In this article, we discuss the 10 new Reddit WallStreetBets stocks on the rise. If you want to skip our detailed analysis of these stocks, go directly to the 5 New Reddit WallStreetBets Stocks On the Rise.
WallStreetBets, the Reddit forum with more than 10.8 million members, has become one of the hottest places in the world of finance over the past few months. This is evident from the meteoric rise in memberships – the group had only around 1.6 million members in December 2020. On January 28, the group gained a record 1.5 million members in a single night at the height of the short squeeze saga involving video game retailer GameStop. The forum is used by retail investors for market-related discussions.
Some of the most popular stocks on WallStreetBets presently include Tesla, Inc. (NASDAQ: TSLA), Apple Inc. (NASDAQ: AAPL), NIO Inc. (NYSE: NIO), Amazon.com, Inc. (NASDAQ: AMZN), and Alphabet Inc. (NASDAQ: GOOG), among others. Since retail investors do not often see eye to eye with big finance on key investment choices, the group has become a hotbed of activity around meme stocks – firms with little to offer in terms of basic fundamentals but popular because of internet interest.
On August 30, the founder of the WallStreetBets group, Jaime Rogozinski, gave an interview to news platform Kitco News and revealed that he was confident that a new type of exchange-traded product that would let investors with a stake have a say in the asset selection process would soon be launched. Rogozinski even went as far as to call the product “the next meme stock” and said the product would follow a decentralized autonomous organization model. Rogozinski founded WallStreetBets in 2012.
The influx of retail investors on the market has fundamentally altered the dynamics of Wall Street. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
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Our Methodology
With this context in mind, here is our list of the 10 new Reddit WallStreetBets stocks on the rise. They were picked keeping in mind the hype around the companies on Reddit forum WallStreetBets.
In order to separate the best from the rest, only the stocks that have registered gains of 10% or more during the last five days were selected for the final listing. The stocks are ranked according to their percentage gains.
The analyst ratings of each firm are also discussed to provide readers with some more context for their investment decisions. The hedge fund sentiment around the stocks was gauged using data of 873 hedge funds tracked by Insider Monkey.
New Reddit WallStreetBets Stocks On the Rise
10. Lithium Americas Corp. (NYSE: LAC)
Number of Hedge Fund Holders: 9
Percentage Gain in Past Five Days: 10.41%
Lithium Americas Corp. (NYSE: LAC) is placed tenth on our list of 10 new Reddit WallStreetBets stocks on the rise. The firm operates as a resource company and is headquartered in Canada.
On August 30, investment advisory Cowen maintained an Outperform rating on Lithium Americas Corp. (NYSE: LAC) stock and raised the price target to $19 from $17, noting that constructive policy and near-term supply limits were driving lithium pricing higher.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Axel Capital Management is a leading shareholder in Lithium Americas Corp. (NYSE: LAC) with 408,130 shares worth more than $6 million.
Just like Tesla, Inc. (NASDAQ: TSLA), Apple Inc. (NASDAQ: AAPL), NIO Inc. (NYSE: NIO), Amazon.com, Inc. (NASDAQ: AMZN), and Alphabet Inc. (NASDAQ: GOOG), Lithium Americas Corp. (NYSE: LAC) is one of the new Reddit WallStreetBets stocks on the rise.
In its Q1 2021 investor letter, Massif Capital, an asset management firm, highlighted a few stocks and Lithium Americas Corp. (NYSE: LAC) was one of them. Here is what the fund said:
“Lithium Americas: The volatility noted above in LAC has resulted in solid returns via our options trades around our core equity position. At the current time, we are short calls on LAC, as we have done multiple times throughout the position’s life, expiring on May 21, 2021, at a $17.5 and $22.5 strike price. The volume of contracts sold at each strike corresponds to the size of the equity position we want should the calls expire in the money, and the underlying equity gets called away from us. The thought process behind this trade construction is that if we know the size of the position we want at a particular price point, there is no reason not to accumulate additional returns by pre-selling the stock we would have sold anyway.
High levels of volatility positively impact the price of options, increasing the premium we can earn from selling covered calls. To date, we have sold covered calls on LAC that have expired worthless four times, yielding a roughly 7% return on the equity position’s current value or 71bps for the portfolio overall. The outstanding covered calls appear to be trending towards a similar worthless expiration. If they do, the covered call trades on LAC will result in us owning the shares with committed capital of -$0.28 per share.
Although we believe in the fullness of time LAC warrants a $30+ valuation, the prices achieved in early January of this year were not justified by the underlying fundamentals. Some will argue we should have sold down our position. We had already established our option positions and believe LAC is an emerging major in the lithium mining industry. Thus, we decided to maintain the position unchanged. Although still relatively high, the current $15 per share valuation is not crazy compared to where we think the firm should be trading based on fundamentals, so we are no longer overly concerned with the position as is.
LAC management also took advantage of the volatility issuing stock on January 22 for $22 a share. The ~$400 million in proceeds will be used to develop Thacker Pass, the US-based clay lithium deposit, which will likely be the largest producing Lithium mine in America when turned on. In our opinion, the stock issuance could not have come at a better time. LAC management has advanced the project through various development stages (de-risking), but with the share issuance, they have significantly reduced the need to bring in an outside partner to develop the asset as the first phase of the project is expected to cost roughly $581 million. After-tax and at an 8% discount rate, the Thacker Pass project’s present value is approximately $2.6 billion (the firm’s current market capitalization is $1.5 billion). Although the share issuance was dilutive, increasing the total shares by 17%, we believe it will, in the long run, prove a forward-looking, value-additive decision by management.
The lithium market remains an area of interest and focus for us. This reflects our belief that the most exciting investment opportunities to capture secular trends in EV’s and batteries are found upstream in the mining industry. It is also a reflection that there is a greater diversity of lithium investment opportunities relative to other battery metals.”
9. Penn National Gaming, Inc. (NASDAQ: PENN)
Number of Hedge Fund Holders: 40
Percentage Gain in Past Five Days: 11.43%
Penn National Gaming, Inc. (NASDAQ: PENN) is ranked ninth on our list of 10 new Reddit WallStreetBets stocks on the rise. The firm owns and manages gaming and racing properties. It is headquartered in Pennsylvania.
On August 5, investment advisory Stifel reiterated a Buy rating on Penn National Gaming, Inc. (NASDAQ: PENN) stock with a price target of $108. Steven Wieczynski, an analyst at the firm, issued the ratings update.
At the end of the second quarter of 2021, 40 hedge funds in the database of Insider Monkey held stakes worth 1 billion in Penn National Gaming, Inc. (NASDAQ: PENN), down from 42 in the previous quarter worth $907 million.
Along with Tesla, Inc. (NASDAQ: TSLA), Apple Inc. (NASDAQ: AAPL), NIO Inc. (NYSE: NIO), Amazon.com, Inc. (NASDAQ: AMZN), and Alphabet Inc. (NASDAQ: GOOG), Penn National Gaming, Inc. (NASDAQ: PENN) is one of the new Reddit WallStreetBets stocks on the rise.
In its Q1 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Penn National Gaming, Inc. (NASDAQ: PENN) was one of them. Here is what the fund said:
“Shares of regional casino operation Penn National Gaming, Inc. increased in the quarter on strong share gains in the online sports betting and gaming markets in Michigan and the opening of the large Illinois online sports betting market. Strong sequential growth in revenue and sustained margin improvement in its brick and mortar operations also helped boost the share price. We think these positive developments will lead to improvements in the company’s balance sheet and its EBITDA to free cash flow conversion.”
8. The Beauty Health Company (NASDAQ: SKIN)
Number of Hedge Fund Holders: 33
Percentage Gain in Past Five Days: 12.85%
The Beauty Health Company (NASDAQ: SKIN) is a California-based firm that markets aesthetic technologies and products. It is placed eighth on our list of 10 new Reddit WallStreetBets stocks on the rise.
On August 11, investment advisory Benchmark maintained a Buy rating on The Beauty Health Company (NASDAQ: SKIN) stock and raised the price target to $25 from $18, identifying contracts with retailers and international market expansion as growth catalysts for the firm.
At the end of the second quarter of 2021, 33 hedge funds in the database of Insider Monkey held stakes worth $665 million in The Beauty Health Company (NASDAQ: SKIN).
In addition to Tesla, Inc. (NASDAQ: TSLA), Apple Inc. (NASDAQ: AAPL), NIO Inc. (NYSE: NIO), Amazon.com, Inc. (NASDAQ: AMZN), and Alphabet Inc. (NASDAQ: GOOG), The Beauty Health Company (NASDAQ: SKIN) is one of the new Reddit WallStreetBets stocks on the rise.
7. Peabody Energy Corporation (NYSE: BTU)
Number of Hedge Fund Holders: 18
Percentage Gain in Past Five Days: 16.32%
Peabody Energy Corporation (NYSE: BTU) is a Missouri-based coal mining firm. It is ranked seventh on our list of 10 new Reddit WallStreetBets stocks on the rise.
On August 2, investment advisory B Riley maintained a Neutral rating on Peabody Energy Corporation (NYSE: BTU) stock and raised the price target to $11 from $7, appreciating the second quarter earnings report of the company.
At the end of the second quarter of 2021, 18 hedge funds in the database of Insider Monkey held stakes worth $297 million in Peabody Energy Corporation (NYSE: BTU), down from 21 in the preceding quarter worth $122 million.
Tesla, Inc. (NASDAQ: TSLA), Apple Inc. (NASDAQ: AAPL), NIO Inc. (NYSE: NIO), Amazon.com, Inc. (NASDAQ: AMZN), and Alphabet Inc. (NASDAQ: GOOG) are some of the new Reddit WallStreetBets stocks on the rise, along with Peabody Energy Corporation (NYSE: BTU).
6. Hut 8 Mining Corp. (NASDAQ: HUT)
Number of Hedge Fund Holders: 4
Percentage Gain in Past Five Days: 22.08%
Hut 8 Mining Corp. (NASDAQ: HUT) is placed sixth on our list of 10 new Reddit WallStreetBets stocks on the rise. The firm operates from Canada and engages in cryptocurrency mining operations.
On August 3, investment advisory Craig-Hallum initiated coverage of Hut 8 Mining Corp. (NASDAQ: HUT) stock with a Buy rating and a price target of $10, underlining that the firm had the right combination of hash, power, agility and diversity.
At the end of the second quarter of 2021, 4 hedge funds in the database of Insider Monkey held stakes worth $2 million in Hut 8 Mining Corp. (NASDAQ: HUT).
Tesla, Inc. (NASDAQ: TSLA), Apple Inc. (NASDAQ: AAPL), NIO Inc. (NYSE: NIO), Amazon.com, Inc. (NASDAQ: AMZN), and Alphabet Inc. (NASDAQ: GOOG) are some of the new Reddit WallStreetBets stocks on the rise, just like Hut 8 Mining Corp. (NASDAQ: HUT).
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Disclosure. None. 10 New Reddit WallStreetBets Stocks On the Rise is originally published on Insider Monkey.
