Love it or hate it, the Meme Market is back, and Wall Street strategists say it can’t be ignored.
While shares of AMC Entertainment (AMC) are having a volatile Thursday, the social-media-fueled trading frenzy has pushed shares of AMC up nearly 3,000% this year, giving the money-losing movie theater chain a market value of more than $30 billion. AMC is not alone. Shares of Bed, Bath & Beyond (BBBY), Express (EXPR), and BlackBerry (BB) are all up this year. It’s reminiscent of the eye-popping run-up in shares of Gamestop (GME) that we saw back in January, when the Reddit investing crowd bought shares of the struggling video game retailer to stick it to the Wall Street pros who were betting against the stock.
Ryan Nauman, market strategist at Zephyr told Yahoo Finance Live that wild trading in these so-called meme stocks is not so much a “threat” to the broader market as it is a “learning experience.”
“This is no longer our grandparents’, or for that matter, our parents' stock market,” Nauman said. “Now, investment professionals need to start focusing more on looking at alternative data sets, rethinking their investment thesis to consider this growing cohort of retail investors.”
Even if you’ve vowed to stay away from the “meme trading madness,” you may own AMC and GameStop and not even know it, because the stocks are still part of the Vanguard Russell 2000 Value Index Fund ETF Shares (VTWV). The recent rallies in those two stocks have pushed the Russell 2000 Value Index up 30% year-to-date, dusting the Vanguard Russell 2000 Growth Index Fund ETF Shares' (VTWG) 3.8% gain during the same period.
“These retail investors, because of day trading, and for the most part, because of this virtually free money that we've had from the Fed since the pandemic, their voice is getting much larger due to social media,” Nauman said. “They need to be considered when we are coming up with the investment thesis moving forward.”
Story continuesMoviegoers queue for concessions at the AMC 25-screen multiplex in Times Square, Manhattan, New York, U.S. May 27, 2021. Picture taken May 27, 2021. REUTERS/Nick Zieminski
AMC was quick to reward individual investors with perks, like a large free popcorn at theaters. The company also unveiled a new portal on its website where shareholders can access exclusive discounts and invitations to special screenings.
As my colleague Myles Udland wrote in the Yahoo Finance Morning Brief, “with all these moves, AMC CEO Adam Aron and the whole executive team at the company are putting the pressure on their peers running other companies caught up in the meme trade to not just let this market moment come and go. These are episodes that management teams must cash in on.”
And “cash in” they did. On Thursday morning, the company filed to sell 11.5 million shares just two days after it raised $230 million by selling 8.5 million new shares to the investment firm Mudrick Capital.
The filing was also littered with warnings for investors to have their “eyes wide open” if they venture to buy the stock.
"We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last," the filing said.
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Nauman said at some point, fundamentals will matter again, once the Federal Reserve starts raising interest rates.
“Money's going to get a little bit more expensive so there's going to be some more volatility here,” cautioned Nauman. While he admits he “doesn’t have the heart” for investing in many of these meme stocks, Nauman said for younger investors with a long time horizon, they could be an opportunity.
“You have the fear of missing out, you're shooting for the moon here,” said Nauman. “I really think it has to depend on your goals and objectives. Can you afford to lose that money that you're really gambling with, investing in some of these meme stocks? You've got to be careful with these meme stocks, but if you have the time, you have the money, you might be able to include them in your portfolios.”
Alexis Christoforous is an anchor at Yahoo Finance. Follow her on Twitter @AlexisTVNews.