Social media has been exerting an ever-greater influence on the movement of markets over the past few months. The mainstream finance world, after suffering billions in losses as a result of this new phenomenon at the turn of the year, is now closely monitoring forums like the WallStreetBets subgroup, which has a user base of almost 11 million, on internet platform Reddit to predict future market direction. The explosion in popularity for this group is evident as it only had around 1.6 million members in December 2020.
Some of the stocks that are presently popular on WallStreetBets include Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOG), Facebook, Inc. (NASDAQ: FB), Tesla, Inc. (NASDAQ: TSLA), and Apple Inc. (NASDAQ: AAPL), among others. Investors who are monitoring this group for insights should understand that not all stocks hyped up on WallStreetBets are rising. In fact, many stocks that retail investors piled onto over the past few days in anticipation of an earnings boost have tumbled.
According to Fortune magazine, part of this is explained by the decline in retail investor interest in equities that had peaked during the coronavirus lockdowns - investment bank Morgan Stanley claims that retail investors were responsible for close to 15% of total volume on the market in September last year. Fortune reports that Google searches related to trading have gone down dramatically in the past few weeks. The weak business fundamentals of the firms favored by retail investors - often referred to as meme stocks - have also played their part in this decline.
It is important to track stocks that are popular on WallStreetBets but still registering losses because a careful look at these firms can give investors valuable insight into the disruptive forces of the market. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, 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 124 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 SPY. Our stock picks outperformed the market by more than 115 percentage points. 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's WallStreetBets Stocks That are Tumbling
Number of Hedge Fund Holders: 64
Percentage Losses Over Last Five Days: 3.18%
Palo Alto Networks, Inc. (NYSE: PANW) is placed tenth on our list of 10 Reddit's WallStreetBets stocks that are tumbling. The company markets cybersecurity solutions and is based in California. The company stands to benefit from a recent plan of the US government that envisions mandatory cybersecurity requirements for critical infrastructure firms. The administration of US President Joe Biden has already asked federal agencies to come up with cybersecurity goals in this regard.
On July 26, investment advisory Loop Capital downgraded Palo Alto Networks, Inc. (NYSE: PANW) stock to Hold from Buy and revised the price target down to $410 from $465, noting that collective growth rates in the security software space may have peaked.
Out of the hedge funds being tracked by Insider Monkey, Connecticut-based firm Viking Global is a leading shareholder in Palo Alto Networks, Inc. (NYSE: PANW) with 2.5 million shares worth more than $807 million.
9. Corsair Gaming, Inc. (NASDAQ: CRSR)
Number of Hedge Fund Holders: 9
Percentage Losses Over Last Five Days: 3.80%
Corsair Gaming, Inc. (NASDAQ: CRSR) is ranked ninth on our list of 10 Reddit's WallStreetBets stocks that are tumbling. The firm makes and sells gaming peripherals and is headquartered in California. In earnings results for the second quarter, posted on August 3, the company reported earnings per share of $$0.36, missing market estimates by $0.03. The revenue over the period was close to $473 million, up 24% compared to the revenue over the same period last year but missing expectations by $2.2 million.
On August 4, investment advisory Credit Suisse downgraded Corsair Gaming, Inc. (NASDAQ: CRSR) stock to Neutral from Outperform and lowered the price target to $31 from $43, noting that there had been a faster-than-expected normalization in demand and profit for the firm.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Corsair Gaming, Inc. (NASDAQ: CRSR) with 414,300 shares worth more than $13.7 million.
8. Plug Power Inc. (NASDAQ: PLUG)
Number of Hedge Fund Holders: 25
Percentage Losses Over Last Five Days: 5.06%
Plug Power Inc. (NASDAQ: PLUG) is a New York-based firm that markets hydrogen fuel cell technology. It is placed eighth on our list of 10 Reddit's WallStreetBets stocks that are tumbling. The firm posted earnings results for the second quarter on August 5, reporting earnings per share of -$0.18, missing market predictions by $0.11. The revenue over the period was $124 million, up 83% compared to the revenue over the same period last year and beating market estimates by $13 million.
On August 6, investment advisory B Riley maintained a Buy rating on Plug Power Inc. (NASDAQ: PLUG) stock but lowered the price target to $45 from $51, noting that the margins for the firm remained under pressure despite billings guidance boost.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in Plug Power Inc. (NASDAQ: PLUG) with 12 million shares worth more than $433 million.
In its Q2 2020 investor letter, Massif Capital, an asset management firm, highlighted a few stocks and Plug Power Inc. (NASDAQ: PLUG) was one of them. Here is what the fund said:
"We also closed our short position in Plug Power this quarter as the market was subsumed with enthusiasm over their recent acquisitions, resulting in an almost 80% rally in the stock over ten trading days. Our decision to exit was painful at the time as we were forced to reconcile with a collective exuberance that was (and is, in our opinion) not grounded reality. In hindsight, it was the correct decision as we avoided most of its recent vertical trajectory.”
7. IAC/InterActiveCorp (NASDAQ: IAC)
Number of Hedge Fund Holders: 63
Percentage Losses Over Last Five Days: 5.26%
IAC/InterActiveCorp (NASDAQ: IAC) is a media and internet company headquartered in New York. It is ranked seventh on our list of 10 Reddit's WallStreetBets stocks that are tumbling. The firm reported earnings for the second quarter on August 4, posting earnings per share of $2.02 and a revenue of $820 million, up 14% year-on-year. Last month, Joey Levin, the CEO of the company, had told news platform CNBC that the firm was increasing investments in blockchain technology through an incubator program.
On August 6, investment advisory Piper Sandler maintained an Overweight rating on IAC/InterActiveCorp (NASDAQ: IAC) stock but lowered the price target to $158 from $180, underlining that the second quarter results of the firm looked solid.
At the end of the first quarter of 2021, 63 hedge funds in the database of Insider Monkey held stakes worth $2.1 billion in IAC/InterActiveCorp (NASDAQ: IAC), down from 67 the preceding quarter worth $2.2 billion.
In its Q4 2020 investor letter, Alphyn Capital Management, an investment management firm, highlighted a few stocks and IAC/InterActiveCorp (NASDAQ: IAC) was one of them. Here is what the fund said:
“On November 22nd, IAC announced it would look into spinning out Vimeo, its Software-As-A-Service video creation company, on the back of strong revenue growth and robust investor interest. To quote from the IAC shareholder letter “We just tested Vimeo’s ability to access capital with a small private fundraise to bolster Vimeo’s balance sheet and to repay capital to IAC. We entered into agreements today to raise $150 million of equity capital at Vimeo from outside investors at an implied enterprise value of $2.75 billion, a large multiple of current revenue. We don’t normally think in terms of revenue multiples, but we found real appetite among investors who do – we had more interest in Vimeo than the number of shares we were willing to let Vimeo sell.” In other words, IAC will exploit current valuations while the market is willing to pay for it. This has so far been a good example of our defensive approach towards investing software companies from the cover of an undervalued holding company run by intelligent capital allocators.”
6. Exact Sciences Corporation (NASDAQ: EXAS)
Number of Hedge Fund Holders: 41
Percentage Losses Over Last Five Days: 5.42%
Exact Sciences Corporation (NASDAQ: EXAS) is placed sixth on our list of 10 Reddit's WallStreetBets stocks that are tumbling. The company makes and sells cancer screening and diagnostic products. It operates from Wisconsin. On July 28, the firm posted earnings for the second quarter, reporting earnings per share of -$1.03, missing market estimates by $0.27. The revenue over the period was $434 million, up 61% compared to the revenue over the same period last year and beating estimates by $14 million.
On July 29, investment advisory Baird kept an Outperform rating on Exact Sciences Corporation (NASDAQ: EXAS) stock but lowered the price target to $127 from $157, noting that the mixed second quarter results for the firm had been overshadowed by negative billing adjustment.
At the end of the first quarter of 2021, 41 hedge funds in the database of Insider Monkey held stakes worth $2.4 billion in Exact Sciences Corporation (NASDAQ: EXAS), up from 40 in the previous quarter worth $1.8 billion.
In its Q4 2020 investor letter, RiverPark Advisors, LLC, an asset management firm, highlighted a few stocks and Exact Sciences Corporation (NASDAQ: EXAS) was one of them. Here is what the fund said:
“EXAS shares were the final top contributor for the quarter on both the acquisition of Thrive Earlier Detection, a leading multi-cancer screening company, and strong earnings. Third quarter revenue grew 87% to $408 million, including $102 million from COVID19 testing, and the company reported a 77% gross margin and $94 million of adjusted EBITDA, up 16% year over year.
The company’s Thrive acquisition combines cancer screening pioneers, specifically integrating Thrive’s early-stage cancer screening test CancerSEEK, with Exact’s scientific platform, clinical organization, and commercial infrastructure (the largest commercial team by far with over 1,000 people in cancer diagnostics). Thrive’s recent CancerSEEK study is the only liquid biopsy clinical trial that screens undiagnosed patients. Combined with Exact’s own multi-cancer liquid biopsy screening test (management disclosed compelling data on it for the first-time), Exact has quickly pivoted from its single cancer screening tests (Cologuard for colon cancer and Oncotype for breast cancer) and is now positioned as a leader in the $25 billion+ multi-cancer screening market.”
5. Meta Materials Inc. (NASDAQ: MMAT)
Number of Hedge Fund Holders: N/A
Percentage Losses Over Last Five Days: 5.71%
Meta Materials Inc. (NASDAQ: MMAT) is ranked fifth on our list of 10 Reddit’s WallStreetBets stocks that are tumbling. The firm is based in Canada and markets functional materials and nanocomposites. The share price of the firm has been given a short-term boost after weeks of losses on the back of the firm announcing that it had purchased a firm called Nanotech Security in a deal worth close to C$91 million. The closure of the transaction in this regard is expected in October, according to reports.
Meta Materials Inc. (NASDAQ: MMAT) is one of the most popular meme stocks on Reddit but despite the mentions on the internet forum, the stock was one of the biggest losers in July, losing close to a third in value over the month. These losses have extended into August.
On July 12, the share price of Meta Materials Inc. (NASDAQ: MMAT) plunged 6% in a single day to a two-month low. This followed an more than 30% decrease in value of the shares over the previous weeks after the firm upsized a stock offering to $250 million from $100 million.
4. GameStop Corp. (NYSE: GME)
Number of Hedge Fund Holders: 13
Percentage Losses Over Last Five Days: 5.80%
GameStop Corp. (NYSE: GME) is a Texas-based retailer of gaming and entertainment products. It is placed fourth on our list of 10 Reddit’s WallStreetBets stocks that are tumbling. The firm has a market cap of over $11 billion. The short interest on the stock is more than 13%. The stock has been hit in recent weeks amid media reports that streaming giant Netflix is planning a blockbuster entry into the world of video gaming. Investment advisory Citi has already termed the development a threat to existing video game firms.
On June 10, investment advisory Wedbush maintained an Underperform rating on GameStop Corp. (NYSE: GME) stock but raised the price target to $50 from $39, noting that the share price of the firm was completely disconnected from basic business fundamentals.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in GameStop Corp. (NYSE: GME) with 3.2 million shares worth more than $620 million.
In its Q1 2021 investor letter, Rhizome Partners, an asset management firm, highlighted a few stocks and GameStop Corp. (NYSE: GME) was one of them. Here is what the fund said:
“The first quarter saw some bizarre market reactions. Game Stop is a heavily shorted legacy video game retailer that saw its stock price rise from $17 to a peak of $483 within a month. It appears that retail investors on a Reddit.com forum called WallStreetBets used memes to create a viral feedback loop of forced buying. Game Stop reached $20 billion in market cap and had more daily trading volume than Apple at one point. The Game Stop short squeeze became a black swan event for the short sellers. Large hedge funds such as Melvin Capital suffered 50% losses during a short period and required emergency capital injections that resulted in costly dilution. Shorting is difficult and introduces a risk of ruin. This is especially true in situations where a large percentage of the float is shorted. We want to remind you that we hedge our portfolio via index puts, sector puts, and sometimes buying puts directly in our own portfolio companies. However, we rarely short because 1) we are not good at it 2) the potential for brain damage is too high and 3) we want to avoid the risk of ruin.”
3. Roku, Inc. (NASDAQ: ROKU)
Number of Hedge Fund Holders: 63
Percentage Losses Over Last Five Days: 8.60%
Roku, Inc. (NASDAQ: ROKU) is a company that owns and runs a TV streaming platform. It is headquartered in California and is ranked third on our list of 10 Reddit’s WallStreetBets stocks that are tumbling. In earnings results for the second quarter, posted on August 4, the company reported earnings per share of $0.52, beating market predictions by $0.45. The revenue over the period was $645 million, up 81% year-on-year and beating estimates by $26 million. The share price of the firm still tumbled 9% after the results as user growth still lagged.
On August 5, investment advisory Morgan Stanley kept an Underweight rating on Roku, Inc. (NASDAQ: ROKU) stock and lowered the price target to $310 from $325, noting that the growth for the stock may peak soon.
At the end of the first quarter of 2021, 63 hedge funds in the database of Insider Monkey held stakes worth $3.7 billion in Roku, Inc. (NASDAQ: ROKU), up from 60 in the preceding quarter worth $3.2 billion.
In its Q4 2020 investor letter, RGA Investment Advisors, an asset management firm, highlighted a few stocks and Roku, Inc. (NASDAQ: ROKU) was one of them. Here is what the fund said:
“For two years running, Roku has now been either the largest or second largest driver of performance in portfolios. When we purchased Roku, obviously we never expected such a phenomenal outcome, so quickly—these things can only be chalked up to luck. However, we do think luck is the residue of design and Roku had all the hallmarks ex ante as the kind of position that could do something wildly spectacular. One of the first signs in seeing Roku’s potential was the sharp contrast between our modeled expectations for the top line of the business and where the consensus expectations were. This was the Shopify setup all over again. By this time, we had added an additional tool to our analytical framework, and this helped further enforce our conviction that not only was it we who were right about where things should go, but also that the very existence of this gap could be a potent source of fuel behind the stock as the world came around to our expectation. Specifically, we had become increasingly comfortable building lifetime value analyses of companies, and notably, when we bought Roku, we were quite confident that with only modest annual increases in average revenue per user (ARPU), and a 5-year average customer lifespan, we were buying the company for its existing customer base and nothing more. In other words, the growth at Roku was entirely free at the prevailing prices we bought into.”
2. AMC Entertainment Holdings, Inc. (NYSE: AMC)
Number of Hedge Fund Holders: 19
Percentage Losses Over Last Five Days: 11.67%
AMC Entertainment Holdings, Inc. (NYSE: AMC) is placed second on our list of 10 Reddit’s WallStreetBets stocks that are tumbling. The firm is based in Kansas and operates as a movie theatre chain. The stock is one of the most volatile ones on the market and has seen share price decrease in value despite mentions on Reddit and other social platforms over the past few weeks. The short interest on the stock is close to 16%. The company has a market cap of over $16 billion and posted $1.2 billion in revenue last year.
On June 4, investment advisory Wedbush reiterated a Neutral rating on AMC Entertainment Holdings, Inc. (NYSE: AMC) stock but raised the price target to $7.5 from $6.5, highlighting that the volatility in the share price of the firm was likely to continue.
At the end of the first quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth $34 million in AMC Entertainment Holdings, Inc. (NYSE: AMC), up from 16 in the preceding quarter worth $24 million.
In its Q4 2020 investor letter, Mittleman Investment Management LLC, an asset management firm, highlighted a few stocks and AMC Entertainment Holdings, Inc. (NYSE: AMC) was one of them. Here is what the fund said:
“AMC Entertainment (AMC) was our only material loser in Q4, dropping from $4.71 to $2.12 (-55%). I planned on discussing here why it was worth at least the $10 per share that my recently reduced estimate of fair value claimed, but since then AMC raised more cash against their UK holdings and then the stock took off due to speculative players from reddit.com getting involved, so we sold it all around $14 during the last week of Jan. 2021. This was a modest profit for most clients, but a loss for some others, depending on when the account began, so check your statements to see where you came out. And yes, I recognize it as being a dose of good luck, which I heartily accept from the universe as it seemed somewhat lacking in the portfolio of late. After the sale of AMC in late January 2021, our exposure to the movie theater business is now exclusively in Canada via Cineplex, which has a 75% market share and much less leverage on its balance sheet.”
1. Fastly, Inc. (NYSE: FSLY)
Number of Hedge Fund Holders: 26
Percentage Losses Over Last Five Days: 14.21%
Fastly, Inc. (NYSE: FSLY) is ranked first on our list of 10 Reddit’s WallStreetBets stocks that are tumbling. The company owns and runs a cloud platform and is based in California. In earnings results for the second quarter, posted on August 4, the firm reported earnings per share of -$0.15, beating market predictions by $0.03. The revenue over the period was $85 million, up close to 14% year-on-year but missing estimates by close to $1 million. The company has a market cap of over $4.7 billion and posted $298 million in revenue last year.
Recently, investment advisory Citi maintained a Sell rating on Fastly, Inc. (NYSE: FSLY) stock and lowered the price target to $33 from $46, noting that the second quarter results had worsened an already challenging year for the company.
At the end of the first quarter of 2021, 26 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in Fastly, Inc. (NYSE: FSLY), down from 32 in the preceding quarter worth $1.5 billion.
