Wall Street
Wall street, Wall street
Wall street bets...
...what is going on here?
It was the phenomenon that shocked the marketplace
A new generation of investors...
...are creating chaos on Wall Street
An online community of retail investors...
...outfoxing the market
We're really in unprecedented times
They got “memed” out of existence
causing the stock price of ailing companies to sky rocket
What you're seeing
What you're seeing is a cultural movement...
...not an investing movement
Moves like this are incredibly rare
This headline grabbing story...
...has been told over and over and over again
But until now, nobody has drilled down...
...into the underbelly of Wall Street Bets data
Our team at Capital.com...
...has built the most comprehensive picture yet...
...of the relationships between mentions of stocks...
...on the subreddit...
...and their price on the market
But is Wall Street bets a force that will continue...
...to influence financial markets?
Or a flash in the pan?
This is just the beginning
WallStreetBets inhabits the meme driven vortex...
...that is Reddit
It’s a channel of what’s known as a subreddit...
...It currently has 11.3 million subscribers
And in January 2021 alone...
...it amassed over 2.8 million comments
Although it's been around for almost a decade...
...it was only in January 2021...
...that the subreddit really exploded onto the scene
Most investment groups are looking for fundamentals...
...or long term plays that they can buy...
...and hold in the market
The whole point of WallStreetBets...
...is not to buy and hold the stock forever
Michael Hout is a former moderator on WallStreetBets...
...the financial advisor by trade
He became one of the subreddits...
...most prolific meme creators
You don't see Amazon spike up and down 30% in a day...
...because it's a solid company with decent fundamentals
Whereas BlackBerry or GameStop or AMC stocks...
I would say those are the ones we're looking for...
...because those are the ones that give us that vol...
... that volatility, that volume
WallStreetBets prides itself...
...on taking on the financial establishment
Backing failing stocks that it believes are being unfairly...
...targeted by hedge funds and other big institutions
on WallStreetBets quite often...
...you'll find that some small group in the subreddit...
...or even a large group will get behind a stock...
...and usually nine times out of ten it'll be a flash in the pan...
...where it will rise and fall within a month
And that's what happened in early 2021
The subreddits faithful...
...got behind a fading high street gaming company
GameStop
Stock is skyrocketing
What's known in the markets as a short squeeze, was on
It wasn't as if it all happened in one day...
...but as it slowly started to accumulate attention...
...we obviously knew we had something on our hands...
...by the end of January
GameStop was valued at just $20 a share...
..but some hedge funds have been shorting...
...have been shorting the stock at $4...
...expecting the price to crash even lower
I don't understand how anyone be short Gamespot at $4
That is really, really risky...
...really risky
The posters reckon that well...
...if we can start moving the stock higher...
...it's going to force these institutions who are short...
...to buy back and close out that position...
...and by buying back, they push the stock up...
...and of course if the investors have brought in early enough...
...they'd make money on the way up
The price of GameStop shares...
...which have been static for so long...
...increased tenfold within seven days
It was probably the biggest short squeeze in history...
...if not very close to it
Then actually over the next week...
...the stock was back at $50
The American cinema chain AMC, became the next target
It's stock price had been struggling for years...
...until Wall Street WallStreetBets users...
...bought it off in droves...
...sending its price soaring
Some in the early days of that stock increase...
...certainly made money
Others who jumped on, when the prices were sky high...
...would have lost an awful lot of money
And that is the real risk, but it certainly did...
...take the stock markets by surprise
But Wall Street bets is far from a two horse race...
...between GameStop and AMC
Here at Capital.com, we studied data on all Nasdaq...
...New York Stock exchange and Amex listed stocks...
...mentioned on the subreddit throughout 2021
That's 4,855 stocks in total
176 of those...
...have made it into the top ten most mentioned stocks...
...at least once during the year
So what truly is the relationship...
...between hype and stock price...
...on the now fabled subreddit?
Let's start with GameStop, AMC and BlackBerry
The three most mentioned meme stocks...
...and Wall Street bets back in early 2021...
...when all eyes were on this guy
We're going to walk down to the Capital
But as if from nowhere...
...Gamestop started stealing the headlines
Look at this, see that spike
Wen it comes to investing, timing...
...like many things in life is everything
Get set
And GameStop is the sprinter in this pack...
...If your timing isn't spot on...
...it's going to drastically affect your return
When we examine the price movement of the stock...
...between the week following the January hype...
...and December 2021...
...we found that it had increased by almost 300%
But returns for investments...
...made long after the January hype are much lower
AMC took a different trajectory...
...it was the long distance runner of three
In contrast to GameStop...
...the cinema chain's stock had a more sustained run
The data showed impressive returns...
...for investments made three months...
...after the initial January hype on the subreddit
200 300% returns look incredible...
...but first of all, there's the benefit of hindsight
There's getting into that stock...
...on that day...
...before the hype or the day the hype exploded...
...and then holding it through all of the volatility
If you were a few days late...
...to the GameStop trade, for example...
...you could have been buying that well above $400
Ultimately, almost every single one of our picks are losers...
...and I think GameStop and AMC...
...will eventually prove that
BlackBerry is the third most mentioned stock on the subreddit
For the past five years...
...its stock price has been on a downward trend...
...climbing rapidly in early 2021 before falling again
The data show that investments in the veteran tech stock...
...made three months after the January hype...
...would have provided a minuscule gain
Otherwise Investors who had followed Wall Street bets...
...and rallied behind BlackBerry, were set for big losses
Now, let's look at the top five most mentioned stocks...
...Palantir and Tesla make this list
Humanity must become a multi-planetary...
...space bearing civilisation
Those seem like exciting goals, don't they?
Since the pandemic, Tesla's stock price has soared
Palantir, which went public in late 2020...
...has followed a rockier route
If investors had held onto investments...
...in the top five stocks for six months...
...they would have made big returns
But it's also worth noting...
...that during that six month period...
...there would have been dips...
...that resulted in short term losses
That performance is being flattered...
...by a very strong performance by Tesla and AMC
The other three stocks...
...if you bought them and sat on them for six months...
...you're probably going to be underwater...
...or break even a best
So happens if we peel back the curtain of the media hype...
...around January and February of 2021
Looking at all the stocks...
...that made it into the top-ten...
...most mentioned list on Wall Street bets...
The returns are much lower...
...and similar to the S&P 500...
...an index of the top 500 companies in the US
It's the old discussion about risk versus reward
These meme stocks have been much higher risk...
...and are higher risk...
...obviously than buying something that's a basket of stocks
In order to get a broader picture of average returns...
...we analysed every new stock that made it...
...into the top ten most mentioned list on the subreddit...
...of a weekly, monthly and quarterly returns
Following the January hype...
...returns are mostly negative after seven days
Monthly returns for newcomers are also poor on average
Those peaks in January and may reflect...
...how a couple of successful stocks...
...offset monthly average returns
Finally, looking at returns on a quarterly basis...
...the results are mixed
Those who invested after the hype periods on the subreddit...
...in January and May incurred big losses
This is in line with the high risk, high return...
...and get rich quick ethos of Wall Street bets
The ethos of Wall Street Bets has always been right in line...
...with what it took to get rich in our country
Which is it takes a risk...
...a lot of people are going to lose their money...
...a lot of people are going to lose their shirts, so to speak
But the people that make it big...
...the people that make it rich...
...those are the ones that we point to...
...because they provide an example...
...of somebody that escaped...
...and somebody that made it good
Despite a continued increase in the number of users...
...WallStreetBets has observed...
...a decline in the number of comments...
...since those heady days in January and February
But that doesn't mean that these users are no longer active
I think ultimately you could see...
...you know a bunch of different groups pop up...
...each of them promoting their own stocks...
...each of them belonging to their own segment of the market
And you could see more stocks...
...that maybe are unwilling participants in a pump and dump...
...like GME or AMC or BB or NOK...
...get scooped up by these retail traders...
...who see opportunity...
...where maybe institutional investors don't
There's a wider trend going on behind the scenes too
The percentage of retail investors...
...as share of overall US trading volumes...
...has been rising steadily for the past decade...
...but it's increased dramatically...
...since the start of the pandemic
The global health crisis...
...has accelerated the rise of generation investor...
...in mostly younger but mixed cohort...
...who joined the world of investing in 2020
In the US, one study found that 22% of new retail investors...
...were under 30...
...compared with just 6% prior to the pandemic
It's really great to see so many more people...
...talking about investing and talking about...
...really contributing to the stock market...
...and contributing to companies growth
The problem comes when speculation is swirling...
...around certain meme stocks in particular...
...and you're going past the kind of...
...fundamentals of that stock...
...and being urged to pile in...
...just to grab on to the coattails of a share...
...which appears to be going sky high
There's been a crucial factor that has led to the rise...
...of the retail investor...
...trading apps
During the GameStop short squeeze...
...downloads of major trading apps increased dramatically
We talk a lot about equity in the West...
...and like a newfound sense of equity...
...when we speak about it in many different respects...
...the democratisation of the market...
...isn't just going to be found in how many new people...
...are going to be opening up accounts on Robinhood
It's found in the fact that...
...people now have access to a wealth generating machine...
...that is the stock market...
...that is the equities markets
The prospect of getting rich on meme stocks...
...remains a highly elusive goal...
...for the vast majority of retail investors
Understanding a company's fundamentals...
...and using a reliable trading app...
can help you to manage the risks involved in trading
Perhaps the whole meme stock thing...
...has been and gone
That doesn't mean we're not going to see...
...retail private investors...
...having an impact in the future
But it probably won't be short squeezing unloved stocks...
...it will be something different
WallStreetBets is not going to be...
...the end all and be all of retail trading
So, it's sort of all scattered up in the air...
...It's 52 card pickup...
...and whoever is able to scoop up and kind of capture...
...that lightning in a bottle again...
...are going to the ones to win this industry
They're going to be the ones...
...to win the business of the retail trader
The golden age of the retail investor...
...may be yet to come
The emergence of blockchain based finance...
...such as cryptocurrencies, NFTs...
...and decentralised finance...
...or largely driven by retail investors...
...suggests that this new cohort of traders...
...who play a key role in shaping...
...the financial markets of the future
You can read all of our original analysis...
...and research and data led journalism on WallStreetBets...
...by clicking on the link in the description below
There's also our explainer video...
...on the inflation hedge battle between bitcoin and gold...
...that you might find interesting...
...to watch that click on a film in the box
And of course, don't forget to subscribe...
...to stay notified of films...
...that we are going to produce on similar topics in the future