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