Characterized by popularity, momentum, and high short interest, meme stocks have attracted much investor attention since the beginning of the year. However, since most meme stocks possess weak fundamentals, it could be risky to bet on them based solely on their price performance. As such, we believe investors are better off avoiding meme stocks Beyond Meat (NASDAQ:BYND), Virgin Galactic (SPCE), and Clover Health (CLOV). These stocks are rated ‘Strong Sell’ in our proprietary rating system. Read on. Following the massive short squeezes experienced by GameStop Corporation (NYSE:GME) and AMC Entertainment Holdings (NYSE:AMC) earlier this year, meme stocks gained immense popularity. While discussion on social media led to many other fundamentally weak stocks witnessing skyrocketing price rallies, meme trading has attracted criticism from several analysts. In addition, allegations of a fraudulent trading scheme made by the U.S. Securities and Exchange Commission (SEC) has created some wariness and confusion related to investing in meme stocks.
The meme investing trend is still causing hedge funds’ conniptions. Hedge funds have lost billions of dollars in a battle for market supremacy with retail investors this year. Given that most meme stocks are overpriced, and it’s almost impossible to identify when to buy or sell them, we think investors should be judicious when picking a meme stock.
We believe meme stocks Beyond Meat, Inc. (BYND), Virgin Galactic Holdings, Inc. (NYSE:SPCE), and Clover Health Investments, Corp. (CLOV), which possess weak fundamentals and growth prospects, are best avoided now. These stocks have been rated ‘Strong Sell’ by our proprietary rating system.