The meme stock rally was fun while it lasted. But it's now a memory handing out an expensive lesson as it increasingly falls apart versus the S&P 500.
A more than monthlong slide in meme stocks erased all aggregate gains by pounding online Reddit traders' favorites, like AMC Entertainment(AMC),GameStop(GME),Peloton Interactive(PTON) and the direct player Robinhood Markets(HOOD). Those are among the hardest hit, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. The analysis looks at the 25 most-popular stocks with meme traders plus those most highly shorted compiled by Solactive for the new Solactive Roundhill Meme Stock ETF.
Game Over For Meme Stocks
But now the selling has completely wiped out the aggregate gains from the entire phenomenon this year. And it continued on Monday. Former meme darling GameStop (GME), which kicked off the Reddit trading rage,dropped more than 13% Monday on concerns of the company's future.
These 25 stocks, on average, are down 27% in just a month. And that adds up to a painful $80 billion loss on them in just four weeks. In comparison,the S&P 500 has been under pressure, too, but it's up in a month. It's the first time many of the speculators playing these risky stocks,many with no fundamentals, have seen losses.
"We have many investors who don't have real depth and experience in the markets right now and, using the analogy of going to a casino, the worst thing that can happen is that the first time you go, you win big," said Eben Burr, president of $2.2 billion in assets advisory Toews. "Then you keep going back and may get reckless — you're not as skilled as you believe and the house eventually wins. Meme stocks have to be seen as a very speculative move."
Assessing Brutal Meme Stock Damage
Meme stock pain is reaching levels their fans haven't seen before.
A custom market-cap weighted index of the 25 stocks topped out on Jan. 27. And since then it has collapsed more than 22%. Much of that pain has happened in just the last four weeks, with the index dropping roughly 20% in that time.
Some of the individual stocks have done much more poorly.Robinhood is among the worst of them all,plunging 44% in just a month. That loss alone cost investors more than $13 billion in just a month.
GameStop, too, is gobbling up speculators' quarters fast.The original meme stoc kis down 32% in a month, sucking more than $4.8 billion out of investors' portfolios. And it lost more than half its value from the meme stock high.
What's Next For Meme Stocks Vs. The S&P 500?
Fans of meme stocks might point out they're still up for the year. That's true. But they're lagging the S&P 500 now.
Take theater chain AMC Entertainment. It's still up huge for the year and it's even up 16% from the meme peak. But in just one month shares are down more than 40% to 23.17. That's much worse than the S&P 500's 0.2% rise in that time.
And that's the point. Meme stocks are now lagging the market, even if you include gains from the start of the year. The index of the 25 meme stocks is now flat for the year. Had you just bought the S&P 500, you'd be up much more than that — 25%. And that doesn't even include the S&P 500's 1.4% dividend yield. Investors generally do much better by following sound investing rules.
Now that's a tough lesson to take.
Meme Stocks Are Crashing
All but one of the 25 top meme stocks dropped in the past month
| Company | Symbol | 1-mo. % ch. | Market value change one month ($ millions) |
|---|---|---|---|
| Marathon Digital | (MARA) | -51.2% | -$3,977.8 |
| Riot Blockchain | (RIOT) | -44.9% | -$1,400.1 |
| Robinhood Markets | (HOOD) | -44.2% | -$13,376.8 |
| Upstart Holdings | (UPST) | -42.7% | -$9,252.6 |
| AMC Entertainment | (AMC) | -42.1% | -$8,649.3 |
| Clover Health Investments | (CLOV) | -40.7% | -$1,004.3 |
| Sundial Growers | (SNDL) | -37.8% | -$714.9 |
| ContextLogic | (WISH) | -36.7% | -$1,275.6 |
| SoFi Technologies | (SOFI) | -35.8% | -$6,548.0 |
| Tilray | (TLRY) | -35.6% | -$2,039.9 |
| Cassava Sciences | (SAVA) | -34.8% | -$957.5 |
| GameStop | (GME) | -32.1% | -$4,860.4 |
| fuboTV | (FUBO) | -30.0% | -$1,062.8 |
| DraftKings | (DKNG) | -28.4% | -$4,680.3 |
| Best Buy | (BBY) | -25.8% | -$9,152.5 |
| Beyond Meat | (BYND) | -25.3% | -$1,363.2 |
| Virgin Galactic | (SPCE) | -22.7% | -$1,126.2 |
| Penn National Gaming | (PENN) | -17.9% | -$1,766.1 |
| Rush Street Interactive | (RSI) | -17.0% | -$199.1 |
| Peloton Interactive | (PTON) | -16.7% | -$1,370.1 |
| Lucid Group | (LCID) | -10.4% | -$6,302.4 |
| Cleveland-Cliffs | (CLF) | -9.5% | -$1,055.2 |
| Digital World Acquisition | (DWAC) | -7.2% | -$171.7 |
| ZIM Integrated Shipping | (ZIM) | -0.2% | -$9.5 |
| Roblox | (RBLX) | 3.7% | $2,303.8 |
| SPDR S&P 500 ETF Trust | (SPY) | 0.2% |
Sources: IBD, S&P Global Market Intelligence