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MemeMoney: Is the golden age of the meme stock rally over?

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Meme stocks have been thrust into the spotlight once again following recent rallies from the likes of GameStop, AMC, and Bed Bath & Beyond, fueled once again by the Wall Street Bets crowd on Reddit.

GameStop Corp.
GME,
-1.97%

shares, which are down 9.6% this year, have risen 50.5% in the last three months. AMC Entertainment Holdings Inc.
AMC,
-3.87%
,
which is down 39.9% this year, is up 57.4% over the last three months. Shares of Bath & Beyond Inc.
BBBY,
-4.76%

have declined 41% this year, but have gained 10.2% in the last three months. Even grill maker Weber Inc.
WEBR,
-3.32%
,
which has seen its shares fall 37.5% in 2022, has seen a rise of 11.9% in the last three months.

AMC has also seen a lot of volatility related to the debut of its AMC Preferred Equity Units, or APEs
APE,
+18.08%
,
this week.

See Now: Will AMC’s bold ‘APE’ strategy be a win for the cinema chain?

“Continued volatility in markets continue to feed momentum driven, speculative behavior, leading to this type of price action,” Dan Raju, CEO of cloud-based financial services provider Tradier, told MarketWatch. “I believe that volatile markets combined with the influx of 25 million plus new retail investors that jumped into online investing before and during the pandemic caused a lot of the meme stock rallies.”

However, Raju thinks these rallies will become less frequent. “I expect to see brokerage accounts with smaller balances to hole up, ultimately resulting in fewer rallies in the future,” he said. “Additionally, I do not expect to see the same intensity of meme stock rallies as we had seen before in 2020 and 2021, because the more recent bearish markets have pushed vast subsets of the young social traders who engaged in them to stay out of the market.”

Ultimately, the CEO expects the meme stock rallies we saw through 2021 to taper off, regardless of the recent GameStop surge. “This is due to workplaces opening up and many of these traders graduating to better measure trade risks,” he told MarketWatch. “We’re seeing a graduation effect of retail traders who are adopting fundamentals and advanced trading platforms and diversifying to more effective trading instruments, like options.”

See Now: After ‘APE’ units make trading debut, AMC price target cut at Wedbush

One investor recently told MarketWatch how he applied the lessons of the meme stocks frenzy to Blockchain and NFTs. He described the pivot as “life changing.”

Wes Gottesman, market adviser at live-streaming trading platform TradeZing, thinks that investors looking to educate themselves should look to a variety of sources when making an informed investment decision. “Reading investing books and the expertise of financial professionals are great ways to learn,” he told MarketWatch, via email.

“We would highly recommend that investors looking to achieve long term returns, stay away from the meme stocks, or what we like to call casino stocks,” he added. “Instead, they should buy well-known, strong companies as well as undervalued companies for long term capital appreciation.”

Jim Chanos bets on AMC and its new APE shares to converge in an arbitrage trade

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