The Market Is Ripe For Another GameStop Saga
Michael Kern , 31 May 2021
About three months ago, the investing world was left reeling after retail investors proved they can beat Wall Street at its own game.
Reddit group “r/Wallstreetbets” (aka WSB)–a longstanding subreddit channel created nearly a decade ago where more than 4 million Reddit users discuss highly speculative trading strategies and ideas–engaged in a crowdsourced pump-and-dump scheme that created massive volatility in the stock markets by buying heavily shorted stocks such as GameStop Inc. (NYSE:GME), AMC Entertainment Holdings (NYSE:AMC), and BlackBerry Inc. (NYSE:BB), among others. The massive buying wave created large short squeezes as hedge funds betting against these stocks rushed to cover their positions and cut losses after GME skyrocketed an unfathomable 1,500% in the space of a few days; AMC saw its share price triple while BB jumped 460% before they came crashing to the ground after popular zero-fee trading app Robinhood blocked trading activity.
Many analysts suspected the SEC would quickly act to nip this emerging trend in the bud while Nasdaq promised it would flag any suspicious trading activity.
But it now appears that this is not the last we will be seeing of the little guy pummeling the big guy in the stock markets.
A basket of stocks heavily favored by smaller investors has been outperforming the broader market since March of last year, according to Vanda Research. This group, consisting of tech behemoths like Apple Inc. (NASDAQ:AAPL) and Tesla Inc. (NASDAQ:TSLA) alongside electric-vehicle maker NIO Inc. (NYSE:NIO) and digital-payments company Square Inc. (NYSE:SQ), has gained 68% since the beginning of March 2020 through Monday, comfortably outpacing the S&P 500’s roughly 36% climb.
