Retail investors using Reddit’s r/WallStreetBets have cost hedge funds billions of dollars over the past six months by investing in stocks that these firms have shorted. The Wall Street Journal reported that Melvin Capital Management lost $6 billion to meme stocks at the beginning of this year and is still down 50% since January.
This article was originally written by MyWallSt. Read more insights from the MyWallSt team here.
This trend has truly been unprecedented on the stock market and investors have become hooked on following the developments on social media. The craze is just as big as it was back in January, so let’s take a look at the stocks that are being discussed on Reddit right now and see if they are good long-term investments.
1. United Microelectronics Corporation
United Microelectronics Corporation (NYSE: UMC) shares have gained 245% over the past 12 months. The company, which operates as a semiconductor wafer foundry, released sales figures for May which resulted in meme stock investors buying shares of the Taiwan-based firm. The figures showed that net sales had increased over 16% year-over-year, which fueled interest in the stock from meme stock investors.
The semiconductor space has great potential for investors right now with massive shortages being reported by Tesla and other massive tech companies.
MicroVision (NASDAQ: MVIS) stock has jumped 860% in the past year and is currently one of the most talked-about companies on WallStreetBets. The lidar sensor creator is used by motor companies and is one of the top-performing tech stocks this year because of the interest from social media investors.
With the company’s relatively small market cap of $2.5 billion coupled with its high short interest level of 18%, MicroVision has the perfect recipe for a squeeze.
There is a long-term opportunity for MicroVision investors, as some experts believe the high-tech LIDAR builder could become a big player in the highly lucrative automotive space.
The original meme stock, GameStop (NYSE: GME), has returned a whopping 4,242% over the past 12 months. Bullish sentiment over the stock has been recently driven by the company’s developments in e-commerce.
Earlier this month, the video game retailer announced that it has leased a 530,000 square foot facility in Nevada to expand its fulfillment network, just two months after it signed a similar lease for a warehouse in Pennsylvania. These investments in packaging centers prove that the company has big hopes that its e-commerce business will take off.
GameStop has gone through a dramatic rally that really kicked off the entire meme stock trend but it might just receive more attention as it diversifies its business to keep up to date with the digital world.
4. Virgin Galactic Holdings
Virgin Galactic Holdings (NYSE: SPCE) shares are up over 104% over the last year as retail investors look to get a slice of the private space tourism pie. Recently, Virgin’s founder, Richard Branson, completed a successful test flight on the company’s spaceplane which intends to take tourists to space.
Virgin Galactic is racing Blue Origin, the space company founded by Jeff Bezos, to the stars. As the two battle it out, this is definitely one meme stock to watch.
With revenue estimates for 2022 standing at around $50 million, this means that its share price is currently trading at more than 260x forward revenues. Therefore, the stock might need to come back down to reality before you invest.
What meme stocks should I watch?
These companies have the potential to become worthy, long-term investments. They are at the forefront of offering products and services that are highly in demand in today’s fast-moving world.
However, what investors need to remember is that their share prices are currently out of line with their fundamentals so you will be paying a premium for these stocks. Be warned, you can also expect extreme volatility in the near future. For successful investing, it’s best to distinguish between true potential and social media hype.