As the major equity indices clawed out of their recent doldrums, so-called Reddit stocks — particularly those with meme-ish qualities — joined in on the optimism. While social media-driven investments dominated headlines throughout 2021, this year, they grabbed the spotlight for less-than-favorable reasons. However, with the bulls apparently returning to the scene again, prospective traders may enjoy an encore performance.
However, before you dive into Reddit stocks, you should heed words of wisdom from the Wall Street Journal. In its view, meme trades are back but not quite to the same magnitude of enthusiasm.
“This month is different. For one thing, individual investors’ activity is still well off the record highs notched last year. Fears about decades-high inflation and a possible future recession continue to loom, confounding professionals and rookies alike on where the stock market might go from here.”
At the same time, even the big wigs learned the power of coordinated trading through social media. Therefore, while you shouldn’t go crazy with these Reddit stocks, ignoring them outright isn’t astute either.
In other words, if you have the courage, here are the Reddit stocks to watch as memes regain momentum.
|Bed Bath & Beyond
|TravelCenters of America
Bed Bath & Beyond (BBBY)
Recently, home décor retailer Bed Bath & Beyond (NASDAQ:BBBY) has been all over the map. Over the trailing month through the Aug. 19 session, BBBY stock gained over 97% of its market value. However, during the past five days, shares are down over 26%.
Consider it an example of activist investor Ryan Cohen giving and taking away. Last week, the market was abuzz when it learned that Cohen — via his investment vehicle RC Ventures — bought call options on 1.67 million shares. Later, Cohen sold his entire stake in BBBY stock, according to Barron’s.
Then again, that’s the game when it comes to speculative Reddit stocks. You live by the sword, you die by the sword.
Still, according to the website ApeWisdom BBBY ranks as the topmost trending among Reddit stocks. That’s over the past 24 hours, which could present different data by the time you read this. Still, the dynamic indicates that enthusiasm still abounds for the embattled retailer. Per Fintel, the company ranks as one of the top 150 most shorted securities, implying a short-squeeze attempt.
Fundamentally speaking, outdoor grill manufacturer Weber (NYSE:WEBR) isn’t having a great time. Early last week, the company disclosed its results for its fiscal third quarter. Unfortunately, it missed the consensus earnings target. While analysts anticipated a loss of seven cents per share, Weber instead posted a loss of 41 cents.
Even the company’s chief executive Alan Matula admitted: “Our third quarter performance reflects the margin pressures we are experiencing as a result of global headwinds in our current operating environment.” Not surprisingly, the bears smelled blood.
At the time, I wrote that “the short interest percentage of float for WEBR stock is a staggering 55.86%. Just as significantly, the short interest ratio (also known as days to cover) is 13.27.” And that’s apparently the saving grace for WEBR and many other Reddit stocks to watch. Basically, the bad news is good news.
Indeed, WEBR gained 17% last week, belying fundamental expectations. While WEBR may be good for a short-term swing trade, the fundamentals could start to matter eventually.
Occidental Petroleum (OXY)
Oil giant Occidental Petroleum (NYSE:OXY) ranked as one of the more popular Reddit stocks to watch and for good reason. Last Friday, CNBC reported that Warren Buffet, via his company Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B), received regulatory approval to purchase up to 50% of Occidental. On the news, OXY shares popped up just under double digits.
As well, many folks on social media ate up the news. Known as the “Oracle of Omaha,” Buffett cuts a contradictory figure when it comes to Reddit stocks. Though he doesn’t care for young investors’ fascination with speculative vehicles like cryptocurrencies, Buffett nevertheless commands their respect. Thus, if the guru — and I don’t use that pejoratively with Buffett — says buy OXY, then OXY it is.
However, investors have other fundamental reasons to consider Occidental or other hydrocarbon investments. With Russia’s invasion of Ukraine taking another deadly turn, global oil supplies will likely face future supply constraints. Therefore, OXY represents one of the smart, longer-term Reddit stocks to watch.
TravelCenters of America (TA)
Certainly, a temptation exists among traditional investors to label Reddit stocks as pure bovine excrement. If you ever read some of the social media posts supporting the flavors of the week, many (though not all) write content that appears to be influenced by being under the influence. However, it would not be fair to characterize every Reddit-inspired name as speculative garbage.
Indeed, TravelCenters of America (NASDAQ:TA) proves the existence of creative contrarianism among Reddit stocks. Specializing in full-service truck stops, bullishness in TravelCenters represents the anticipation of a full return to normal. With Covid-19 pandemic-related restrictions significantly fading, TA presents an interesting thesis.
However, prospective investors should note that vehicle miles traveled have been stagnant in recent months. According to the U.S. Federal Highway Administration, the aforementioned metric actually slipped slightly in the first half of this year.
Still, it’s possible that as global supply chain disruptions ease, commerce will flow more smoothly. Therefore, TA is one of the Reddit stocks to watch.
It’s hard to think of a more boring topic in the investment world than insurance-related securities. Yet Allstate (NYSE:ALL) ranks among the most popular Reddit stocks as of this writing. Again, I think this ranking is significant because it confirms that not all Reddit-inspired ideas cater to dumb speculation.
Many veteran investors will likely classify buying ALL as an astute maneuver. That’s because one of the talking points on Friday — aside from Buffett buying OXY — centered on interest rates. Specifically, CNBC reported that: “St. Louis Federal Reserve President James Bullard indicated that the central bank would likely continue hiking rates in the near term, putting a damper on investors’ hopes of a slowdown.”
Generally speaking, insurance-related securities and interest rates share a direct correlation. As rates move higher, so too do insurance stocks. High-rate climates facilitate the underlying bond investments to yield stronger returns than under low-rate environments.
Put another way, ALL represents one of the Reddit stocks to watch with serious long-term implications.
Party City (PRTY)
Back in October last year, I sat down with former CGTN America correspondent Rachelle Akuffo (who’s now part of the Yahoo Finance team) to discuss the so-called Halloween economy. At the time, pandemic-related disruptions caused many trick-or-treaters to have slim pickings for their preferred costumes. However, some astute consumers purchased ahead – well ahead of the festivities.
Let’s be honest. While PRTY represents one of the Reddit stocks to watch, it has performed horribly so far this year, down 66%. Nevertheless, in the trailing month, PRTY skyrocketed over 51%. Here again we see evidence that not all social media traders run their portfolios blindly following others.
Essentially, PRTY follows the same logic as we saw in 2021. It’s just that this time, more people have prepared themselves to profit from unique supply chain disruptions.
Blue Apron (APRN)
An ingredient-and-recipe meal kit, Blue Apron (NYSE:APRN) once represented a much-anticipated initial public offering. However, sentiment quickly died down. According to data from Google Finance, APRN shares feature a lifetime return of a loss of nearly 97%. Still, the one positive is that the company now makes up the ranks of Reddit stocks to watch.
But is this name worth considering? Likely, the answer depends on your timeline. As a short-squeeze attempt, APRN could make its way higher. Per Fintel’s Short Squeeze Leaderboard, APRN ranks as number six. At the time of writing, APRN features a short percentage of float of nearly 40%. However, the one drawback with this speculative approach is that the days to cover is only 0.3.
On the fundamental side, investors face significant challenges should they hold onto APRN longer term. For instance, the company continues to post consecutive annual net losses. In the second quarter, those losses widened on a year-over-year basis. As well, revenue came in relatively flat YOY but gross margins dipped.
It’s too much of a high-risk venture for most investors to get involved in.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.