In this article, we discuss the 10 most popular Reddit stocks to consider.
This year financial markets were jolted amid an influx of Reddit-based retail investors who band together to initiate bets on companies and affect the overall direction of the market. David Kostin, a strategist at Goldman Sachs, asserted that households and retail investors will account for an estimated net purchase of $350 billion worth of U.S. stocks in 2021. This, however, represents just 1% of domestic equity market value.
According to a report published by Business Insider, retail investors accounted for nearly 25% of the stock market activity in 2020, up from 10% in 2019. This growth can be attributed to the increasing knowledge of retail investors and their access to investment products through a collaborative platform.
Some of the stocks that Redditors are betting on include, Facebook, Inc. (NASDAQ:FB), Alibaba Group Holding Limited (NYSE:BABA), Apple Inc. (NASDAQ:AAPL), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Tesla, Inc. (NASDAQ:TSLA).
Our Methodology:
Let’s analyze our list of the most popular stocks to consider. These companies are selected on the basis of recent trends on Reddit forum WallStreetBets and are ranked according to the number of hedge funds having stakes in each stock. Data of 873 hedge funds tracked by Insider Monkey was used to gauge hedge fund sentiment around each company.
Image by Sergei Tokmakov Terms.Law from Pixabay
Why pay attention to hedge fund sentiment while choosing stocks?
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 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). 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.
Reddit Stock Portfolio: 10 Most Popular Stocks To Consider
10. Lucid Group, Inc. (NASDAQ:LCID)
Number of Hedge Fund Holders: N/A
As the electric vehicle industry is expected to grow at a CAGR of 33.6% by 2027, Lucid Group, Inc. (NASDAQ:LCID) is gaining ground among investors. This September, John Murphy of BofA called Lucid Group, Inc. the Tesla-Ferrari of new EV automakers, while appreciating the company’s innovative and competitive technology. The firm initiated its coverage on Lucid Group, Inc. with a Buy rating and a $30 price target. In July, the company announced that its total Lucid Air reservations are above 10,000.
Like Facebook, Inc., Alibaba Group Holding Limited, Apple Inc., Advanced Micro Devices, Inc., and Tesla, Inc., Lucid Group, Inc. is also one of the notable stocks to invest in.
9. Tilray, Inc. (NASDAQ:TLRY)
Number of Hedge Fund Holders: 17
Tilray, Inc. (NASDAQ:TLRY), a Canadian pharmaceutical and cannabis company, benefits from its global reach in medical and recreational distribution.
In Q2, Citadel Investment Group is the largest shareholder of Tilray, Inc., with shares worth $73.4 million. Overall, 17 hedge funds tracked by Insider Monkey reported having stakes in the company in Q2, compared with 21 in the previous quarter. The total value of these stakes is $94.8 million.
Jefferies Financial Group reiterated its Buy rating on Tilray, Inc., with a $14 price target.
8. AMC Entertainment Holdings, Inc. (NYSE:AMC)
Number of Hedge Fund Holders: 21
AMC Entertainment Holdings, Inc. (NYSE:AMC) has been one of the most popular Reddit stocks over the past few months. In the third quarter, the company posted GAAP EPS of -$0.44, beating the Street’s estimate by $0.10. Revenue jumped over 500% in the period.
As of Q2, 21 hedge funds tracked by Insider Monkey reported having stakes in AMC Entertainment Holdings, Inc., up from 19 in the previous quarter. The total value of these stakes is $404.3 million.
Heartland Advisors mentioned AMC Entertainment Holdings, Inc. in its Q2 2021 investor letter. Here is what the firm has to say:
“AMC is up a whopping 2,500% since the beginning of the year. Even AMC management seems stunned by the mind-boggling rise in its shares as witnessed by the following quote from a prospectus the company filed to issue more shares.
‘We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last.’
We too don’t believe that prices are tied to valuation metrics for the theater and entertainment company. At current levels, shares of AMC are trading at roughly 63X sales. It’s a steep price for a company that has been losing money for years and isn’t expected to turn a profit in the coming year. No wonder insiders have cashed in on the mania and unloaded over $200 million in stock since March.
While valuations for AMC are an extreme example, speculative fever is running rampant. Investors have been clamoring to pay premium prices in hopes that the current goldilocks moment of low interest rates, easy sales comparisons and low inflation will go on forever. The appetite for pricey unicorns in a quest for quick gains was a drag on performance for your portfolio, and the Fund modestly underperformed the benchmark for the period.
Despite stratospheric valuations in many areas of the market, attractive valuations still exist if you know where to look. A good place to start is among small caps.
Looking at price to sales metrics, as shown below, smaller businesses are trading at discount levels versus their large counterparts not seen since the dotcom bubble. Price to sales is one of the metrics we look at when examining businesses. Over the years, it has served as an effective tool in identifying compelling opportunities when incorporated with other fundamentals.”
7. Upstart Holdings, Inc. (NASDAQ:UPST)
Number of Hedge Fund Holders: 21
This September, Ronald Josey of JMP Securities showed confidence in Upstart Holdings, Inc. (NASDAQ:UPST) as the company gains growth in the personal lending market by utilizing advanced AI tools. The firm lifted its price target on Upstart Holdings, Inc. to $327, while keeping an Outperform rating on the shares.
Upstart Holdings, Inc. showed a positive hedge fund sentiment in Q2, as 21 hedge funds in the Insider Monkey database reported owning stakes in the company, up from 13 in the previous quarter. The total value of these stakes is over $2.1 billion. Dan Loeb’s Third Point was the leading shareholder of Upstart Holdings, Inc. in Q2, with shares worth $1.6 billion.
Vulcan Value Partners mentioned Upstart Holdings, Inc. in its Q2 2021 investor letter. Here is what the firm has to say:
“During the quarter, we purchased Upstart Holdings Inc. Upstart is an artificial intelligence (AI) and cloud-based lending platform. The company uses AI models to underwrite superior loans with lower interest rates, lower default rates, higher approval rates, and increased underwriting automation. Consumers can access Upstart-powered loans through its banking partners’ websites; however, most of its loans are underwritten on Upstart.com. Upstart has a fee-based revenue model and retains only a small portion of the loans, while the majority of the loans end up on the balance sheets of its partner banks or are sold into the capital markets. We believe Upstart’s technology is superior to the FICO score, which is ubiquitous within the consumer credit markets. With an excellent product and a large total addressable market, we believe that Upstart’s prospects are bright.”
6. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 26
This August, Wolfe Research raised its price target on Palantir Technologies Inc. (NYSE:PLTR) to $25 while keeping a Peer Perform rating on the shares. The firm’s analyst appreciated the company’s accelerating revenue growth and its strategic investments.
Cathie Wood’s ARK Investment Management is the largest shareholder of Palantir Technologies Inc. in Q2, with shares valued at $808.7 million. In addition, 26 hedge funds tracked by Insider Monkey reported owning stakes in the company in Q2, compared with 32 in the previous quarter. The total value of these stakes is $1.36 billion.
Like Facebook, Inc., Alibaba Group Holding Limited, Apple Inc., Advanced Micro Devices, Inc., and Tesla, Inc., analysts and investors are also paying attention to Palantir Technologies Inc. in 2021.
5. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 60
Tesla, Inc. remained the winner in the electric vehicle sector as the company managed to generate an annual run rate of 1 million cars in recent weeks. Recently, Wedbush raised its price target on Tesla, Inc. to $1,100 with an Outperform rating on the shares.
Overall, 60 hedge funds tracked by Insider Monkey reported having positions in Tesla, Inc., compared with 62 in the previous quarter. The total worth of these stakes is $9.2 billion.
Tesla, Inc. announced its Q3 2021 results on October 20. The company posted an EPS of $1.86, beating the estimates by $0.25. The company reported the production of over 238,000 vehicles and delivered 241,300 units during the quarter, beating the estimates of 233,000 vehicles.
Worm Capital LLC mentioned Tesla, Inc. in its Q3 2021 investor letter. Here is what the firm has to say:
“Our core portfolio as of this writing—TSLA, SPOT, SHOP, ABNB, and AMZN—are all premier examples of companies that use the concept of aggregation of marginal gains to continuously improve their value proposition for customers. After all, what is innovation if not just a continuous search for fractional advantages in business?
The way we see it, Tesla is perhaps the generational example of the marginal gain aggregation theory. It’s also been our largest position for several years now. There are many ways to characterize and value this business (see previous letters for longform write-ups), but perhaps the best way to think about the company is that it is a highly vertically-integrated software and hardware firm that’s devoted entirely to aggregating marginal gains across its organization. The goal? Lower costs, improve thruputs, and dramatically enhance the value proposition—at scale—for consumers…”
4. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 63
Recently, Goldman Sachs called Advanced Micro Devices, Inc. its best stock pick in the semiconductor space. The firm lifted its price target on the company to $127, with a Buy rating on the shares.
Of the 873 hedge funds tracked by Insider Monkey, 63 hedge funds reported having stakes in Advanced Micro Devices, Inc. in Q2, compared with 62 in the previous quarter. The total value of these stakes is over $4.6 billion.
3. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 138
Warren Buffett’s Berkshire Hathaway was the largest shareholder of Apple Inc. in Q2, owning shares worth $121.5 billion. Overall, the company presented a positive hedge fund sentiment in Q2, with 138 hedge funds tracked by Insider Monkey having stakes in the company, up from 127 in the previous quarter. The total value of these stakes is over $145.5 billion.
ClearBridge Investments mentioned Apple Inc. in its first-quarter 2021 investor letter. Here is what the firm has to say:
“As we actively manage holdings and position sizes, we look to regularly recycle capital into more compelling opportunities. Maintaining our valuation discipline, we sharply reduced our position in Apple, whose shares more than doubled following our initial purchase in mid-2019 with an earnings multiple rising from the low-to-mid teens to nearly 30x.”
2. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Funds: 146
This September, Benchmark lifted its price target on Alibaba Group Holding Limited to $277, with a Buy rating on the shares.
The number of hedge funds tracked by Insider Monkey having stakes in Alibaba Group Holding Limited increased to 146 in Q2, from 135 in the previous quarter. The total value of these stakes is over $16.7 billion.
Polen Capital Management mentioned Alibaba Group Holding Limited in its Q2 2021 investor letter. Here is what the firm has to say:
“Alibaba also detracted from performance as the company continues to remain under regulatory scrutiny from both the Chinese State Administration for Market Regulation on antitrust concerns and the U.S. Securities and Exchange Commission on ADR listing requirements. Despite the regulatory overhang, we believe that Alibaba’s competitive positioning and growth outlook remains intact, even if the company must pay fines or modify some business practices. We viewed the current valuation at <20x next twelve month’s earnings as a compelling opportunity to add to our position. Alibaba is the second largest position in the Portfolio.”
1. Facebook, Inc. (NASDAQ:FB)
Number of Hedge Fund Holders: 266
In Q2, 266 hedge funds tracked by Insider Monkey were bullish on Facebook, Inc., compared with 257 in the previous quarter. The total value of these stakes is $42.3 billion.
First Eagle Investment Management mentioned Facebook, Inc. in its second-quarter investor letter. Here is what the firm has to say:
“Leading contributors in the First Eagle Global Fund this quarter included Facebook, Inc. Class A. Facebook has continued to post impressive results for both revenue and active users of its traditional platforms. In the meantime, the social media giant continues to make progress on new initiatives—like Facebook Horizon (virtual reality) and Facebook Shops (e-commerce)—and maintains attractive monetization optionality around services like Messenger and WhatsApp.”
You can also take a look at 10 Best Dividend ETFs to Buy According to Reddit and 10 Best SPACs to Invest In According to Reddit
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This article is originally published at Insider Monkey.
