Can You Spot the Next GameStops?
WHY YOU SHOULD CARE
Because these trends could make you rich, broke or just downright more interesting.
By Nick Fouriezos
GameStop shocked the world with its sudden stock price surge earlier this year, buoyed by a band of renegade Redditors turned amateur day traders. And while it has since come down to earth somewhat, there are a number of lessons to learn from its rise. Today we look at more stocks that will shock the Wall Street set, plus some market trends and wobbly stocks that could be crashing soon — meaning it may be time to short (or bet against) them. Who’s the trader who called the Great Depression? What trade earned George Soros a billion dollars in one month? Today’s Daily Dose masters the market.
the next stock surprises
Canopy Growth Corp. This Canadian pot producer was one of many marijuana stocks that shot up during a Reddit-inspired binge in February. And while its price has since settled below that high mark, Canopy does have a lot going for it. Among Canadian companies, Canopy seems best positioned to capitalize if pot becomes legal across America, with an agreement already in place to buy U.S.-based Acreage Holdings should that happen. In fact, its CEO has said the company expects to enter the U.S. market this year and is already selling CBD products to American consumers online. One potential hiccup? Joe Biden not playing ball. Despite early optimism that the U.S. president would decriminalize weed federally, cannabis access advocates were disappointed to see him canning White House staffers for toking up.
AMC Entertainment. The movie theater chain’s rise after a tough 2020 began as a Reddit lark in GameStop fashion. But while that may have buoyed the company through the tail end of the damage wrought by COVID-19, improved fortunes based on a return to normalcy may already be here. The movie chain declared that 99 percent of its theaters will reopen as of March, and with the vaccine rollout going better than expected in America, a summer surge to the movies could be in the cards. Will we see AMC follow other theaters by offering free popcorn to vaccinated filmgoers?
MercadoLibre. What if you could get in early on Amazon, only an Amazon that serves a more diverse population and isn’t accused by activists of brewing human rights disasters? This Latin American e-commerce operator is significantly smaller than the Jeff Bezos brainchild, but it serves growing international markets that represent the greatest new opportunities for savvy investors. As more young consumers choose to boycott Amazon, they may look to this Argentine company to meet their delivery needs.
Coupang. This South Korean e-commerce company also riffs off the Amazon model, only better, by incorporating elements of Instacart, DoorDash and Netflix. Its impressive IPO in March instantly made it the second-largest publicly held company in South Korea, behind only Samsung, and was the biggest foreign IPO since China’s Alibaba in 2014. One benefit Coupang has over its competitors? South Korea is super dense, about the size of Indiana but with roughly eight times the population. That makes it easy to run a delivery shop predicated on advanced tech and geographic proximity, allowing it to do other things well — like mostly ditching cardboard boxes and bubble wrap while offering customers reusable containers for their groceries.
Bed Bath & Beyond. The smell-good, feel-good, home-goods store suffered a brutal 2020 as its in-store purchases were hampered by the pandemic. That is one reason why, like GameStop, it is one of the most-shorted companies out there — the eighth-most, at 26.2 percent shorted, as of mid-February. But there are reasons to believe in a turnaround: CEO Mark Tritton, who took over in late 2019 right before all retail hell broke loose, is “the guy” to make BB&B relevant again, as Jim Cramer put it. That’s because he led a similar turnaround at Target, where he remodeled thousands of stores and pioneered their now thriving e-commerce business. And after poaching two key execs from Wayfair and Walmart this week to lead BB&B’s $3 billion online sales efforts, 2021 feels like a comeback story in the making.
Dangote Cement. So what if it doesn’t fit the mold of some sexy stock pick? Just because watching cement dry is as boring as watching grass grow, it’s not like seeing your investments soar will ever truly bore you. The Nigerian company is owned by Africa’s richest man, the billionaire Aliko Dangote, meaning there’s little risk it will run out of backing anytime soon. And it is on the rise, with the stock nearly doubling this year as it builds on its foundation of operations across 10 African nations.
market on your calendar: the trends to watch
Non-Fungible Tokens. Trust us, buying these digital tokens, called “NFTs,” isn’t the equivalent of setting your money on fire — although doing just that was profitable for one blockchain firm that torched a Banksy painting, created an NFT from what was left and earned a $285,000 net profit for striking the match. The phenomenon for original digital works of art builds on many of the principles behind the wild chase Reddit investors have given Wall Street lately, from the esoteric and often personal assigning of what has value to the power of the masses to congregate around a fascinating idea to create powerful new economies. Read more on OZY.
SPACs. Sports media startup The Athletic and political newsbreaker Axios are discussing a merger to combine their respective, disruptive interests … under the umbrella of a special-purpose acquisition company that would work to build a larger digital publishing portfolio. It’s just one more example of the way so-called “blank check companies” are revolutionizing industries, although some wonder if such financial maneuvers are ignoring actual value by lionizing business leaders and selling tulips to the foolish. Still, the model has driven investment by everyone from Martin Luther King III to Steph Curry, which means SPACs aren’t likely to fade from the headlines any time soon.
Bank on Bankruptcy. Coronavirus closures, and the mass layoffs that followed, were supposed to drive bankruptcies across America. Only the opposite happened, as The Wall Street Journal reports, with the number of bankruptcies falling sharply — individual Chapter 13 bankruptcies dropped by 46 percent, while Chapter 7 filings that result in liquidation for businesses and consumers fell 22 percent. Part of that stability may have been the result of government COVID aid artificially keeping families and businesses afloat, particularly with unemployment benefits receiving a boost during the worst of the pandemic recession — aid that may continue to be felt after the federal government passed another $1.9 trillion stimulus in March. But some experts believe bankruptcy will be back once federal government coffers close back up, leaving Americans in the lurch once more. Read more on OZY.
Solar Energy By Sea. If innovation is born out of necessity, then it’s no surprise that the Dutch were the ones to create the largest floating solar park in Europe — an architectural marvel 4 miles from Rotterdam that will soon be joined by three even bigger ones in the coming months. Such ingenuity is necessary in the Netherlands, a country only about a third of the size of New York state. With limited land and many cities that are at or below sea level, the Dutch are taking advantage of their North Sea border to create new energy sources. And one could see floating solar parks become increasingly popular across the globe as space constraints grow and humanity is forced to make smarter use of its available bodies of water.
Tiger No More. A handful of Chinese tech firms and American media companies, including ViacomCBS and Discovery, were mysteriously kept afloat — and even surging — thanks to regular purchases from an anonymous trader. However, that run of anonymous aid disappeared late last week, as top banks dumped some $30 billion worth of stocks, seemingly as part of a larger forced liquidation by Archegos Capital Management, owned by former Tiger Asia manager Bill Hwang, suggesting that Hwang was responsible for those secretive gains all along. As of early this week, ViacomCBS had dropped precipitously from the top of the S&P 500, falling 55 percent as others saw their fortunes plummet as well.
Amateur Traders Won’t Fade. It’s easy to lampoon the Robinhood day-trading masses, but count them out at your peril. That’s what the straight-talking Jim Cramer, host of CNBC’s Mad Money, said recently on The Carlos Watson Show. “There are parts of it that are unrealistic,” Cramer says. “But I’ve met a lot of younger investors, and their knowledge of the companies is so vastly superior to what people think.” Their secret sauce, according to Cramer? Tech savvy that allows them to conduct deep research far surpassing that of older traders, as well as a lived experience from still being at the bottom of the workforce: “They do homework, and anyone who writes them off rather than trying to encourage them is really trying to keep people in their chains,” Cramer adds.
count them out: the stocks to short next
Daqo New Energy. Just like your awkward middle-school friend who grows too fast for his coordination to keep up, this Chinese solar panel maker is due for a stumble, given it has shot up more than 600 percent in just 12 months. Daqo has been part of a rise in mid-tier Chinese stocks that has experts pointing to China’s own “Reddit army.”
Clovis Oncology. GameStop wasn’t picked at random: It benefited from a heavily shorted market against it, substantial turn-of-the-century gamer nostalgia and a feeling that Redditors could do good by taking on Wall Street giants. Colorado-based Clovis fits two of those categories: It has a noble cancer-fighting mission for white knight Redditors to rally behind, and big funds have bet heavily against it since 2017 due to heavy research and development investments that have yet to pan out. Redditors could soon take it upon themselves to artificially inflate its worth. But while you could ride the ascent, don’t wait too long. Without clear product wins and nostalgia to maintain momentum, Clovis could fall as quickly as it rises.
Steinhoff International Holdings. The furniture and household goods seller saw a 60 percent stock price rise in a single week in January, and is now trading at three times its 2020 low. But why this penny stock rose is questionable, as its fundamentals remained largely unchanged: It carried more than a $10 billion debt burden and is still in court over claims that it misled shareholders. Turns out that r/WallStreetBets had been discussing the stock that week, likely leading to the surge in interest. The stock has dipped a little bit but remains overvalued. Steinhoff is in long-term trouble and doesn’t fit the profile of a stock that can hold Redditors’ interest, making it a prime pick to short.
Zovio. The edtech services company is in the middle of a leadership change, with its president and CEO of nearly two decades, Andrew Clark, on the way out. And while it once boasted a massive online enrollment of nearly 80,000 students in 2012, that number dipped to under 33,000 by 2019. The company has low ratings across the board with Q.ai, a Forbes company that uses artificial intelligence to make investment recommendations: a “C” in technicals, “D” in growth and an “F” in low volatility momentum — a measure weighing consistency with growth prospects.
history’s craziest stock plays
What Great Depression? You could have called Jesse Livermore a weatherman early in his career, given the fact that his first big shorting win came from acting on a hunch that preceded the 1906 San Francisco earthquake. He earned himself a quarter-million dollars, then turned luck into skill by making $1 million through shorts in the 1907 crash. The trade that puts him in the history books, though, is when he correctly predicted the end to the Roaring ’20s, betting against the market in 1929 and making $100 million — equivalent to $1.5 billion today — as the nation was thrust into the Great Depression. But the tale of history’s first legendary short-seller did not end well: Livermore shot himself in the coatroom of a New York hotel in 1940, declaring himself a failure.
The Nifty Fifty. Shocked by how the stock market set record highs during the pandemic, even as employment and economic output plummeted? Well, high-risk investing that goes far beyond actual value is nothing new. Even if risky business went out of vogue after the crash of ’29, it resurrected itself with the Nifty Fifty — 50 stocks identified by the Morgan Guaranty Trust as the planet’s fastest-growing opportunities in the late 1960s and early ’70s. Valuing “growth at any price” over demonstrated value, investors chased these cash cows off a cliff when, in 1973, American optimism ran headlong into soaring inflation, an oil crisis and Vietnam War disillusionment. Read more on OZY.
George Soros. Surprised to see his name on something that’s not a political attack ad? People forget, but this bankroller of liberal causes is a legendary trader who “broke the bank of England” after borrowing billions to invest big against the pound. Recognizing the pound was valued far higher than it should have been against the German deutsche mark, via Europe’s exchange-rate-setting mechanism, Soros told his team to “go for the jugular” by rapidly adding to their short-sell position. The move hastened the British currency’s decline, as stockwatchers chased Soros after realizing he was right. In addition to bringing the Brits to their knees, Soros’ gutsy gambit in the ’90s paid off to the tune of $1.5 billion in a single month.