Meme stocks have been the talk since the start of this year, but there seems to be no formal definition of what it is
But there are characteristics that make a meme stock easier to spot
Isabelle Lee chats with Adrian Franklin on meme stocks. She is a reporter at Insider covering everything in markets from earnings reports to cryptocurrencies
Meme stocks are usually stocks that rally out of the blue.
“These are stocks that have unusually high trading volume, stocks that have wild price swings, and of course, stocks that social media loves,” Lee said.
“So this definition isn’t set in stone, it could obviously change, it could expand. But we’ll see for now, this is the definition that I see most captures current stocks that we are seeing.”
What characteristics do meme stocks have?
AMC, GameStock, Nokia and Virgin Galactic cane spring to mind when you think of meme stocks
“I spoke with one of my sources this week, Matthew Tuttle. So he’s the CIO and CEO of total capital management. And I said, What constitutes a meme stock? What if it doesn’t have a fan base? Is it still a meme stock? And I think no one can really answer it,” Lee said.
Lee says she thinks it’s just consensus agreement, as there really is no formal definition, which makes it tricky.
“But also, I guess, makes just the stock market. So exciting.”
What meme stocks should you be watching?
There are several but today, let’s talk about two.
So first is software company and second is digital marketing firm, vinco ventures.
“So both these shares rallied so much this week. Support.com, I think in the past month is up around 220 percent. Vinco ventures is also up around 180%,” Lee said.
Both these two companies exhibit the four meme traits, but they also have a high short interest.
Could there be a GameStop 2.0?
“GameStop is GameStop is the main stock King,” Lee said.
However she notes that the stock market, especially the retail traders, are always after something different.
Then we have runner ups like AMC entertainment, we have hertz, Saba health, Blackberry, but the now support.com and vinco. I don’t think these two are necessarily the most popular companies.”
It remains to be seen if there will be another GameStop that really caught the attention of most of the world
“The amount of stocks shorted in those two companies are relatively small compared to the average trading volume before now it doesn’t seem like they will reach GameStop levels, but we’ll see it’s anyone’s guess.”
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Market speculation rises, fueling concerns about correction
Investors are concerned about market speculation amid rising options trading and booming meme stocks and cryptocurrencies during a lengthy bull market.
Investors are concerned about market speculation amid rising options trading and booming meme stocks and cryptocurrencies during a lengthy bull market.
In Short
Investors are worried about rising speculation in options, meme stocks, and cryptocurrencies, which may lead to market corrections despite ongoing enthusiasm. Analysts highlight elevated stock valuations and concerns over inflation and interest rates as key risks for future market stability.
Despite challenges such as trade wars and competition from AI, enthusiasm remains high. However, some traders fear that this speculation could lead to significant market corrections.
Seema Shah, a strategist at Principal Asset Management, has noted increasing signs of market froth, suggesting vulnerability to disappointments.
A key indicator of this is the strong performance of popular stocks like Palantir Technologies, which saw a significant increase following positive sales growth, and Strategy, a company heavily invested in Bitcoin.
Meme stocks, including GameStop and BlackBerry, have also experienced notable price increases, raising questions about market behaviour.
Record volumes
Options trading is surging, with record daily volumes noted in January, indicating heightened activity among traders looking for quick profits.
Speculation is spreading beyond traditional markets into prediction markets and cryptocurrencies, with Bitcoin reaching record highs in January.
Meme coins, which derive value from internet popularity, have also gained traction, while overall stock valuations appear elevated compared to historical averages.
Although elevated valuations do not guarantee a selloff, they pose risks to long-term returns and are closely tied to the needs for strong corporate earnings.
Analysts warn that persistently high inflation could disrupt current market conditions, especially if interest rates remain elevated.