New meme stocks of 2024
In this article, the experts at the Traders Union will cover the topic of investing in meme stocks. This new direction in securities trading has been heating the imagination of individual investors over the past few years. According to statistics, incredible fortunes were created and lost in this niche. We will talk about the history of the term “meme stocks”, the pathfinders in this field, communities of financial analysts in social networks, and their attempts to influence the global financial system.
Here you will learn about the main features of modern meme stocks and read the entertaining story of the influence of private investors’ groups on GameStop stock quotes, which have already become a classic within the genre. The pricing mechanism of meme stocks and the four stages of the cyclical price behavior for these securities will also be discussed.
Check out the list of the top 6 forward-looking meme stocks in 2023. You will learn about the risks associated with using this financial instrument, and the best online brokers for direct trading in meme stocks. This review will help you receive answers to the most common questions.
Start trading stocks right now with eOption!What are meme stocks?
According to the definition from Investopedia, meme stocks are rapidly growing, hyped-up, and widely promoted securities in the investment environment. Quotes for meme stocks are constantly growing, sometimes tens or even several hundredfold. For example, the well-known securities of the GameStop company, the previous price of which did not exceed a couple of dollars per unit, rapidly rose to a resistance level of USD 400 (all without visible changes in its fundamental factors).
Basically, securities quotes are driven by investor expectations, which are based on future dividend income and a significant increase in market value. This may occur as a result of a change in the trend of the commodity cycle, a positive decision in a serious legal proceeding, the introduction of new technologies, the receipt of an innovative product patent, a change in government policy, and other significant factors. In the case of meme stocks, the rapid growth of quotes occurs for other reasons. Let's try to understand the essence of the issue.
In recent times, it happens that companies whose papers are taken as memes do not have impressive success. The reason for this phenomenon consists in the group behavior of individual investors. Relatively recently, the WallStreetsBets investment community was created on the Reddit platform, where private investors share their experience and, as the practice has shown, even sometimes carry out a semblance of coordinated interventions to inflate the quotes of the securities they like. Since all this happens in the Reddit environment, then, accordingly, the latest stock market news is discussed in the form of "memes" or funny pictures.
Community members began to work as a team at the end of 2020. From that moment on, attacks on the stock market were carried out once in a while; or more precisely, on the stocks they liked, one day with more, another day with less success. As a result, such a thing as meme stocks appeared. In fact, thousands, maybe hundreds of thousands of individual investors are trying to consistently invest in the securities they like to achieve a certain financial result.
The main features of meme stocks
Meme stocks have several key features that make them stand out from other investment tools. Basically, meme stocks are highly volatile securities that are widely popular among users of social networks such as Reddit, Twitter, and Facebook.
Also, one of the key features is their low price and the so-called cult glory created by minor members of the investment community around a particular stock issuer. As a result, the coordinated actions sometimes create rapid growth in quotations of the targeted securities. This is especially true when there are no significant changes in the fundamental indicators. At the same time, it is to be noted that meme stocks are the interest area of the young generation of modern investors.
GameStop is a classic example of a meme stock
Until the beginning of January 2023, the GameStop brand was known in certain circles as a store chain selling computer games and consoles. However, after January 21, 2021, millions of investors worldwide, specialists from the Securities Commission, and even the US presidential office became interested in the company's activities. The turnover in transactions of GameStop shares on January 26, 2021, was significantly higher than that of such behemoths as Apple, Microsoft, Tesla, and other world-famous corporations. In the investment world, there was even talk of a Wall Street upheaval and a battle of generations. So what is the key feature of such frenzied popularity of this average brand?
At the very height of the coronavirus pandemic, GameStop, the offline seller of game consoles and game discs, was going through a very tough time. Naturally, due to a complex of negative fundamental factors and uncertain prospects, GameStop stock quotes fell back from $62 (the peak of business activity in 2017) to $4-10 per share by mid-2020.
Honestly assessing the fundamental prospects of GameStop, large Wall Street hedge funds attempted to short sell the securities of this company. Melvin Capital Management was the most active participant in this activity. However, at the end of January 2023, one of the anonymous members of the Reddit investment community — which comprises more than four million users — suggested preventing large hedge funds from destroying GameStop.
Lacking significant funds to buy shares, hundreds of Reddit members started buying call options on the company's shares in concert. As a result, quotes slowly crept upwards. Large hedge funds had to take losses and buy large holdings of shares from brokers to avert disaster, which led to even more price increases.
The initiator of the Reddit uprising, known on social media as “Roaring Kitty” or “Screaming Kitty”. His real name is Keith Jill. He and his cohorts successfully turned his $53,000 into $48 million in just a few weeks. By January 26, 2021, GameStop shares were quoted at $147 per unit. This festive occasion was joined by Elon Musk, who spoke out in support of Reddit, which resulted in a real boom. On January 28, 2021, GameStop's share price hit $468. According to the S3 Partners analysts, the agreed-upon financial "flash mob" saw GameStop's stock rise 2,000% in a year.
How are meme stocks growing?
The Traders Union has learned that meme stocks are an attractive speculation tool for individual investors, and they are bought in the hope of a quick return on investment with a fat profit margin. A surge in viral activity and excitement is supported by users of social networks such as Reddit, Twitter, and Facebook. It is they who, by their actions, forced Wall Street hedgers to buy back large holdings of shares to prevent huge losses, which gave additional impetus to a further increase in the price of the securities.
The meme community, seeking high profits, prefers stocks with high but "short" open interest. According to users of the WallStreetBets forum, there is a certain cyclicity in the behavior of meme stock quotes. During the first phase, undervalued shares are also identified by the community of individual investors, and applications for the purchase of securities of this company began to soar.
Then comes the middle phase, during which more and more individual traders show interest in the company's shares. Prices start to rise and get even higher. Thus, there is a smooth transition to the late phase, during which these securities cause a storm among users of social networks, which contributes to further inflation of quotes.
Individual investors, seeking easy prey, make significant capital investments. Within this period, short-sellers also join the process, as there are multiple reassessments of the prospects for the targeted security. And then, of course, the profit-taking phase comes, which is when the most sophisticated retail investors begin to gradually exit long positions. These actions sometimes create a panic wave of sales due to fear of losing accumulated profits. As a result, after a few weeks, there is a rapid collapse in quotes and the securities of the targeted corporation, and its shares begin to trade in a dull sideways motion with small volumes until the next cycle occurs.
Тop 6 new meme stocks in 2024
The experts at the Traders Union have made a list of the top 6 new meme stocks that will excite the attention of individual investors throughout 2023. Below is more detail on each of them:
Bed Bath & Beyond
Blackberry
Nokia
Palantir
Virgin Galactic
AMC Entertainment
Bed Bath & Beyond is a large retail chain of home goods and accessories. Until 2010, the company's business was excellent. However, since the development of e-commerce and in connection with the onset of the coronavirus pandemic, Bed Bath & Beyond's financial position has been shaken. Today, the company is successfully building a multi-channel business, both online and offline. In the light of the global economy’s normalization, the company's shares are becoming increasingly popular among members of the meme community.
Blackberry is a well-known Canadian pathfinder in the smartphone niche. The glory of the company has noticeably faded after the revolutionary achievements of Apple and its iPhone. However, Blackberry's leadership managed to tough out the difficulties. Currently, the company is engaged in advanced software development for the automotive industry.
Nokia is a former global leader in mobile technology that enjoyed its heyday in 1990-2000. After abandoning the development of new models of gadgets, the company refocused on the production of infrastructure equipment for mobile operators. Today, the construction of 5G lines is in full swing, and the financial outlook of Nokia is in a position to improve significantly.
Palantir is a company that quickly gained the attention of large investors after a successful IPO in 2020. Its area of activity is focused on the development of artificial intelligence echo systems and it works with large data storage facilities. Previously, Palantir's collaborations have mostly been with public sector firms, but recently there have also been successful commercial projects.
Virgin Galactic is a pioneer in space tourism. It was founded by Richard Branson with the support of Elon Musk and Jeff Bezos. Exploratory flights are currently underway, but soon it is planned to produce tourist excursions to low Earth orbit for $250,000 per seat per flight.
AMC Entertainment is a large cinema chain in the United States. Of course, after the start of the pandemic, it had financial difficulties. As a result of large hedger short open positions, AMC Entertainment shares have become of great interest to the meme community.
Risks of investing in meme stocks
Today, in this time of geopolitical crises, regional conflicts, two-digit inflation in the industrialized world, skyrocketing commodity prices, and massive financial market turbulence, many investors are wondering how to save and boost their hard-earned money. Everyone wants to ensure a decent standard of living for themselves and their loved ones, even after retirement. So, to what facts should a novice investor pay attention?
The yield of G20 and government bonds — although distinguished by their reliability, and in combination with modest interest rates and inflation expectations — have lost their former attractiveness. Naturally, a certain percentage of government securities can be added to your investment portfolio to reduce overall risk, but if you are energetic and full of ambition, then you should also consider the high-yield component of your investment strategy. Commodity futures trading today is like playing with the weather. Working with options contracts involves the risk of losing the entire deposit, and besides, it requires serious knowledge in the field of financial mathematics. So, maybe you should continue to buy meme stocks?
Of course, they deserve attention, too. However, you should always remember that this is a very risky type of speculation and you may lose all your invested funds. Investing in meme stocks is like investing in high-yield investment programs (HYIPs). Whoever recognized the trend and joined at the very beginning of the movement, and then locked in profits at a good hour, can make an incredible fortune.
When working with high-risk instruments, it is highly recommended to use protective settings such as stop-loss. Also, during the rapid upsurge of meme stock quotes, it is possible to use a trailing stop to lock in part of the profit, because you still need to be able to keep the money in your hands. There is a golden rule of investing that says: You must not invest more than you are willing to lose in very risky securities without hurting your own needs in everyday life.
In general, investing in meme stocks is an innovative movement and a kind of flash mob of a younger generation of investors who want to bring new trends to Wall Street and at the same time make good money.
Stock investment brokers
If you still decide to buy meme stocks, you need a reliable, tried, and trusted broker with low commission costs, positive reviews, and a strong reputation. Also, when choosing an intermediary for stock trading, you should pay attention to the availability of a license from a financial institution, the required minimum deposit amount, and the possibility of uninterrupted replenishment/withdrawal of earned funds.
Also, important factors are the loyal attitude of the broker's administration towards new clients, the politeness and promptness in solving issues by the support service, the functionality and multilingualism of the broker's website, as well as the trading platform. Moreover, the broker should provide opportunities for the implementation of programmable advisors, expert systems, development, and testing of its own strategies for trading securities.
The Traders Union highly recommends the brokers listed below as they meet all of the above requirements. In 2023, you can buy meme stocks without problems and with low commissions through them.
RoboForex - the best choice of stock CFDs
Below, you may learn the main competitive advantages of these brokers, which include:
one of the fastest online charts and quotes of trading instruments in the trading industry;
the possibility of providing leverage up to 1:20;
tight spreads;
a huge number of trading instruments (over 12,000);
multiplatform and multilingual programs;
minimum deposit from $10;
the highest safety of invested funds;
the financial activities of the broker are fully licensed;
there is a negative balance protection mechanism;
the ability to use a very convenient constructor of trading robots;
lowest non-trading fees.
RoboForex is the owner of the most prestigious awards in the trading industry. This broker is trusted by more than 8 million investors from 169 countries. Also, this financial institution is a member of The Financial Commission’s Compensation Fund.
Interactive Brokers | Best international stock broker
Below TU elaborates on the main advantages of this financial intermediary, which are:
fully licensed activity in accordance with strict international standards;
the existence of the simplest system of low rates and commissions;
providing the best execution prices in the industry;
availability of a program to increase profitability;
one of the lowest in trading costs;
a huge variety of financial instruments such as stocks, currency pairs, futures, and bonds, including standard options;
convenience, simplicity, and pleasant interface of the site and the broker's trading platform;
a serious training program for beginners;
guaranteed safety of investor funds;
application of advanced technologies;
multicurrency, multilingual, and cross-form programs;
the possibility of applying structured trading solutions;
the most prestigious awards in the financial industry.
The Interactive Brokers company is the key for a professional investor to access the global financial markets. It offers its clients trading in 150 markets from 33 developed countries.
FAQs
What are meme stocks?
They are securities that are rapidly growing, hyped-up, and widely promoted in the investment environment, the value of which does not depend on economic or financial factors.
How much can you earn if you buy meme stocks?
With luck and a competent approach, you may earn hundreds or even thousands of percent per annum. However, for this, you need to fall under the wave of excitement and hype around a particular stock.
How much can you lose if you buy meme stocks?
Meme stocks are an investment tool with a very high risk. You should always remember that when making spontaneous decisions, you may lose a significant part of your deposit.
Where can I buy meme stocks?
Excellent opportunities for investing in meme stocks are provided by RoboForex and Interactive Brokers. These are reliable companies that offer optimal conditions for the purchase of various financial instruments.
Glossary for novice traders
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1
Broker
A broker is a legal entity or individual that performs as an intermediary when making trades in the financial markets. Private investors cannot trade without a broker, since only brokers can execute trades on the exchanges.
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2
Investor
An investor is an individual, who invests money in an asset with the expectation that its value would appreciate in the future. The asset can be anything, including a bond, debenture, mutual fund, equity, gold, silver, exchange-traded funds (ETFs), and real-estate property.
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3
Trading
Trading involves the act of buying and selling financial assets like stocks, currencies, or commodities with the intention of profiting from market price fluctuations. Traders employ various strategies, analysis techniques, and risk management practices to make informed decisions and optimize their chances of success in the financial markets.
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4
Yield
Yield refers to the earnings or income derived from an investment. It mirrors the returns generated by owning assets such as stocks, bonds, or other financial instruments.
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5
Leverage
Forex leverage is a tool enabling traders to control larger positions with a relatively small amount of capital, amplifying potential profits and losses based on the chosen leverage ratio.
Team that worked on the article
Rinat Gismatullin is an entrepreneur and a business expert with 9 years of experience in trading. He focuses on long-term investing, but also uses intraday trading. He is a private consultant on investing in digital assets and personal finance. Rinat holds two degrees in Economy and Linguistics.
Olga Shendetskaya has been a part of the Traders Union team as an author, editor and proofreader since 2017. Since 2020, Shendetskaya has been the assistant chief editor of the website of Traders Union, an international association of traders. She has over 10 years of experience of working with economic and financial texts. In the period of 2017-2020, Olga has worked as a journalist and editor of laftNews news agency, economic and financial news sections. At the moment, Olga is a part of the team of top industry experts involved in creation of educational articles in finance and investment, overseeing their writing and publication on the Traders Union website.