As experts point out, the growth of the stock meme is usually one-off and the shares, as an investor topic, may also disappear completely after the end of the pandemic.
“An investment strategy betting on stock mems is rather adventurous. It is a question of how long, for example, the VanEck fund’s algorithm will capture the initial fashion trends. The risk is that it will not work and the fund will invest in bubbles, “says Aleš Prandstetter, head of the securities trader eFrank.cz.
He has raised a quarter of a billion dollars since the beginning of March, when the fund has existed. “This indicates that demand from investors is relatively high,” says Finlord economist Boris Tomčiak.
Investors switched from cryptocurrencies to meme stocks virtually overnight. According to statistics from the Coinmarketcap portal, the peak of the cryptocurrency market occurred on May 12. Then the total value started to decline, the VanEck fund comprising 75 shares with a “meme dimension” has been growing practically steadily since the same moment to the current peak.
The iconic stock meme GameStop, for example, is 55 percent more expensive than in mid-May. Since the cryptocurrency cooling, other stock names inflected by the WallStreetBets group on the Reddit network are significantly higher.
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Since the turnaround in the cryptocurrency market, AMC Entertainment has seen rocket growth of up to a thousand percent, and BlackBerry shares have been celebrating 50% growth since mid-May. The retail chain Bed Bath & Beyond is almost 40 percent more expensive on the stock exchange than at the end of May.
The shares of the Beyond Meat meat substitute business are about sixty percent more expensive and up to a 30 percent, but time-limited growth jump was also shown by the shares of the American restaurant chain Wendy’s. At the same time, from the point of view of the S&P 500, the entire market rose by only about five percent.
“In the long run, I wouldn’t expect miracle performance from stock-oriented funds. The portfolios include companies that have been talked about for a long time and most of the time the price has already risen, “adds Tomčiak, adding that the funds can be one step behind the market. The strategy of searching for future memes is being adopted by the big players.
“Hedge funds try to use sophisticated algorithms to scan various discussion forums where retail investors are active, and to quickly identify stocks that may be coordinated by small speculators,” said Cyrrus economist Tomáš Pfeiler.
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VanEck Vectors Social Sentiment also includes large stock names, such as Amazon, Apple or some banks, provided the frequency of comments on networks is a prerequisite. Initially, the performance was unconvincing, from its inception until May 12, investors even lost on the fund’s shares.
“Shares that attract attention can grow regardless of the valuation according to financial indicators. All you have to do is write about it on social networks. After all, small investors often take markets as a supplement to, or a direct replacement for, betting or lotteries, ”recalls Jiří Tyleček, an analyst at XTB. However, according to him, the mindset of retail will change significantly.
“With the stabilization of markets and the return of new investors to employment, the phenomenon of the influence of social networks on the markets will gradually fade away,” Tyleček emphasizes, adding that the meme stock fund would cease to be an investment alternative in such a case.
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