In this article, we discuss the 10 stocks both Reddit’s WallStreetBets and hedge funds love. If you want to skip our detailed analysis of these stocks, go directly to the 5 Stocks Both Reddit’s WallStreetBets and Hedge Funds Love.
The stock market battle between retail investors on internet platform Reddit, most popular through the ten million strong WallStreetBets group, and hedge funds has shaped market dynamics in the first half of the year. Retail investors have mostly tried to spoil the short-selling attempts of hedge funds, driving up the prices of stocks being sold short to deliver devastating losses to some of the biggest hedge funds. Earlier this month, London-based White Square Capital, that bet against WallStreetBets, announced that it would close down for good.
Some of the stocks presently popular on the forum include Tesla, Inc. (NASDAQ: TSLA), Advanced Micro Devices, Inc. (NASDAQ: AMD), ContextLogic Inc. (NASDAQ: WISH), and Palantir Technologies Inc. (NYSE: PLTR), among others. These stocks can offer handsome returns to investors in the coming months as hedge funds are also bullish on them. Since they do not represent an avenue for the retail investor versus hedge fund battle, they will be safe from perhaps the most influential market force of the year, affording these firms breathing space compared to others.
Last month, a report in a popular news publication revealed that hedge funds had lost close to $12 billion in this battle against retail investors over the past six months. According to the publication, Financial Times, this had forced big finance to reconsider investment strategy, balancing risks by monitoring Reddit forums to keep tabs on the stocks occupying the interest of retail investors. It remains to be seen who eventually comes out the winner in this stock market war. Retail investors have the edge at the moment, but that could soon change.
Calls for regulation around internet-based stock trading, which Redditors employ through the use of applications like Robinhood, have been growing in recent months. Robinhood has been forced to halt trading in some highly volatile stocks over the past few months despite strong protest from retail investors as the application, which has more than 13 million users – mostly around 30-years-old – realizes the responsibility it has to provide a level playing field to everyone in the marketplace, be it Redditors or billion dollar hedge funds.
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 February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. 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
In this list we mentioned the stocks that are very popular on Reddit’s WallStreetBets, as well as among the 800+ hedge funds tracked by Insider Monkey. With each stock we mentioned the total number of hedge funds having stakes in it as of the end of the first quarter based on our data.
With this context in mind, here is our list of the 10 stocks both Reddit’s WallStreetBets and hedge funds love.
Stocks Both Reddit’s WallStreetBets and Hedge Funds Love
10. GameStop Corp. (NYSE: GME)
Number of Hedge Fund Holders: 13
GameStop Corp. (NYSE: GME) is a video game retailer that also sells other entertainment products. It is placed tenth on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The company’s shares have offered investors returns exceeding 4,869% over the course of the past twelve months. Over the past month, the stock has rallied more than 30% as it trends heavily on the WallStreetBets platform on Reddit.
On June 28, investment advisory Baird suspended coverage of GameStop Corp. (NYSE: GME) stock, saying that it wanted to more fully understand the new business strategy of the firm before advising investors on it.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in GameStop Corp. (NYSE: GME) with 3.2 million shares worth more than $620 million.
Just like Tesla, Inc. (NASDAQ: TSLA), Advanced Micro Devices, Inc. (NASDAQ: AMD), ContextLogic Inc. (NASDAQ: WISH), and Palantir Technologies Inc. (NYSE: PLTR), GameStop Corp. (NYSE: GME) is one of the stocks both Reddit’s WallStreetBets and hedge funds love.
In its Q1 2021 investor letter, Rhizome Partners, an asset management firm, highlighted a few stocks and GameStop Corp. (NYSE: GME) was one of them. Here is what the fund said:
“The first quarter saw some bizarre market reactions. Game Stop is a heavily shorted legacy video game retailer that saw its stock price rise from $17 to a peak of $483 within a month. It appears that retail investors on a Reddit.com forum called WallStreetBets used memes to create a viral feedback loop of forced buying. Game Stop reached $20 billion in market cap and had more daily trading volume than Apple at one point. The Game Stop short squeeze became a black swan event for the short sellers. Large hedge funds such as Melvin Capital suffered 50% losses during a short period and required emergency capital injections that resulted in costly dilution. Shorting is difficult and introduces a risk of ruin. This is especially true in situations where a large percentage of the float is shorted. We want to remind you that we hedge our portfolio via index puts, sector puts, and sometimes buying puts directly in our own portfolio companies. However, we rarely short because 1) we are not good at it 2) the potential for brain damage is too high and 3) we want to avoid the risk of ruin.”
9. Virgin Galactic Holdings, Inc. (NYSE: SPCE)
Number of Hedge Fund Holders: 17
Virgin Galactic Holdings, Inc. (NYSE: SPCE) is ranked ninth on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The company operates as a private spaceflight firm that aims to take tourists into space one day. The stock has offered investors returns exceeding 175% over the course of the past year. On June 30, the founder of the firm, Richard Branson, told news platform CNBC that he was waiting for approval from his engineering team to take his first flight into space.
On June 30, investment advisory Bank of America downgraded Virgin Galactic Holdings, Inc. (NYSE: SPCE) stock to Underperform from Buy on the back of increased competition in the private space market as more firms go public.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in Virgin Galactic Holdings, Inc. (NYSE: SPCE) with 2.8 million shares worth more than $86 million.
Just like Tesla, Inc. (NASDAQ: TSLA), Advanced Micro Devices, Inc. (NASDAQ: AMD), ContextLogic Inc. (NASDAQ: WISH), and Palantir Technologies Inc. (NYSE: PLTR), Virgin Galactic Holdings, Inc. (NYSE: SPCE) is one of the stocks both Reddit’s WallStreetBets and hedge funds love.
8. UWM Holdings Corporation (NYSE: UWMC)
Number of Hedge Fund Holders: 19
UWM Holdings Corporation (NYSE: UWMC) is a company that offers loans for residential mortgages. It is placed eighth on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The company’s shares have returned 10% to investors in the past three months. The company has been regularly mentioned on the WallStreetBets forum in the past month, resulting in a stock rally that has seen share price climb 52% in four weeks.
On June 23, investment advisory Jefferies initiated coverage on UWM Holdings Corporation (NYSE: UWMC) stock with a Hold rating and a price target of $9.5 on the back of fierce and uncertain competition in the market.
At the end of the first quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth $76.6 billion in UWM Holdings Corporation (NYSE: UWMC).
Just like Tesla, Inc. (NASDAQ: TSLA), Advanced Micro Devices, Inc. (NASDAQ: AMD), ContextLogic Inc. (NASDAQ: WISH), and Palantir Technologies Inc. (NYSE: PLTR), UWM Holdings Corporation (NYSE: UWMC) is one of the stocks both Reddit’s WallStreetBets and hedge funds love.
7. Clover Health Investments, Corp. (NASDAQ: CLOV)
Number of Hedge Fund Holders: 23
Clover Health Investments, Corp. (NASDAQ: CLOV) is a health insurance company based in Tennessee. The stock has returned 19% to investors in the past twelve months. It is ranked seventh on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The company has been trending heavily on the WallStreetBets forum and on June 22, the number of mentions of the firm on the forum climbed to their highest in more than a week, sending the stock soaring more than 6% over seven days.
On June 24, Clover Health Investments, Corp. (NASDAQ: CLOV) stock soared by over 8% as the firm announced plans to expand into more than 200 new counties across nine different states in the United States.
Out of the hedge funds being tracked by Insider Monkey, San Francisco-based investment firm Greenoaks Capital is a leading shareholder in Clover Health Investments, Corp. (NASDAQ: CLOV) with 96.3 million shares worth more than $728 million.
Just like Tesla, Inc. (NASDAQ: TSLA), Advanced Micro Devices, Inc. (NASDAQ: AMD), ContextLogic Inc. (NASDAQ: WISH), and Palantir Technologies Inc. (NYSE: PLTR), Clover Health Investments, Corp. (NASDAQ: CLOV) is one of the stocks both Reddit’s WallStreetBets and hedge funds love.
6. BlackBerry Limited (NYSE: BB)
Number of Hedge Fund Holders: 24
BlackBerry Limited (NYSE: BB) is placed sixth on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The company’s shares have returned more than 151% to investors in the past year. The firm makes and sells security software and other services to businesses and governments around the world. Despite the massive interest around the company on WallStreetBets, the company has been getting bearish ratings from investment advisors on the back of the recent earnings report.
In quarterly earnings results, posted on June 24, BlackBerry Limited (NYSE: BB) reported earnings per share of -$0.05 for the first quarter of 2021, in line with market predictions. The revenue over the period was $174 million, down 15% year-on-year.
Out of the hedge funds being tracked by Insider Monkey, Canada-based investment firm Fairfax Financial Holdings is a leading shareholder in BlackBerry Limited (NYSE: BB) with 46 million shares worth more than $392 million.
Just like Tesla, Inc. (NASDAQ: TSLA), Advanced Micro Devices, Inc. (NASDAQ: AMD), ContextLogic Inc. (NASDAQ: WISH), and Palantir Technologies Inc. (NYSE: PLTR), BlackBerry Limited (NYSE: BB) is one of the stocks both Reddit’s WallStreetBets and hedge funds love.
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Disclose. None. 10 Stocks Both Reddit’s WallStreetBets and Hedge Funds Love is originally published on Insider Monkey.
