5 Pump and Dump Stocks Hedge Funds Like

2. GameStop Corp. (NYSE:GME)

Number of Hedge Fund Holders: 13    

52-Week Price Range ($): 19.40 – 50.03 

GameStop Corp. (NYSE:GME) is a specialty retailer that provides games and entertainment products through its e-commerce properties and various stores in the United States, Canada, Australia, and Europe.

Among 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 5.3 million shares worth more than $132 million. 

In its Q2 2022 investor letter, Bireme Capital, an asset management firm, highlighted a few stocks and GameStop Corp. (NYSE:GME) was one of them. Here is what the fund said:

“Amazingly, GameStop Corp. (NYSE:GME) is one of our only short positions to not fall in 2022. The stock trades at an $11.5b market cap, exceeding its pre-pandemic peak by billions of dollars. This is even though revenue is down 30% from the peak, gross margins are down 1500 bps, and the company has generated a negative free cash outflow of $700m in the last four quarters (we had to double-check that number because it is so high).

Wall Street has consistently revised downward their estimates of Gamestop’s profitability, making its stock price stability in 2022 even more perplexing. Analysts currently estimate an EBITDA loss of around $400m, markedly worse than their estimates as of 2/3/22 of a loss of $60m. Their recently launched NFT marketplace will do nothing to fix their core business and comes about a year too late to be relevant in the NFT space. Instead, we see this as another example of a meme stock company hoping it can ape its way into a new business model, utilizing the popularity of the stock to drive new lines of business. We are not optimistic and think the $11.5b market cap drastically overestimates the capability of Gamestop to pivot into something more profitable. We find it unlikely that Gamestop books a GAAP profit ever again.”