Meme stocks: What they are and the most popular stocks

If you’ve ever heard about people trading meme stocks and making a bundle, you might wonder what they are and if this is a good investment strategy. While it’s true that some individuals have made money on meme stocks, it’s a highly speculative way of trading. More people than not will lose money by “betting” on risky meme stocks, and there are much more reliable, albeit slower, strategies to make money in the stock market.

What are meme stocks?

In a nutshell, meme stocks describe publicly traded companies that experience a surge in popularity based almost entirely on social media hype. These companies may not have increased in value because of innovation, growth or financial performance. Still, hordes of retail investors buy the stock in droves.

Their sudden popularity is driven by individuals or groups on social media aggressively hyping certain companies, making them go viral. The result is often inflated stock prices, which typically don’t have much basis in reality. In other words, rather than buying shares in a company you believe has a good future, meme stock investors buy up stocks that are merely popular according to social media standards.

“There is a cult-like fascination with many meme stocks,” says Robert Johnson, a PhD, chartered financial analyst (CFA), chartered alternative investment analyst (CAIA) and co-founder and CEO of Economic Index Associates. “Independent speculators (note, I refuse to say investors because these are not investors) get together virally and can influence the share prices of stocks that become popular ‘meme stocks.’ Meme stocks are characterized by extraordinarily high trading volumes and valuations that are in no way tethered to reality.”

The meme stock term was coined after the famous 2021 GameStop short squeeze, where numerous individuals banded together on Reddit’s subforum, WallStreetBets, to buy up low-cost shares of the company in unison and drive up the stock price. This unprecedented movement led hedge fund investors shorting the stock to lose billions in the process. Since then, dozens of other companies have found themselves in a similar position with their stock.

Popular Reddit meme stocks

The following are some top meme stocks and how they’re performing so far this year. These companies have experienced a boost in share prices after going viral on Reddit and other social media channels — with varying degrees of success.

Ticker	Company	Market cap	Year-to-date performance
GME	Gamestop	$6.5B	21.16%
AMC	AMC Entertainment Holdings	$1.3B	-26.47%
BB	BlackBerry	$1.62B	-22.32%
SPCE	Virgin Galactic	$391.4M	-61.17%
PYPL	PayPal	$63.9B	-0.59%
NOK	Nokia	$891.6B	9.94%
TSLA	Tesla	$561.9B	-29.09%
PLTR	Palantir Technologies	$46.6B	21.96%
COIN	Coinbase Global Inc.	$56.1B	36.07%
NVDA	Nvidia	$2.9T	131.87%
CAVA	Cava Group Inc	$29.4M	105.12%
MU	Micron Technologies	$145.7B	54.18%
SOFI	SoFi Technologies	$7.2B	26.62%
HOOD	Robinhood Markets Inc	$18.5B	65.50%
DJT	Trump Media	$9.0B	192.11%

Source: Finviz: Stock data and returns as of May 29, 2024

How meme stocks work

Meme stocks gain sudden and significant popularity and are characterized by dramatic price increases due to speculative trading and the bandwagon effect. The term “meme stocks” is derived from the internet phenomenon of “memes,” which are humorous images, videos or texts that spread rapidly online through social media and forums.

In most cases, the share price of a meme stock does not reflect the company’s performance. It’s all about the social media hype and numerous people jumping on board, hoping to make a pile of money quickly. But if you don’t time it right — before the stock price inevitably falls — you lose money.

From an investment expert: On the unsustainable valuations of meme stocks

While those who buy early when a stock becomes a 'meme stock' can sell high if they time it right, this is a risky proposition. These meme stock values are unsustainable because they're artificially inflated by the mass purchases rather than their prices being a reflection of how valuable the company itself actually is at a given time in the market.

— Todd Stearn, Financial expert and founder of The Money Manual

Meme stocks and their impact on the stock market

Meme stocks may be labeled a fad by some, but it’s undeniable that they’ve significantly impacted the stock market. For good or bad, meme stocks have impacted the stock market in the following ways:

• Increased volatility. Meme stocks are often subject to extreme price swings, leading to heightened market volatility. This volatility can spread to other stocks and sectors, affecting overall market stability.
• Market liquidity. The surge in trading volumes for meme stocks can increase liquidity in the short term, but it may also strain the systems of brokerage firms, as seen during the GameStop surge.
• Attention to retail investors. The rise of meme stocks has highlighted the influence of retail investors. Traditionally dominated by institutional players, the market is seeing a shift where individual investors have a more pronounced impact.
• Scrutiny and regulation. The phenomenon has attracted the attention of regulators. There have been calls for increased oversight to ensure market fairness and transparency, particularly regarding short selling and the practices of trading platforms.⁽¹⁾

Popular meme stock terms

Other than the meme stock term itself, several other terms were coined with the rise of meme stocks following the GameStop phenomenon.

• Apes. How those who participate in the meme stock community refer to themselves — a strong, united group that stands together against institutional investors.
• Diamond hands. Being steadfast and resolute in holding onto a stock, no matter how volatile and even as it experiences significant losses.
• Paper hands. The opposite of diamond hands; a term used to describe those who sell their stock quickly at the first sign of trouble.
• To the moon. The hope or belief that a particular stock’s price will surge dramatically.
• Stonks. Represents the absurdity or irrationality of stock market movements.
• Tendies. Refers to the profits or gains made from meme stocks.
• ATH. Stands for all-time high, referring to a stock’s highest share price.
• BTFD. Buy the f***ing dip (BTFD) means to buy a stock when its price is low in hopes of a turnaround.
• Bagholder. Someone who holds onto a stock even after it’s experienced losses so drastic it may even be worthless.
• Hold the line. A statement or form of encouragement to hold onto a stock even as it experiences volatility.
• FOMO. Most people already know that FOMO means “fear of missing out,” but in the meme stock community, it refers to an individual’s motivation for buying into the craze.
• YOLO. Similar to FOMO, “you only live once” is basically the rationale for buying risky meme stocks.

Pros and cons of meme stocks

Many meme stocks are highly speculative and risky, but they do have their share of advantages.

What to consider before buying meme stocks

Here are a few things to consider if you’re considering putting money into current meme stocks.

• Allocate a small portion of your portfolio to speculative stocks. Many financial experts recommend only allocating around five or ten percent of your overall portfolio to speculative assets.
• Set realistic expectations. Think of meme stocks as gambling — hope for the best, but expect to lose most of the time.
• Do your due diligence. Research a company and review its fundamentals before buying its shares; don’t do it solely based on its social media hype.

Other investment ideas to consider

Investing in meme stocks can be volatile and speculative, so it’s wise to explore other investment options that may offer more stability and long-term growth potential for the bulk of your portfolio.

Here are some diverse investment ideas to consider:

• Blue chip stocks. Shares in large, well-established companies with a history of reliable performance and dividends. Examples include Apple (AAPL), Microsoft (MSFT) and Johnson & Johnson (JNJ).
• Index funds. Funds that track a specific index, like the S&P 500, offer broad market exposure with low fees. Examples include the Vanguard S&P 500 ETF (VOO) and the SPDR S&P 500 ETF (SPY).
• Dividend stocks. Stocks that regularly pay dividends, providing a steady income stream. Examples include Coca-Cola (KO), Procter & Gamble (PG) and AT&T (T).

Bottom line

While the meme stock trading trend is fun and exciting and has the potential for big gains, it’s unreliable for achieving long-term wealth. A better investment strategy — especially if you’re investing for retirement — is to have a well-diversified portfolio to minimize risk and maximize returns. Regardless of the asset, you’ll need a brokerage account to start trading and investing.

Frequently asked questions

Are there meme stock exchange-traded funds (ETFs)?

One example of a meme stock ETF was the Roundhill MEME ETF (MEME). However, the ETF shut down after waning investor interest.

What are considered meme stocks?

Any company that’s seen its share price rise rapidly almost entirely due to social media hype — not based on real growth or financial health — is considered a meme stock. However, some solid companies get caught up in the meme stock trend.

Is Blackberry a meme stock?

Blackberry is considered a meme stock and experienced a surge in share prices in 2021 on the heels of other famed meme stocks like GameStop and AMC. More recently, it saw a renewed rise in stock prices alongside some other original meme stocks after new posts on X by Keith Gill, aka Roaring Kitty, one of the most famous meme stock proponents.

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