In this article, we discuss the 10 stocks Redditors are buying for 2022. If you want to skip our detailed analysis of these stocks, go directly to the 5 Stocks Redditors are Buying for 2022.
Internet platforms like Reddit and the retail investors who use them to exchange investment ideas have perhaps been the biggest story in the finance world this year. At the beginning of 2021, the “Reddit crowd” was responsible for a short squeeze involving GameStop, a retailer for gaming products, and AMC Entertainment, a movie theatre business, that resulted in losses worth at least $12 billion to institutional investors like hedge funds. The Alternative Investment Management Association, a hedge fund-led body, called the frenzy a “market distortion”.
Over the past twelve months, as vaccine deployment improved and the economy reopened, many experts had predicted that this retail investing boom would steadily fizzle out. However, it seems like the opposite has happened. According to David Kostin, the chief US equity strategist at investment bank Goldman Sachs, the retail investor buying frenzy at the market is just getting started and renewed volatility will be one of the defining characteristics of this trend.
Heading into 2022, analysts expect retail investors to once again fade into the background as average growth and inflation fears “bore” them out of the market. Reddit discussion threads and the enthusiasm that these retail investors portray for the market, on the other hand, would suggest otherwise. Some of the stocks presently popular on Reddit include Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), among others discussed in detail below.
Our Methodology
These stocks were selected based on the hype around the companies on different Reddit forums. The analyst ratings and business fundamentals of each stock are also discussed in a bid to weed out “meme stocks” and provide readers with some informed context for their investment choices. Hedge fund sentiment was included as a classifier as well.
The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
Speedcurve Performance Analytics
Stocks Redditors are Buying for 2022
10. Piedmont Lithium Inc. (NASDAQ:PLL)
Number of Hedge Fund Holders: 6
Piedmont Lithium Inc. (NASDAQ:PLL) explores for and develops resource projects. In late August, the company completed the $196 million acquisition of Sayona Mining, an emerging lithium producer, after gaining regulatory approvals. The purchase creates a lithium production hub in the Abitibi region of Quebec. Redditors expect the firm to grow as lithium demand rises in North America, especially in the context of EV production.
In October, Loop Capital analyst Christopher Kapsch maintained a Buy rating on Piedmont Lithium Inc. (NASDAQ:PLL) stock and raised the price target to $108 from $86, noting increased demand, surging prices, and emerging trends from China as growth catalysts for Piedmont.
At the end of the third quarter of 2021, 6 hedge funds in the database of Insider Monkey held stakes worth $16 million in Piedmont Lithium Inc. (NASDAQ:PLL).
Just like Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), Piedmont Lithium Inc. (NASDAQ:PLL) is one of the stocks trending on Reddit.
9. Lithium Americas Corp. (NYSE:LAC)
Number of Hedge Fund Holders: 12
Lithium Americas Corp. (NYSE:LAC) is a diversified metals and mining firm with core interests in lithium. A record rally in the prices of lithium over the past few weeks has pushed the stock higher, attracting the attention of the Reddit crowd which views the firm as one of the leading plays in the lithium mining market.
In mid-November, Lithium Americas Corp. (NYSE:LAC) announced that it had agreed to purchase Millennial Lithium, another lithium firm, for $400 million. The acquisition provides the firm with regional growth opportunities in South America, an important lithium mining area.
Among the hedge funds being tracked by Insider Monkey, Singapore-based investment firm Himension Capital is a leading shareholder in Lithium Americas Corp. (NYSE:LAC) with 2.2 million shares worth more than $50 million.
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 Lithium Americas Corp. (NYSE: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 Lithium Americas Corp. (NYSE: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.”
8. Energy Fuels Inc. (NYSE:UUUU)
Number of Hedge Fund Holders: 13
Energy Fuels Inc. (NYSE:UUUU) operates as a uranium recovery firm. The stock has surged in the past few weeks after Kazakhstan, the largest producer and seller of uranium, said it would soon be launching a physical uranium fund.Energy Fuels Inc. (NYSE:UUUU) stock has registered gains of more than 200% in the past twelve months and looks to rise further in the coming months as Redditors pile into the stock to ride this rally.
In earnings results for the third quarter, posted in early November, Energy Fuels Inc. (NYSE:UUUU) reported a revenue of $0.7 million, up over 46% year-on-year and smashing analyst expectations by $0.02 million.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Driehaus Capital is a leading shareholder in Energy Fuels Inc. (NYSE:UUUU) with 2.2 million shares worth more than $15 million.
7. United Microelectronics Corporation (NYSE:UMC)
Number of Hedge Fund Holders: 13
United Microelectronics Corporation (NYSE:UMC) owns and runs a semiconductor wafer foundry. The stock is gaining traction on Reddit as one of the “undervalued” names in the semiconductor market that has registered incredible gains this year because of a chip shortage that is expected to last well into 2022.
Citi analyst Roland Shu recently upgraded United Microelectronics Corporation (NYSE:UMC) stock to Buy from Neutral and raised the price target to NT$70 from NT$65, appreciating the quarterly earnings of the firm amid strong demand and tight supply.
At the end of the third quarter of 2021, 13 hedge funds in the database of Insider Monkey held stakes worth $151 million in United Microelectronics Corporation (NYSE:UMC), up from 10 in the preceding quarter worth $141 million.
6. BlackBerry Limited (NYSE:BB)
Number of Hedge Fund Holders: 20
BlackBerry Limited (NYSE:BB) provides security software and services to enterprise clients. The stock has been one of the most discussed on popular Reddit forum WallStreetBets for most of this year, and the heavy trading volume, based on retail investor interest, has helped the share price soar by over 41% year-to-date.
In early October, BlackBerry Limited (NYSE:BB) announced that it had signed a partnership deal with market research firm Deloitte to provide original equipment manufacturers with the protection they needed to secure software supply chains.
Among 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 $454 million.
Alongside Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), BlackBerry Limited (NYSE:BB) is one of the stocks popular among the Reddit crowd.
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Disclosure. None. 10 Stocks Redditors are Buying for 2022 is originally published on Insider Monkey.
