In this piece, we will take a look at 10 new stocks Reddit’s WallStreetBets is buying.
The surge of the Internet and the easy access to financial information, courtesy of the personal computing revolution, means that investing is no longer limited to the professionals. While Wall Street of the 1950s and onward was made of traders relying on hand made graphs of daily stock price movements to decipher long term trends, now, anyone with a computer and an internet connection has access to similar and more sophisticated tools.
This has also led to the rise of retail investing, which first made its mark during the coronavirus pandemic. Between 2020 and 2021, more than thirty million brokerage accounts were opened in the US, and the low interest rates coupled with coronavirus stimulus checks led to these traders accounting for 15% of the market’s trading volume in September 2020. Data from investment bank Morgan Stanley shows that retail traders tend to prefer well known consumer facing stocks, and crucially, the bank’s proprietary methodologies also show that in the five years between 2016 and 2021, stocks that garnered interest from retail investors ended up outperforming those without it.
Building on this, the pandemic and the surge of information in today’s age have also shifted the dynamics of how America views wealth preservation. A fresh survey from Gallup shows that while real estate continues to dominate as Americans’ favorite investment regardless of their income bracket, stocks come in second place for middle and high income families. This preference for equities dropped after the Great Recession of 2008 which wiped out some of the biggest companies in the world after risky bets on mortgage securities shattered Wall Street’s public image. According to Gallup’s data, the percentage of Americans who own stocks is the highest in 2024 since 2007 – or before the global economic crisis. Stock ownership stood at 52% of those polled – an all time low – in 2013 and 2016.
It slowly picked up and sat at 55% in 2020, and has risen every year since then to a post 2007 high of 62% in 2024. In fact, the last time stock ownership was higher than it is right now was in 2004 when 63% of Americans owned stocks during an era when interest rates were relatively low and the housing market was booming – economic conditions that are on a completely different spectrum than what we’re experiencing right now.
Building on this, the divergence between retail investors and hedge funds came to the forefront of the investing world during the meme stock mania that saw the former pump up video game retailing and entertainment chain stocks as they rallied on social media and particularly Reddit’s WallStreetBets, this trend continued in 2023. Data from S&P shows that in October when market sentiment about interest rates and the economy was at its lowest, retail investors sold off $15.64 billion in stocks for their largest monthly outflow since 2021. However, at the same time, the hedge funds appeared to smell blood. In a classic illustration of Warren Buffett’s mantra of being greedy when others are fearful, the hedge funds bought $5.56 billion in stocks. Their three favorite sectors were real estate, utilities, and materials, with real estate and utilities witnessing the inflows after smart money flew out in the prior month. For some great Warren Buffett quotes, you can check out Warren Buffett’s 35 Best Quotes About Business, Investing, and Life.
Judging by this, it appears that retail investors are driven by their economic perceptions instead of setting up their portfolios during a downturn. This is also evident in Charles Schwab’s Trader Sentiment Survey released in February 2024. The bank’s data reveals that 52% of retail traders planned to move more money into stocks during Q1 2024, which marks a 7 percentage point sequential gain. This also coincides with their view of the economy, as 48% think that the US will avoid a recession in 2024 and 53% are bullish for the stock market.
With this context and as retail traders start to become bullish once again, we decided to take a look at how their previous bets have performed. The GameStop short squeeze of 2021 brought the Reddit subreddit WallStreetBets into the limelight and made Roaring Kitty a global celebrity. We covered some WallStreetBets stocks in 2021 and 2023, and in this piece, we’ll analyze how the top 2021 stocks have performed since then. If you’re interested in similar content, we also evaluated Cathie Wood’s stock performance as part of our coverage of 10 Best Stocks to Buy and Hold For 5 Years According to Cathie Wood.
Image by Sergei Tokmakov Terms.Law from Pixabay
Our Methodology
For our list of stocks, we took a look at our 2021 coverage of Forget AMC and Gamestop: 10 New Stocks Reddit’s WallStreetBets Is Buying and evaluated how these stocks have performed since June 2021. The stocks are re-ranked according to their share price percentage performance.
For these stocks, we also mentioned hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Workhorse Group Inc. (NASDAQ:WKHS)
Share Price Performance Since July 2021 Start: -99.53%
Number of Hedge Fund Investors In Q1 2024: 3
Workhorse Group Inc. (NASDAQ:WKHS) is an electric car manufacturer headquartered in Ohio. It was part of a set of electric vehicle stocks that soared during the pandemic as investors hungrily searched for another Tesla. While Workhorse Group Inc. (NASDAQ:WKHS)’s shares soared initially after it entered the final stages of a sizeable contract with the Postal Service, the stock saw a lot of turbulence after it confirmed an SEC investigation for insider trading related to the deal. It took a year for the company to resolve these differences, and despite the fact that the SEC did not take any enforcement actions against the firm, the stock had lost 89% of its value between July 2021 and the start of January 2023. Workhorse Group Inc. (NASDAQ:WKHS) also lost the USPS contract to Oshkosh, which further dented its share price. Like other EV companies, the firm’s success depends on its ability to scale up manufacturing and make deliveries – and Workhorse Group Inc. (NASDAQ:WKHS) isn’t doing well on either front. The firm is yet to turn a profit, and its $25.8 million in cash is just 2x its accounts payables.
Workhorse Group Inc. (NASDAQ:WKHS) is focused on production though, and during its Q4 2023 earnings call, management shared:
During the year, we rolled out our first W56 step van, signed up our first fleet customers and established our production capabilities for the W4CC and W750 vehicles. We also expanded our commercial dealer network, adding new dealers and up bidding partners in multiple states. In our aero business, we continue to expand our relationship with key government agencies and partners. Let’s review the key accomplishments and successes we achieved at Workhorse in 2023. We will have four distinct commercial EV products in production and we have four distinct commercial EV products in production. We received important HVIP certification for both our Class 4 and our Class 5,6 vehicles. We secured initial fleet orders for the W56 step vans and strip chassis, and we organically grew the stables business.
Additionally, we completed the overhaul of our Union City manufacturing complex. The Workhorse Ranch is now capable of building 5,000 and painting 3,000 vehicles per year on one shift. Our lean, highly flexible production facility can ramp up staffing and production in line with future market demand. At our Aero business, we sold our first units. We are on track for FA certification in first quarter this year, landed several government funded grants all while we continue to evaluate alternatives for the business. Moving to Slide 6. We have stabilized production of both the W4CC and W750 miles and handed those production over to the plant, while continuing dealer programs and field demonstrations for both of these vehicles. Notably, we successfully overcame unexpected issues with California’s HVIP program and worked with the California Air Resources Board to list the W4CC and the W750 in the HVIP program in a first of its kind program for intermediate vehicle manufacturers.
9. Virgin Galactic Holdings, Inc. (NYSE:SPCE)
Share Price Performance Since July 2021 Start: -99.08%
Number of Hedge Fund Investors In Q1 2024: 8
Virgin Galactic Holdings, Inc. (NYSE:SPCE) is a space tourism company. Like EV stocks mirrored Tesla’s performance in 2021, Virgin Galactic Holdings, Inc. (NYSE:SPCE) saw retail and institutional investor interest in 2021 because of SpaceX’s successful first crewed mission for NASA in 2020. Investors were hungry for space stocks, and Virgin Galactic Holdings, Inc. (NYSE:SPCE) was helped by its founder Richard Branson’s celebrity status. However, while the shares did well initially, they started to bleed in 2021 after a series of bad news for investors. These included a delay in flights due to problems with materials suppliers and Virgin Galactic Holdings, Inc. (NYSE:SPCE)’s plan to raise funds through a share sale. The stock wasn’t helped by high interest rates or the pandemic, with Branson announcing last year that he would no longer fund Virgin Galactic Holdings, Inc. (NYSE:SPCE). The firm also conducted its final spaceflight in June 2024, as it has announced a two year hiatus to develop a next generation spacecraft. This pushes Virgin Galactic Holdings, Inc. (NYSE:SPCE) into a non operational phase, and naturally, investors aren’t pleased.
However, Virgin Galactic Holdings, Inc. (NYSE:SPCE) is optimistic about its future spacecraft, with management commenting during the first quarter earnings call:
And I’m pleased to share that we now expect VMS Eve to support three space missions per week, a 50% increase over prior base case estimations. This is fantastic news. We expect Eve and our first two Delta ships will be able to execute approximately 125 space flights carrying 750 or so astronauts to space each year. To put that in perspective, Eve and the first two Delta ships will bring more people to space in a single year than the total number of astronauts who have ever journeyed to space to-date.
Economically, that equates to roughly $450 million in annualized revenue within the first 12 months following entry into commercial service. Of course, those numbers are expected to grow substantially as we scale our operations by adding new ships and expand across multiple spaceports. During today’s call, I’ll ask Doug Ahrens, our Chief Financial Officer, to shed more light on our financial operating model, giving you a sense of what our economics are estimated to look like with the initial rollout of our first 2 Delta ships and in the years to follow.