A sharp downturn won’t scare away the horde of retail investors reshaping the market. We spoke to 5 experts and day traders who explained why they’re here to stay.

Wall Street Bets Reddit Retail Traders GameStop
In this photo illustration the WallStreetBets page seen in the background of a silhouette hand holding a mobile phone with Reddit logo. Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images

  • The surge of retail investors will likely be in the stock market for the long haul, experts told Insider.
  • Fee-free trading, access to market data, and social media, are making it easier to trade.
  • “They see it as more than just a trade or an investment. They see it as a movement,” one expert said.
  • See more stories on Insider’s business page.

The horde of retail traders who have flooded the stock market in the past year are here to stay – even when the market turns sour, experts told Insider.

Since January 2020, retail investors bought $400 billion in stocks, doubling their total equity purchases from years prior, according to Vanda Research. Stock buying had been on the upswing for years before that though as more everyday investors had better access to market data and fee-free trading, thanks to brokerage apps like Robinhood, among others.

Dave Lauer, a stock market structure expert who has been interacting with retail investors, said the COVID-19 pandemic simply accelerated the number of day traders joining the market. But now that they’re here, “they’re here to stay,” he said.

For the first time, he’s seeing hundreds of thousands of people wanting to learn about how markets work and improve them.

“They see it as more than just a trade or an investment,” he said. “They see it as a movement.”

Matt Kohrs, a 26-year-old day trader with more than 300,000 followers on his YouTube trading channel, said the community of retail investors came together because they’re “tired of the tilted game” of Wall Street.

“The driving factor is a huge social-cultural movement,” he said. “It just happens to be playing out on a stock chart.”

Retail traders have joined the stock market in droves before.

Kristina Hooper, chief global market strategist at Invesco, said the dot-com bubble in the 90s had an “extraordinary level” of retail participation.

During that time, “it was not Reddit and Wall Street Bets and forums; it was taxi drivers in New York City talking about their favorite dot-com picks,” said Darren Schuringa, the founder of ASYMmetric ETFs, a firm designed to empower retail investors.

The difference now, according to Tuttle Capital Management Chief Executive Officer Matt Tuttle, “is the access now to all sorts of information, it’s the ability to trade for free and to trade quickly, and it’s the fact that they’re connected.”

That connection, Tuttle said, has given them the buying power of institutional investors.

For example, in January, hordes of day traders mobilizing on Reddit drove shares of GameStop to sky-high prices and caused short-sellers to lose billions. The event started the trend of “meme stocks,” and since then, the traders have driven share prices of multiple other companies, like AMC Entertainment and BlackBerry, up as well.

“They’ve got some power,” Tuttle said. “What history tells you is people who have power don’t give it up, at least not willingly.”

Even a market correction isn’t likely to faze retail traders, though they’ll likely face losses and some will exit, the experts said.

Hooper said a market correction could be on the horizon, though it will be short lived and won’t dent retail appetite.

“If you only have a downturn that lasts a few days and then stocks start going back up, will it shake out a lot of retail investors? Probably not,” she said.

However, a correction could hit meme stocks “quite hard,” she said, “because if there is one area where the fundamentals aren’t backing it, it’s meme stocks.”

Lauer, on the other hand, said meme stocks might avoid a correction because they appear to trade “relatively independent of what the market is doing.”

Kohrs said because retail traders make money off volatility, they could have even “bigger gains” in a bear market if executed properly.

“If you have proper risk management,” Schuringa said, “you can make money on both sides of the trade.”

Read the original article on Business Insider

A majority of Millennial and Gen-Z investors are taking personal loans or borrowing from friends and family to invest in stocks

Happy Stock Market Investor
Caroline Purser/Getty Images

  • A majority of Millennial and Gen-Z investors are borrowing money to invest in stocks.
  • Most took out a personal loan or turned to family and friends, a new survey shows.
  • Borrowing puts investors into “risky territory” said Magnify Money, which conducted the research.
  • See more stories on Insider’s business page.

Millennial and Gen-Z investors in the US are borrowing money to invest in stocks, a survey from LendingTree’s Magnify Money shows.

80% of Gen-Z investors and 60% of Millennials surveyed said they took on debt to invest. The survey gathered responses from about 2,000 US consumers from March 30 to April 6. Of those surveyed, about half were investors.

Young investors were most likely to take out a personal loan – oftentimes borrowing $5,000 or more – to invest and turned to family and friends for funds second, the data showed.

Older generations were much less likely to take on debt, with only 28% of Gen Xers and 9% of Baby Boomers borrowing in order to invest, the survey showed. Of those who borrowed money, more than half said they’d do it again.

Ismat Mangla, MagnifyMoney senior director of content, said borrowing puts investors into “risky territory,” and they need to determine if they can afford to take that risk.

“You want to be confident that your investment gains will exceed the costs of your loan. If they don’t, you should be confident that you could take that financial hit,” she said.

Millennials and Gen Zs have joined the market in droves since the COVID-19 pandemic began, and many have used social media sites like TikTok, which can be sometimes be a source of questionable advice, to educate themselves on investing. Data from Vanda Research shows retail traders purchased an additional $400 billion in stocks since January 2020, doubling their total purchases from the year prior.

Many of the young investors have poured into the new phenomenon of meme stocks – a trend that started earlier this year when retail traders coordinating on social media caused shares of GameStop to skyrocket. Since then, companies, including AMC Entertainment and BlackBerry among others, have seen sky-high prices largely thanks to the retail trade.

Wall Street analysts have said meme-stock prices are disconnected from reality, making them a riskier bet and nearly equivalent to gambling. And meme-stock companies have even begun to warn retail traders that they could lose all their investment making risky bets on stock prices trading above fundamentals.

Read the original article on Business Insider

Retail investors are on track to plow $400 billion into stocks in 2021 with the day-trading boom still in its early innings, Goldman Sachs says

Reddit Wall Street Bets Retail Trading GameStop
  • Retail traders are set to pour a net $400 billion into the equity market this year, Goldman Sachs said.
  • That’s a hike from the analysts’ previous estimate of $350 billion.
  • Goldman’s basket of retail favorites has outperformed the S&P 500 by 3 percentage points.
  • See more stories on Insider’s business page.

Retail traders responsible for driving record rallies in meme stocks like GameStop and AMC Entertainment are on track to pour a net $400 billion into equities this year, Goldman Sachs analysts said.

In the Friday note, the analysts, led by David Kostin, raised their estimate for full-year household net equity buying forecast to $400 billion from $350 billion in light of “high cash balances and continued retail participation.”

Last year, households poured $367 billion into equities, while in 2018 and 2019, they were net negative on the asset class, the Goldman Sachs data showed.

“The retail bid is back,” the analysts wrote, noting that in the first quarter alone, households were the largest source of equity purchases, netting $172 billion.

The “renewed strength in retail activity” has pushed Goldman’s basket of “retail favorites” to top the S&P 500’s performance by 3 percentage points this month. Meanwhile, stocks with active retail trading activity have also outperformed the broad market.

Retail traders came into the spotlight earlier this year when they caused a massive rally in shares of video-game retailer GameStop. The rally spread to other stocks, too, including BlackBerry and AMC Entertainment. Since then, the term “meme stocks” has entered Wall Street’s vocabulary, as retail traders, mobilized on social media sites like Reddit and Twitter, continue to rally behind various companies.

In May, retail traders renewed their interest in the new class of stocks as they drove up shares of movie-theater chain AMC Entertainment. Other meme-stock classics also rallied, as retail traders added new stocks to the basket as well.

Retail traders will likely continue to favor stock markets, thanks to “anemic” money market and credit yields, Goldman Sachs said. Plus, a continued increase in inflation would make equities more favorable than bonds or cash.

Currently, households allocate 44% of their assets to equities, the analysts said. That nearly matches the 46% all-time high allocation from 2000, just before the dot-com bubble burst.

Read the original article on Business Insider

New meme stock Corsair Gaming jumps 33% amid surging interest from Reddit traders

Reddit logo

A new meme stock is making the rounds on Wall Street Bets, surpassing mainstays such as GameStop and AMC Entertainment as the forums most-discussed company.

Shares of computer hardware company Corsair Gaming rose 33% on Monday to their highest since February this year, amid a surge in interest from Reddit traders.

In the past 24 hours, Corsair was the most mentioned stock on the 10-million member strong Wall Street Bets forum, garnering over 1,310 mentions, according to data from Quantitative Quiver. Clean Energy Fuels ranked as the second, followed by AMC.

One user on Monday claimed Corsair will “swallow the gaming industry and be a millionaire maker stock.”

The nearly 900-word post, which explained why the company is in a strong position to leverage demand in the gaming sector received nearly a thousand upvotes.

“Put this in your boomer dad’s portfolio (shares) and If you like gambling, buy some calls,” the post said.

Another post, which also received a thousand upvotes, detailed five stocks to watch out for this week, including Corsair. Others on the list are BlackBerry, Clean Energy, AMC, and GameStop.

Data from MarketBeat also show that 21.8% of Corsair’s shares are sold short, in contrast to Clean Energy’s 5.91%.

Meme stocks, an umbrella term describing a group of companies that have seen their stock surge since the GameStop craze in January, have been on the move again as of late. AMC shares surged at the end of May, while a new group of meme-stock names have been making the rounds on forums frequented by retail traders.

Read the original article on Business Insider

New meme stocks Clean Energy Fuels and ContextLogic rally as AMC fever fades


  • New meme names Clean Energy Fuels and ContextLogic jumped as much as 45% and 28%, respectively.
  • CarLotz and Workhorse also extended rallies from the prior session, alongside Clover Health.
  • Wendy’s, meanwhile, dropped after seeing big gains Tuesday.
  • See more stories on Insider’s business page.

Reddit traders are driving rallies in a string of new meme stocks this week, including Clean Energy Fuels and ContextLogic, among others.

Clean Energy Fuels, the Newport Beach, California-based natural gas provider, jumped 45% Wednesday, as ContextLogic, the mobile e-commerce company, jumped 28%, building on a 50% rise during Tuesday’s trading session.

The two new meme stocks were among the top-trending companies on Reddit investing threads like Wall Street Bets, according to HypeEquity data. Largely bullish Redditors agreed ContextLogic “has room to grow,” and as for Clean Energy Fuels, the phrase “short squeeze” was a common theme.

Recently, Redditors have also renewed their interest in Clover Health, the health-insurance provider backed by Chamath Palihapitiya. The stock – which plummeted earlier this year following a report from short-seller Hindenberg Research accusing the company of misleading investors, customers, and the federal government – remained the top-hyped name on Reddit. The stock was also trending on Twitter.

Clover rose 21% Wednesday, building on an 86% gain from the day prior.

Auto retailer CarLotz and electric vehicle-maker Workhorse bolstered gains from Tuesday, rising as much as 10% and 18%, respectively, thanks to their new status as meme stocks among Reddit investors. Meanwhile, electric-vehicle manufacturer Canoo whipsawed after rallying the day prior.

As for Wendy’s, the fast-food restaurant struggled to replicate the previous day’s rally as it dropped as much as 7% after the market opened. The stock on Tuesday ended at its highest level in nearly two decades, at $28.87, higher by almost 26%.

For Wendy’s, the word “tendy” was the most mentioned in posts about the company – a reference to both chicken nuggets on the menu and Reddit lingo that equates “tendies” with returns on investment.

Meanwhile, meme stock classics AMC Entertainment and BlackBerry, which have remained steady this week after massive gains last week, dropped. The movie-theater chain fell as much as 12%, while BlackBerry dropped 9%. GameStop, this year’s original meme stock, saw a modest rise.

Read the original article on Business Insider

Market analysts warn against meme-stock ‘gambling,’ as AMC’s stock price remains decoupled from fundamentals

crime scene stock
Timothy Abero / EyeEm / Getty Images

  • Market analysts said it’s hard to predict when surges in AMC’s stock price will come to a halt.
  • “It is anyone’s guess how much larger this bubble can grow,” one analyst said.
  • AMC shares whipsawed Thursday after a record surge Wednesday that nearly doubled the stock price.
  • See more stories on Insider’s business page.

The rally in shares of AMC Entertainment, fueled by an army of retail traders, could be at an end – or not.

The world’s largest movie theater chain nearly doubled in value in a single day of trading Wednesday, adding to gains from the day and week prior, as retail investors – pooled together on sites like Reddit and Twitter – poured into the stock.

The price then whipsawed from red to green to red again Thursday after AMC announced a share sale, which initially caused the stock to plummet. The decline, one analyst said, was “to be expected.”

“The bigger it goes, the farther it’s going to fall,” said David Trainer, chief executive officer of investment research firm New Constructs.

Market analysts weighed in Thursday on the unprecedented gains in AMC that helped drive a rally in a group of meme stocks this week. The analysts said the surge in AMC’s stock price was detached from the reality of the company’s value, but when that rally will come to a halt is a gamble.

“The retail force behind this movement is still strong, so it is anyone’s guess how much larger this bubble can grow,” said Edward Moya, senior market analyst at OANDA.

Meme stock trading, he said, “is just gambling. You could easily see this come crashing in minutes time.”

Trying to apply logic to AMC’s share price is “futile,” said David Jones, chief market strategist at European trading and investing platform Capital.com.

“Who knows when the music stops?” he said. “Just don’t expect to be able to call the top in this one. We may have already seen it, but then again perhaps it doubles in price once more.”

The current trading enviornment can’t last forever, Moya said, predicting that meme stocks such as AMC would give up a lot of their gains by the end of the week.

Some retail-trader favorites have already begun to erase gains made earlier in the week. Bed Bath & Beyond, GameStop, and Beyond Meat all declined Thursday. But some meme stocks, like Tilray, BlackBerry, and Workhorse continued increasing in value.

AMC’s actual value, the analysts said, is far detached from where it’s trading.

“It’s hard to justify an equity valuation above $0,” Trainer said, citing the company’s debt load, weak earnings, and share dilution.

Moya said the stock price will likely settle below the $20 mark it surpassed last week. “The overall fundamentals are really going to hamper this stock,” he said.

But, the analysts said, the retail traders don’t care about the fundamentals of the company, which has flirted with bankruptcy in the past and struggled amid the COVID-19 pandemic as movie theaters shuttered and people opted to stay at home to watch new films.

“They call each other ‘apes.'” Trainer said. “They flaunt the fact that they don’t care about fundamentals.”

Read the original article on Business Insider

Meme stocks whipsaw as AMC share sale ends massive Reddit-fueled rally

In this photo illustration a Reddit logo seen displayed on a smartphone.

  • Meme stocks largely retreated Thursday, with AMC, GameStop, and Bed Bath & Beyond all falling.
  • Some retail favorites, like Tilray, Clover Health, and Virgin Galactic continued to rally, though.
  • AMC dropped as much as 40% after announcing plans to sell nearly 12 million new shares.
  • See more stories on Insider’s business page.

A handful meme stocks held onto strong Thursday while others, including AMC Entertainment, GameStop, and Bed Bath & Beyond retreated.

BlackBerry led gains among meme stock Thursday before turning downward along with other well-known names. The stock, which fell as much as 8%, was the top conversation piece among retail-trader favorites on Wall Street Bets with AMC and GameStop behind it, according to data from Quiver Quantitative.

AMC, which nearly doubled in price yesterday, fell as much as 40% after the company announced a 12-million share sale. Trading halted three times for the stock amid the sharp decline.

Other meme stocks that have rallied this week fell with it. Bed Bath & Beyond dropped as much as 27% after its 63% one-day rally Wednesday. And the original meme stock, GameStop, retreated as much as 13%.

Beyond Meat, a new meme stock pushed by Mad Money’s Jim Cramer, also fell along with Koss Corp.

But not all of the retail-trader favorites declined.

Canadian cannabis companies Tilray and Sundial both rallied despite the meme-stock losses. Tilray, which recently completed its acquisition of Aphria, jumped as high as 16% Thursday, as Sundial rose 33%, putting both stocks on a two-day rally.

The two companies have benefited from positive sentiment from retail traders after Amazon announced it would back a federal bill to legalize marijuana. They were among the “most discussed” stocks on Wall Street Bets, Quiver Quantitative said.

Some other lesser-known meme stocks rallied alongside Tilray and Sundial, as well. Workhorse, the Ohio-based seller of electric vehicles and aircraft, jumped as much as 54%. Clover Health, the health insurer backed by Chamath Palihapitiya, jumped as much as 13% before paring gains, and space tourism company Virgin Galactic rose as much as 8%.

If you’re a Millennial or Gen Z investor willing to share your investing experience, reach out to the reporter of this article at ndailey@insider.com.

Read the original article on Business Insider

AMC surges 126% as Reddit cheerleaders overpower large hedge-fund share sale

amc theaters
  • Shares of AMC Entertainment surged as much as 126% on Wednesday before trading was halted for volatility.
  • The move comes after hedge fund Mudrick Capital dumped shares on the same day it was disclosed the firm bought 8.5 million units.
  • Retail traders on sites like Reddit remained bullish on the meme stock.
  • See more stories on Insider’s business page.

AMC Entertainment surged Wednesday despite a share dump from hedge fund Mudrick Capital.

Shares of the world’s largest movie theater operator jumped as much as 126% to trade around $72, triggering a halt for volatility. The surge built on Tuesday’s gains, which pushed the stock 23% higher during the session to close at $32.04. AMC shares have now spiked almost 500% in just seven trading days.

The Leawood, Kansas-based company announced Tuesday it raised $230.5 million in cash after agreeing to sell 8.5 million shares to Mudrick Capital for $27.12 each, a dollar higher than the stock’s Friday closing price. Shares surged following the news as the company said it would use the funds to make acquisitions, improve consumer appeal, and deleveraging.

Just hours after the announcement, Mudrick Capital sold its entire stake at a profit, Bloomberg reported. Despite the share dump, the meme stock continued its rally early Wednesday as retail traders remained bullish. The stock remained one of the top talked-about companies on Reddit threads like Wall Street Bets, HypeEquity data showed.

AMC has led a broader rally in meme stocks, like GameStop and BlackBerry, so far this week amid renewed interest in the retail-trader favorites. BlackBerry, for its part, closed 15% higher at $11.56 Tuesday and continued rallying in early morning trading, as GameStop closed 12% higher at $27.02 Tuesday and upticked just slightly Wednesday.

Last week, shares of the movie theater operator rallied for days after private Chinese conglomerate Dalian Wanda Group announced it sold nearly all of its remaining stake in the company. Retail traders cheered the newly available shares, more than doubling the stock price through the course of the week.

Retail traders have invested in heavily shorted stocks like AMC and GameStop, in an effort to squeeze short sellers, who have lost billions on their bets. But shorts haven’t given up as short interest in the stocks is 21%, according to MarketBeat data.

If you’re a Millennial or Gen Z investor willing to share your investing experience, reach out to the reporter of this article at ndailey@insider.com.

Read more: Morgan Stanley identifies 28 underappreciated, high-quality stocks to own as the market’s most expensive names are due to continue underperforming

Screen Shot 2021 06 02 at 11.34.42 AM
Read the original article on Business Insider

Retail traders driving the meme stock frenzy are ‘here to stay’ but the AMC rally isn’t going to end well, former E*Trade CEO says

Reddit screen on laptop with smartphone reddit logo
  • Retail traders driving up meme stocks have “staying power,” said the former CEO of E*Trade.
  • These investors have powerful tools at their disposal, including social media and trading apps, he said.
  • When his own son asks about mem stocks and dogecoin, he says it’s all about fundamentals.
  • See more stories on Insider’s business page.

The retail traders driving the meme stock frenzy are “here to stay,” but the current rally in shares of AMC Entertainment is not, said Karl Roessner, the former chief executive officer of E*Trade, in an interview with CNBC.

“This is not going to end well,” Roessner said of the AMC rally. “I think historically we we’ve seen this in the past, but I do believe this group has staying power.”

Shares of AMC jumped as much as 27% Monday following a record week in the stock that was largely driven by retail traders on Twitter and Reddit.

AMC, the world’s largest movie theater chain operator, became part of a new trend of so-called “meme stocks” earlier this year when retail investors on Reddit threads, most notably Wall Street Bets, began pouring into certain stocks like GameStop in order to squeeze short sellers.

Wall Street Bets since has ballooned into an army of retail traders numbering more than 10 million users.

In the interview with CNBC, Roessner, who is now the CEO of Lefteris Acquisition Corp., said with the availability of social media and trading platforms, the group has “powerful tools” at their fingertips, giving them “staying power.” Apps like Robinhood, WeBull, and Public, have grown in size amid interest from new investors.

He said his own sons, who both have E*Trade accounts, have picked up on investing.

“They keep hitting me as to, ‘Why don’t we own any dogecoin, or why don’t we get involved with one of these meme stocks?’ And I always bring it back to fundamentals,” he told CNBC. “Then they hear from their friends that they just made $10,000 on dogecoin, and they’re going to take the rest of the summer off. So how do you combat that?”

He said educating in financial literacy is key. For example, all of the money retail traders are investing in hyped up stocks should be risk capital, he said, because there’s a chance a person could “lose everything.”

“I always worry about the last retail trader who’s left holding the bag when the music stops,” he said, noting the last retail traders to invest during the internet bubble or before the market crash that prompted the Great Recession.

With regard to AMC specifically, Roessner said he applauds management raising capital to address balance sheet problems. But overall, “Absent some serious strategic undertakings by that company, it’s still just not worth what it’s trading for right now.”

If you’re a Millennial or Gen Z investor willing to share your investing experience, reach out to the reporter of this article at ndailey@insider.com.

Read the original article on Business Insider

BlackBerry jumps 10% as Reddit traders seek another short squeeze mere days after sending AMC soaring

A shareholder uses his Blackberry while waiting for the Research In Motion annual meeting to begin in Waterloo, July 17, 2007.
BlackBerry shareholder

  • BlackBerry shares rallied 10% in pre-market trading as some Redditors sought a new short squeeze.
  • The company jumped last week as well amid a broader meme-stock rally driven by retail traders.
  • Some Redditors mentioned a $20 share price target for the stock, double its current value.
  • See more stories on Insider’s business page.

Shares of BlackBerry jumped 10% in pre-market trading Tuesday as Redditors sought a short squeeze in the stock.

About a tenth of all conversations among Redditors hoped for a short squeeze, and another 1% called for a $20 price target, according to HypeEquity data. That would nearly double the share price from Friday’s close of $10.07.

Shares of BlackBerry, the legacy telecom company that is now focused on cybersecurity, rose last week as well – jumping 16.8% – amid a broader meme stock rally largely driven by retail traders.

AMC Entertainment, the world’s largest movie theater chain, led last week’s meme stock rally, more than doubling in price and closing out the week at $26.12 – its highest in years – as it trended on Twitter hashtags and among retail investors on Reddit. Other meme stocks, such as GameStop, Virgin Galactic, and a new one, Beyond Meat, also rallied last week amid renewed interest from retail traders.

Shares of AMC rose again in pre-market trading Tuesday, but some Redditors seemed ready to move onto the next short squeeze, as BlackBerry was the most popular stock stock on the site.

One Redditor, with a long post history and a lot of “karma” on the site, said, “It’s not worth buying AMC anymore, that train already passed,” and added that, “even BB is a safer choice now, since BB is actually undervalued.”

Ontario, Canada-based BlackBerry joined the meme stock trend back in January, when- in retail traders on social media sites such as Reddit picked what they deemed to be undervalued companies and poured into them in an effort to squeeze short sellers. Shares skyrocketed to $25, before declining in the following months.

Short interest in BlackBerry is 9%, according to MarketBeat data, compared to other meme stocks AMC and GameStop, which have a 21% short interest.

If you’re a Millennial or Gen Z investor willing to share your investing experience, reach out to the reporter of this article at ndailey@insider.com.

Read the original article on Business Insider