So why do some stocks go from being unloved on Wall Street to diehard favorites of the Reddit army?
What all these stocks have in common is that a fair number of short sellers are betting against them.
And that riles the passions of the Reddit crowd, many of whom view short-selling -— when an investor borrows a stock and sells it with hopes of buying it back at a lower price and pocketing the difference as a profit — as a rigged part of the investing game designed to benefit fat cat hedge funds.
A squeeze takes place when short-sellers have to rush to repurchase shares they borrowed because the price is rising.
The higher a shorted stock goes, the more money the short-seller stands to lose. So they have to often quickly buy the stock back to avoid losing their shirts — thus pushing the price even higher.
If a short-seller borrows a stock trading at $50 and sells it but the stock then climbs to $75, that’s a $25 loss. If it goes to $100, the short is $50 in the red, and so on. They want to get out quickly to reduce their losses, and that creates the squeeze.
1. AMC THEATRES $AMC
2. CLOVER $CLOV
It's participating in a new experimental Center for Medicare & Medicaid Services program trying to lower Medicare costs by paying select companies directly to deliver care—a model that should incentivize doctors to focus on quality of care rather than quantity of services. The large population of Medicare patients that Clover Health will now be assigned to under the program is expected to swell its consumer base: Clover execs projected the insurtech will cover 273,000 people this year alone, compared with just 57,000 people as of October 2020.
What does this mean for Clover? Clover can capitalize on its share price surge to fund product development and expansion. Gamestop, for example, plans to sell up to $5 million in shares amid the trading frenzy and will use the proceeds to speed up its ecommerce overhaul. Clover's share price spike, if it holds, could similarly fund expanding its suite of tech-focused virtual care tools to zoom ahead of rivals like health insurtechs Bright Health and Oscar Health, which both filed plans to go public in this year.
In May, Canadian cannabis producer Tilray completed a blockbuster merger with Aphria, making Tilray the world's largest cannabis company. Cannabis investors are optimistic about potential U.S. federal cannabis reform under President Joe Biden's administration. Cannabis legalization is sweeping over North America – 16 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
The Company is focused on producing high-quality cannabis and cannabis-derived products primarily for recreational adult-use globally. The big news on Tilray is that Reddit's traders hope to drive its share price higher by forcing short-sellers to close their positions, which requires them to buy back the shares they shorted. Through its wholly owned subsidiary, High Park Holdings Ltd., Tilray offers a broad-based portfolio of brands and adult-use products.
Tilray currently supplies high-quality medical cannabis products to tens of thousands of patients in 17 countries spanning five continents through its subsidiaries in Australia, Canada, Germany, Latin America and Portugal, and through agreements with established pharmaceutical distributors. Tilray also cultivates medical and adult-use cannabis in Canada and medical cannabis in Portugal. Analysts at Cantor Fitzgerald recently upgraded the stock after its merger with Aphria in May. As a result, Tilray has become one of the leaders in the cannabis industry following the merger, since the combined company has the largest global geographic footprint in the industry, low-cost production facilities, and a wealth of international growth opportunities.
4. NOKIA $NOK
The community has noticed that NOK stock hasn’t taken off like other meme stocks in the latest rally. AMC stock has gained more than 160 percent in the past week and 2,300 percent YTD. Naked Brands (NAKD) has soared 45 percent in the past week and 330 percent YTD. GameStop is up 1,200 percent YTD.
Some WallStreetBets investors think that Nokia could be an opportunity for those who missed on other meme stocks. A major advantage the community sees in Nokia is that it has stronger fundamentals than most other meme stocks. However, since Nokia isn’t heavily shorted, an AMC-type pop doesn't look likely.
Is Nokia (NOK) stock undervalued?
Nokia sells telecom equipment and the services that go with the equipment. It’s jostling for a position as a top vendor of 5G network gear. Nokia has been around for more than 100 years, and its innovations have resulted in a large portfolio of patents. The company licenses its patents to companies in a range of industries and collects royalty payments.
However, Nokia stock hasn’t moved much despite a recent stream of positive news touching on its equipment and patent businesses. The company has secured 5G deals with all of the major wireless operators in the U.S. and has contracts with many operators in Europe and Asia. For example, it recently bagged a 5G deal with the Philippines’ Dito Telecom.On the patent side, Mercedes-Benz brand owner Daimler will pay Nokia for rights to use its technology in cars. Nokia took Daimler to court to get it to pay for the patents. Many Reddit investors think the lagging NOK stock price shows that Nokia hasn’t got the attention it deserves.
Best price to buy NOK stock
Nokia stock has traded in the $3.21–$9.79 range over the past year. The spike to nearly $10 came in February during the initial meme stock squeeze and it lasted only briefly. Nokia has a track record of rising slowly. The stock usually corrects swiftly whenever technical traders appear to be driving it too fast. With that in mind, Nokia stock looks to be a good buy in the $5 price range.
5. PLANTIR $PLTRPalantir s a widely followed stock and is a cult favorite. The daily trading volume of PLTR stock is often around 50 million shares. Palantir is seen by some as the next Facebook or Apple and is one that I am extremely Bullish on and try and stock up and BTFD every chance I get.
PLTR stock has already nearly doubled since its initial public offering. But having fallen from its $45 high, the stock was hurt by the Nasdaq’s sudden correction that began in February. It dropped again a but more after the earnings more so because the initial lock down period had expired and the original investors were able to finally sell and collect their profits. Still, Palantir’s small contract wins have continued to drive sentiment towards the name higher.
After winning customers in the military, government, and health sectors, Palantir on May 28 was given a $111 million contract by the United States Operations Command. It chose Palantir because of its prior use of the company’s platform for real-time missions. Palantir’s software will aggregate data from different sources to enable better decision-making.
Palantir’s Global Defense Lead said, “When Special Operators are risking their lives in no-fail scenarios, they deserve technology that works.” The executive’s confident tone is backed by the company’s past contract wins with the government. Expect more such deals for Palantir and get ready for its contracts to get bigger over time.
Palantir is an expensive software stock. But its valuations should not concern growth investors who are willing to hold the shares for a few years. During those years, Palantir will prove itself, enabling PLTR stock to rise steadily and reward patient shareholders.