals need to pay attention to a new generation of
investors that entered the scene after the rise of commission-free
trading.
Instead of following many of the upgrades and downgrades on Wall Street,
they're doing their own research on platforms like Seeking Alpha, and
signaling a new era to the DIY investing atmosphere.
|Today, 5:20 AM|22 Comments
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