Reddit Traders #WallStreetBets best picks of the day 28 January 2021
Thousands of at-home traders, many perched on Reddit boards, are pouring into a slew of heavily shorted and “fundamentally hated” stocks Wednesday in an effort to squeeze money out of the short bets placed by Wall Street’s elite; here are the stocks–in addition to GameStop and AMC–nabbing mind-blowing gains as regulators start to sound an alarm on the frenzy among retail traders.
Like GameStop and AMC, many of the stocks fueling the Reddit trade are among the most shorted stocks in the market, including Bed Bath & Beyond, Ligand Pharma and National Beverage Corp, which are up 28%, 18% and 36% Wednesday afternoon while the broader market struggles to stay afloat.
“It seems we have done it again and forced the shorts into playing their dirty little tricks on us,” one Reddit user wrote Wednesday on the r/WallStreetBets discussion board, referencing the buying frenzy among online traders successfully propping up the prices of stocks Wall Street firms are betting against.
Out of the 10 most shorted stocks (as a percentage of shares available to trade), eight of them were posting double-digit percentage gains Wednesday, including FuboTV, Tanger Factory Outlets and Tootsie Roll Industries.
Some stocks favored by the Reddit crowd, however, are already reversing their gains: television chain AMC Networks–not to be confused with the theater operator–is down a staggering 20% after climbing nearly 37% over the past week; Pitney Bowes, meanwhile, which surged 93% in the past week, is down about 25%.
Nokia, BlackBerry and even bankrupt BlockBuster are other heavily shorted firms posting unusual highs on a spike in trading volume, surging 35%, 45% and 180%, respectively.
William Galvin, who heads up the Massachusetts office overseeing securities regulation, told Barron’s Wednesday that the New York Stock Exchange, which has temporarily halted trading in specific stocks several times this week, should “consider simply suspending” GamesStop trading for one month, adding that “these small and unsophisticated investors are probably going to get hurt by this.”
“The days-long surge in GameStop and others is eroding market confidence and creating some positioning-driven dislocation,” Vital Knowledge Media Founder Adam Crisafulli noted Wednesday, adding that it’s “not a coincidence that some of the most popular longs have been pummeled” alongside the surge in stocks like GameStop. “The forces driving financial asset prices are a mix of fundamentals and psychology–the former will always prevail over time in determining value, but the latter can still exert massive influence.”
The Securities and Exchange Commission declined Forbes’ request to comment on the Reddit-fueled surge in stocks Wednesday. White House Press Secretary Jen Psaki said Treasury Department officials were “monitoring” the trading around GameStop, AMC and Blockbuster but issued no further guidance, instead saying, “It’s a good reminder though that the stock market isn’t the only measure of the health of the economy.”
According to a new report by the Harvard College Consulting Group, 31% of investors under the age of 24 are looking to “make quick cash,” while roughly the same percentage use Reddit to inform trading. Only about 58% of those are making revenue, and a large majority (65%) of those looking to “make quick cash” fail to generate anything at all.
A growing number of Wall Street shops are saying they have cashed out of their shorts during the Reddit-fueled squeeze, but the mayhem still seems to have no clear end in sight. “For every short position that is closed, and stock borrow returned, we are seeing extremely strong demand from new short sellers looking to capitalize on an Icarus-like fall for a stock price that has soared too high,” Ihor Dusaniwsky, a managing director of predictive analytics at S3 Partners, said Tuesday.