What are meme stocks and why are they so popular?

1. What are meme stocks and why are they so popular?
2. Some of the most well-known meme stocks
3. Which meme stocks should you watch in 2022?
4. How to invest in meme stocks wisely?

 

 

1. What are meme stocks and why are they so popular?

Meme stocks are stocks that have gained popularity and momentum on social media platforms, especially Reddit's r/WallStreetBets forum, where retail investors coordinate their buying and selling actions to create massive price movements. Meme stocks are often driven by hype, sentiment, and speculation rather than by the company's fundamentals or performance.

2. Some of the most well-known meme stocks

include **GameStop Corporation (NYSE: GME)**, **AMC Entertainment Holdings (NYSE: AMC)**, and **Bed Bath & Beyond Inc. (NASDAQ: BBBY)**². These stocks have seen huge rallies and volatility in 2021, as millions of individual traders used platforms like Robinhood and Webull to bet against the short sellers and hedge funds that were betting on the stocks' decline.

Meme stocks are not a new phenomenon, but they have become more prevalent and influential in the stock market since the onset of the Covid-19 pandemic. With more people staying at home, receiving stimulus checks, and having access to commission-free trading apps, retail investors have found a new way to participate in the market and challenge the status quo.

Meme investing can be very risky, as the price movements are often unpredictable and irrational. The initial surge in price and volume is due to viral interest online; there is a good chance that the stock will also lose its value once the hype dies down. So, while some investors can make a lot of money in a short time, there is also a risk for greater loss.

3. Which meme stocks should you watch in 2022?

As we enter a new year, there are some meme stocks that could continue to attract attention and generate buzz among retail investors. Here are three meme stocks to watch in 2022:

- **Tesla, Inc. (NASDAQ: TSLA)**: Tesla is arguably the original meme stock, as it has been one of the most popular and polarizing stocks on social media for years. The electric vehicle maker has a loyal fan base that admires its visionary founder Elon Musk, who is also known for his tweets and memes. Tesla has defied the skeptics and delivered impressive growth and profitability in 2021, becoming the world's most valuable carmaker by market cap. Tesla also joined the S&P 500 index and announced plans to enter new markets like India and Indonesia. However, Tesla also faces increasing competition from other EV players, regulatory challenges, supply chain issues, and valuation concerns. Tesla is likely to remain a volatile and controversial stock in 2022, as investors weigh its growth potential against its risks.
- **Rivian Automotive Inc. (NASDAQ: RIVN)**: Rivian is another EV company that has become a meme stock in 2021, after its blockbuster initial public offering (IPO) in November. Rivian is backed by Amazon (AMZN), Ford (F), and other prominent investors, and it aims to produce electric pickup trucks and SUVs for the mass market. Rivian has received rave reviews for its R1T truck and R1S SUV models, which boast impressive features like long-range batteries, off-road capabilities, and spacious interiors. Rivian has also secured orders from Amazon for 100,000 electric delivery vans by 2030. However, Rivian also faces many challenges, such as scaling up production, delivering on customer expectations, overcoming technical glitches, and competing with established rivals like Tesla and Ford. Rivian's stock price has soared since its IPO, giving it a market cap of over $100 billion, despite having no revenue or profit yet. Rivian's stock could see more swings in 2022, as investors assess its progress and prospects.
- **Robinhood Markets (NASDAQ: HOOD)**: Robinhood is the online brokerage platform that has enabled millions of retail investors to trade meme stocks with ease and convenience. Robinhood has been praised for democratizing investing and making it more accessible and fun for younger generations. Robinhood has also benefited from the surge in trading activity and revenue in 2021, as more people joined its platform and traded cryptocurrencies, options, and stocks. However, Robinhood has also faced a lot of criticism and controversy for its business model, customer service, regulatory compliance, and ethical standards. Robinhood has been accused of gamifying investing, exploiting its users' data, restricting trading during volatile periods, and exposing its customers to excessive risk. Robinhood's stock price has been volatile since its IPO in July 2021, as it reflects the changing sentiment and expectations of its users

4. How to invest in meme stocks wisely?

Meme stocks can be tempting for investors who want to ride the wave of social media buzz and make a quick profit. However, investing in meme stocks also comes with a lot of risks and challenges. Here are some tips on how to invest in meme stocks wisely:

- Do your own research: Don't blindly follow the crowd or the hype. Before investing in any meme stock, do your own due diligence and research the company's fundamentals, financials, competitive advantages, growth prospects, and risks. Look for companies that have a strong business model, a loyal customer base, a clear vision, and a positive outlook. Avoid companies that are losing money, facing lawsuits, or have questionable accounting practices.
- Diversify your portfolio: Don't put all your eggs in one basket. Meme stocks can be very volatile and unpredictable, so don't invest more than you can afford to lose. Allocate only a small portion of your portfolio to meme stocks, and balance it with other types of investments that are more stable and reliable. Diversifying your portfolio can help you reduce your overall risk and enhance your long-term returns.
- Set a clear strategy: Don't let your emotions get the best of you. Meme stocks can be very exciting and exhilarating, but they can also be very stressful and nerve-wracking. To avoid making impulsive or irrational decisions, set a clear strategy for your meme stock investments. Decide how much you want to invest, when you want to buy or sell, and what your target price or return is. Stick to your plan and don't let fear or greed sway you.
- Be flexible and adaptable: Don't get too attached or too detached. Meme stocks can change quickly and dramatically, so be prepared to adjust your strategy accordingly. Monitor the market trends, the social media sentiment, the company news, and the stock performance regularly. Be ready to take profits or cut losses when necessary. Don't hold on to a meme stock for too long or too short. Be flexible and adaptable to the changing conditions.

Meme stocks are not for everyone, but they can be a fun and profitable way to invest in the stock market if done right. By following these tips, you can increase your chances of success and enjoy the ride. Happy meme investing!