Since the beginning of the year, investors have observed many short squeezes driven by the Reddit forum WallStreetBets. Given that meme stock rallies don’t always last a long time, and there are rising uncertainties due to the new coronavirus strain, we believe investors should avoid Lucid Group (LCID) and Upstart Holdings (NASDAQ:UPST). These stocks look highly overvalued and are susceptible to a pullback soon.Subreddit r/wallstreetbets (WSB) has transformed the world of investing and dramatically reshaped the financial markets. WSB has driven skyrocketing rallies in some fundamentally poor stocks this year and successfully squeezed short-sellers out of their holdings. However, the fundamental weaknesses of many such stocks have caused the rally to end for some.
Furthermore, the rising uncertainties related to the emergence of the newly found coronavirus strain could wash out stock market gains in the weeks ahead. Given mounting concerns about the new variant's implications on economic activity and inflationary pressure, investors should be cautiously positioning themselves to endure a potential pullback in the near term.
So, we believe speculative overvalued stocks such Lucid Group Inc. (LCID) and Upstart Holdings Inc . (UPST), which are current favorites of Reddit investors, are best avoided now.