We recently compiled a list of the 10 New Stocks Reddit’s WallStreetBets Is Buying. In this article, we are going to take a look at where Paysafe Limited (NYSE:PSFE) stands against the other WallStreetBets-approved stocks.
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.
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).
An executive in a suit presenting a digital commerce platform to a group of financial advisors.
Paysafe Limited (NYSE:PSFE)
Share Price Performance Since July 2021 Start: -87.01%
Number of Hedge Fund Investors In Q1 2024: 25
Paysafe Limited (NYSE:PSFE) is a payments services provider headquartered in London, the United Kingdom. The stock lost most of its value in 2021, the year in which it started trading on the NYSE. The first of these drops started soon after the listing. Paysafe Limited (NYSE:PSFE)’s shares started to tank in April 2021, although the drops were related more to a weakening macroeconomic environment as the impact of coronavirus lock downs continued to wreak havoc. The stock dropped by nearly 14% in August, after Paysafe Limited (NYSE:PSFE)’s third quarter revenue guidance of $360 million to $375 million missed analyst estimates of $384 million. The final nail in Paysafe Limited (NYSE:PSFE)’s coffin came in November 2021 when it reported earnings for the third quarter. The figures saw it report $353 million in revenue, which was significantly lower than $370 million in analyst expectations. It also cut earnings guidance by $60 million and revenue guidance by a whopping $700 million. Paysafe Limited (NYSE:PSFE)’s shares tanked by 41% as a result and have whimpered since then.
However, Paysafe Limited (NYSE:PSFE)’s shares soared by 24% in May 2024 when its $0.57 in earnings and $417 million in revenue beat analyst estimates of $0.55 and $408 million. During the earnings call, management shared:
As we broaden our wallet portfolio, this will allow Paysafe to strategically market to its new consumer groups and unlock market expansion. And, now that we’ve established three continuous quarters of growth in our classic digital wallet active users, we feel it’s important to transition our metrics to a broader view of the portfolio consistent with how we’re looking at the consumer segment going forward. Here, we’re showing a consumer acquisitions for the first quarter, which is approximately 1.4 million comprising new users from all consumer products and revenue streams. This led to 7.5 million active users for the quarter. While ARPU will vary across products, our focus on building an expanded wallet platform steers us towards a stronger scalable model to drive sustainable growth and value for Paysafe, our merchants and our consumers.
Overall PSFE ranks 5th on our list of the WallStreetBets-approved stocks to buy. You can visit Forget AMC and Gamestop: 10 New Stocks Reddit’s WallStreetBets Is Buying to see the other WallStreetBets-approved stocks that are on hedge funds’ radar. While we acknowledge the potential of PSFE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PSFE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.