Inside the 2024 Meme Stock Surge: Basics, Trends, and Top Picks

Meme stocks are once again making headlines in 2024, and GameStop is at the forefront of this renewed frenzy. The stock’s dramatic rise of more than one hundred percent in one day (118% to be precise) has caught the attention of investors and market observers alike. This recent surge has been triggered by the return of Keith Gill, known as the “Roaring Pussycat”, whose social media activity has reignited the passion of retail investors.

This resurgence is not just about the numbers; it is a testament to the enduring influence of online communities and social media on the stock market. From huge gains for some to billion-dollar losses for short sellers, the dynamics of meme stocks continue to make waves. In this highly manipulable space, we’ve gathered all the information you need to know. Together we’ll examine the basics, explore the latest trends and highlight the top meme stock picks that are shaping the market narrative right now.

What are Meme Stocks?

Definition and Characteristics

Meme stocks are shares of companies that experience sudden and dramatic increases in price, primarily driven by social media hype and online communities rather than the company’s actual performance or fundamentals. These stocks are characterised by their high volatility, with prices that can skyrocket or plummet within a short period. This phenomenon is often fuelled by retail investors who rally around a particular stock, using platforms like Reddit, Twitter, and YouTube to coordinate their buying efforts.

Origin and the Role of Online Communities

The concept of meme stocks gained widespread attention in early 2021, with GameStop (GME) being one of the most notable examples. The origin of this trend can be traced back to the subreddit WallStreetBets, where retail investors banded together to drive up the stock prices of companies heavily shorted by institutional investors. The goal was often to create a “short squeeze,” forcing short sellers to buy back shares at higher prices, further driving up the stock value.

These online communities play a crucial role in the meme stock phenomenon. Platforms like Reddit’s WallStreetBets serve as hubs for discussion, strategy sharing, and collective action. Influential figures, such as Keith Gill (known as “Roaring Kitty”), can sway investor sentiment and trigger significant market movements through their posts and livestreams. The power of these communities lies in their ability to mobilize large numbers of individual investors, creating significant market impact through coordinated buying and holding efforts.

Key Points

• Definition: Meme stocks are stocks that surge in price due to social media hype and online community actions.
• Characteristics: High volatility, driven by retail investors rather than company fundamentals.
• Origin: Gained prominence in early 2021, notably with GameStop.
• Role of Online Communities: Platforms like Reddit’s WallStreetBets coordinate collective buying efforts, often leading to dramatic market movements.

Historical Context of Meme Stocks

The meme stock phenomenon erupted in January 2021, driven by retail investors on the subreddit WallStreetBets who aimed to trigger short squeezes on heavily shorted stocks like GameStop (GME) and AMC Entertainment (AMC). This collective effort saw GameStop’s share price skyrocket from around $17 to a jaw-dropping $483, marking an increase of over 2800% within weeks. AMC experienced a similar surge, rising from about $2 to over $20. However, these dramatic gains were short-lived; by mid-February, GameStop had plummeted back to around $50, and AMC followed suit with a significant decline.

The media was quick to cover this unprecedented event, framing it as a David versus Goliath battle between small retail investors and powerful hedge funds. These funds faced massive losses, while retail investors celebrated their newfound influence with terms like “diamond hands.” Financial analysts, however, cautioned about the speculative nature of such trades. Other stocks, like BlackBerry, also saw significant but fleeting gains, underscoring the impact of coordinated online actions. This episode not only showcased the power of social media in the stock market but also sparked a broader discussion on market dynamics, speculative trading, and the future of financial investing.

The Mechanics of Meme Stocks

 Understanding the rise and fall of these stocks requires a grasp of two key mechanisms: coordinated buying and short squeezes.

Coordinated Buying

Coordinated buying occurs when a large group of investors collectively decide to buy shares of a particular stock. This can significantly drive up the stock’s price, particularly when these efforts are organized and executed in a short time frame. Platforms like Reddit’s WallStreetBets serve as the epicenter for these actions. On these forums, users share information, hype up certain stocks, and encourage others to buy. The sheer number of participants can create a substantial demand for the stock, pushing its price higher.

Example: In January 2021, members of WallStreetBets identified GameStop as a heavily shorted stock and began to buy its shares en masse. This sudden, large-scale buying pressure caused the stock price to surge rapidly. The community rallied around slogans like “hold the line” and “diamond hands,” encouraging each other to hold onto their shares and continue buying more to keep driving the price up.

Short Squeezes

A short squeeze happens when a stock that has been heavily shorted starts to rise in price, forcing short sellers to buy shares to cover their positions, which further drives up the price. To understand this, let’s break down short selling:

Short Selling Basics:

When an investor short sells a stock, they borrow shares from a broker and sell them at the current market price, hoping the price will drop. Later, they plan to buy back the shares at a lower price, return them to the broker, and pocket the difference.

The Squeeze:

If the stock price starts to rise instead of fall, short sellers face increasing losses. To limit these losses, they may be forced to buy back the shares at higher prices. This buying activity adds more upward pressure on the stock price, causing it to rise even more.

Example: In the case of GameStop, hedge funds had heavily shorted the stock, betting that its price would fall. However, as WallStreetBets members coordinated their buying efforts, the price began to rise sharply. This put pressure on the short sellers, who then had to buy back shares to cover their positions, further driving up the price. This created a feedback loop, with rising prices forcing more short covering and thus even higher prices.

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Combining Forces: The Perfect Storm

The combination of coordinated buying and short squeezes can create a perfect storm, leading to dramatic price movements that are not reflective of the company’s actual business performance. This was evident with GameStop, whose stock price surged from around $17 to $483 within weeks due to these combined forces, despite the company’s financial struggles.

Example: AMC Entertainment saw similar dynamics. As retail investors bought shares to counteract the short positions held by hedge funds, the stock price surged from about $2 to over $20 in January 2021. This rapid price increase forced short sellers to buy back shares at higher prices, contributing to the stock’s volatility and further price increases.

In conclusion, the rise and fall of meme stocks like GameStop and AMC are driven by the interplay of coordinated buying and short squeezes, amplified by the power of social media and online communities. These mechanisms can lead to significant price volatility, offering both opportunities and risks for investors. 

Meme Stock Surge 2024: Key Updates and Trends

In 2024, the meme stock community experienced a significant revival, driven by the return of Keith Gill, known as “Roaring Kitty.” After a three-year hiatus, Gill resumed his social media activity, posting detailed investment analyses and scheduling live streams on platforms like YouTube and Reddit. His return quickly galvanized retail investors, leading to a substantial surge in meme stocks such as GameStop and AMC. GameStop, in particular, saw its stock price jump nearly 200% following Gill’s posts, highlighting the continued influence of his insights and the power of coordinated retail investor efforts​.

Gill’s activities not only boosted stock prices but also reinforced the strong community dynamics among retail investors. His detailed updates and motivational posts encouraged collective action, resulting in significant market volatility and increased media attention. This resurgence underscored the lasting impact of social media on stock market movements, demonstrating how influential figures can mobilize large groups of investors to drive substantial changes in stock prices. The renewed interest in meme stocks like GameStop and AMC illustrates the enduring potential for retail investors to shape market trends through coordinated efforts​.

Top Meme Stocks of 2024

Based on recent research from Reddit communities and social media, here are some of the top meme stocks that have garnered significant attention in 2024. These stocks are popular on platforms like WallStreetBets and have shown notable price movements driven by retail investor interest.

1. GameStop (GME)
GameStop remains a cornerstone of the meme stock movement. With a nearly 200% jump since Keith Gill’s (“Roaring Kitty”) return to social media, GameStop continues to capture the enthusiasm of retail investors. Despite its previous highs and subsequent declines, the stock has once again surged due to coordinated buying efforts and Gill’s influential updates​.

2. AMC Entertainment (AMC)
AMC has consistently been at the forefront of meme stock discussions. It has seen substantial gains this year, with strong retail investor support driving its price up significantly. The movie theater chain has leveraged its meme stock status to improve its financial flexibility by raising capital during stock price spikes​.

3. BlackBerry (BB)
Once a leading smartphone manufacturer, BlackBerry has transitioned into cybersecurity and software services. Despite this shift, it remains a popular meme stock due to its historical significance and potential for short squeezes. BlackBerry has seen a steady amount of mentions on Reddit and other forums, reflecting ongoing investor interest​.

4. Coinbase Global Inc. (COIN)
Coinbase has emerged as a top-performing meme stock, with an impressive 263.25% increase over the past year. Its popularity stems from its pivotal role in the cryptocurrency market, making it a favorite among tech-savvy retail investors​.

5. Western Alliance Bancorp (WAL)
Western Alliance Bancorp has seen an 85.87% rise, driven by strong financial performance and investor interest. This stock has become a notable mention in meme stock discussions due to its significant gains and potential for future growth​.

6. Micron Technology Inc. (MU)
Micron Technology, a leader in memory and storage solutions, has posted an 83.30% increase. Its technological innovations and steady market presence have made it a consistent topic among meme stock investors​.

7. SunPower (SPWR)
SunPower, a provider of residential solar energy, has become a potential target for a short squeeze with 88.66% of its stock shorted. Its low share price and high short interest make it an attractive option for meme investors looking to drive up its value​.

8. MicroCloud Hologram (HOLO)
MicroCloud Hologram, known for its innovative hologram technology, has garnered interest despite its volatile performance. With about 68.44% of its shares shorted, it presents an opportunity for a significant price movement through coordinated buying efforts​.

9. Children’s Place (PLCE)
Children’s Place, a specialty retailer for children’s apparel, has seen increased attention due to its high short interest and potential for a short squeeze. Its current trading price and significant short positions make it a candidate for meme stock traders​.

10. Advanced Micro Devices (AMD)
AMD has consistently been a favorite among retail investors, particularly due to its advancements in the semiconductor industry and strong market performance. Its frequent mentions on WallStreetBets reflect its ongoing popularity​.

These stocks highlight the dynamic nature of meme stock investing, driven by social media discussions and collective retail investor actions. Investors should remain cautious, as these stocks can be highly volatile and risky.

Market Implications of Meme Stocks

Market experts, including JPMorgan’s Marko Kolanovic, have raised concerns about the impact of meme stocks on the broader stock market. Kolanovic emphasizes that the speculative nature of meme stocks, driven largely by social media and retail investor enthusiasm, results in unsustainable high valuations. These inflated prices can lead to significant market volatility and potential sharp corrections, posing risks to both individual investors and overall financial market stability.

The high valuations of meme stocks like GameStop and AMC are primarily fueled by speculative trading rather than solid financial performance. This situation creates an environment where stock prices are highly volatile and susceptible to dramatic drops. The disconnect between stock prices and the actual business fundamentals of these companies increases the likelihood of bubbles that can burst, leading to substantial financial losses for investors who buy in at elevated prices. Consequently, the surge in meme stocks underscores the potential for market instability, as it highlights the influence of retail investors and social media on stock prices, which can lead to unpredictable market movements and increased risk of financial instability

Meme Stock Terms Handbook

• Diamond Hands

Definition: Refers to investors who hold onto their stocks despite high volatility and significant price swings.
Meaning: Embodies unwavering commitment and belief in the stock’s future potential, regardless of short-term losses.
Usage: Investors with diamond hands are seen as strong and resilient, capable of withstanding market turbulence without panic selling.

• FOMO (Fear of Missing Out)

Definition: Describes the anxiety investors feel about missing potential profits from a rising stock.
Meaning: Drives retail investors to buy into a stock during its upward momentum, fearing they will miss the opportunity for gains.
Impact: Can lead to impulsive decision-making and contribute to rapid price increases in meme stocks.

• Short Squeeze

Definition: Occurs when short sellers, who have bet against a stock by borrowing and selling shares, are forced to buy back the shares as the stock price rises.
Mechanism: The buying activity drives the stock price even higher, creating a feedback loop of increasing prices.
Tactic: Used to pressure institutional investors who have heavily shorted a stock.

• Tendies

Definition: Slang for profits or gains from investments.
Origin: Stems from the meme culture within the WallStreetBets community.
Usage: Investors celebrate their earnings by metaphorically referring to them as “chicken tenders,” a popular comfort food.

• Apes

Definition: Refers to retail investors who support each other in the meme stock community.
Meaning: Signifies solidarity and collective strength, often in opposition to institutional investors and hedge funds.
Concept: “Apes together strong” underscores the community’s belief in their collective power to influence market outcomes.

Conclusion

The resurgence of meme stocks in 2024 highlights the powerful influence of online communities and social media on the stock market. Led by renewed interest in stocks like GameStop and AMC, driven by influential figures such as Roaring Kitty, these stocks have experienced dramatic price movements fueled by coordinated buying and speculative trading.

While the phenomenon offers opportunities for substantial gains, it also brings significant risks, including market volatility and the potential for sharp corrections. Understanding the unique dynamics, jargon, and cultural aspects of meme stocks is crucial for investors navigating this highly unpredictable market. As meme stocks continue to evolve, their impact on market trends and investor behavior remains a compelling aspect of modern trading.

FAQ

What are meme stocks?

Meme stocks are stocks that experience a sudden surge in popularity driven by social media platforms, particularly Reddit and Twitter.

These stocks often gain attention due to viral memes, online communities, and retail investors banding together to drive up the price of a particular stock. The phenomenon of meme stocks has disrupted traditional notions of stock valuation and trading, leading to debates about market manipulation and the democratization of investing.

How does social media play a role in the rise of meme stocks?

Social media platforms like Reddit’s WallStreetBets have become breeding grounds for discussions, tips, and stock recommendations that can rapidly influence the market.

Through the power of social media, individual investors can now wield significant influence over the stock market, challenging institutional investors and analysts. The speed at which information spreads on these platforms can create rapid and extreme price movements, catching the attention of both seasoned traders and regulators.

What are the risks of investing in meme stocks?

Meme stocks are highly volatile and driven by sentiment rather than fundamental analysis, making them a high-risk investment.

Investing in meme stocks can lead to substantial financial losses if the hype fades quickly or if regulatory scrutiny increases. The speculative nature of these stocks means that prices can plummet as swiftly as they rise, leaving investors vulnerable to significant market corrections and sudden downturns.

What are the potential rewards of investing in meme stocks?

Investors who time their investments right can potentially make significant profits from the momentum generated by meme stock crazes.

For those who are able to navigate the volatile nature of meme stocks successfully, there is the possibility of reaping substantial financial rewards in a short period. However, it is essential to approach these investments with caution and a clear understanding of the risks involved, as the market dynamics can change rapidly.

What does the future hold for meme stocks?

Meme stocks are likely to continue shaping the market as the power of social media and online communities grows. Regulatory bodies are closely monitoring this space to strike a balance between investor protection and innovation.

As technology and social media platforms evolve, the influence of meme stocks on the financial markets is expected to persist. Regulators are exploring ways to adapt to this new landscape, seeking to safeguard market integrity while fostering innovation and accessibility for all types of investors.

Now armed with a comprehensive understanding of meme stocks, you can make informed decisions and navigate the exciting world of online investing. Remember to approach these investments with caution, do your research, and always stay up to date on the latest trends and developments. Happy investing!

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Disclaimer: All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, or individual’s trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on an evaluation of their financial circumstances, investment objectives, risk tolerance, and liquidity needs. This post does not constitute investment advice.