Investors on Reddit’s WallStreetBets (WSB) forum usually focus on stocks with high short interest with the expectation of benefiting from a short squeeze. While retail traders’ bets against short sellers could potentially help the prices of such stocks to rally, they possess high investment risks. As such, popular Reddit stocks GameStop (GME), SoFi Technologies (SOFI), Virgin Galactic (SPCE), and Tattooed Chef (TTCF) could witness a downtrend in the near term. So, we think they are best avoided now. Read on.With more than 10 million users, subreddit r/wallstreetbets (WSB) has propelled several fundamentally weak stocks to impressive price gains this year. The WSB community has successfully squeezed short sellers out of their positions and gained significantly from this earlier this year. However, the fundamental weaknesses in most of the Reddit plays have caused their rallies to be short-lived, and the stocks have declined quickly after hitting their price highs.
Though the market has been witnessing a relentless rally despite the resurgence of COVID-19 cases, experts believe the stock market is currently raising red flags similar to the dotcom bubble, which saw stocks soar in price despite their poor fundamentals. Consequently, we think investors should remain cautious and shift their strategies to survive a potential pullback in the near term.
Therefore, we think fundamentally weak stocks GameStop Corp . (NYSE:GME), SoFi Technologies Inc. (SOFI), Virgin Galactic Holdings Inc. (NYSE:SPCE), and Tattooed Chef Inc. (TTCF), which are favorites of investors on the Reddit forum, are best avoided now.