my meme-stock fiasco

I like money as much as anyone, and I’m not too naive to chase cash fast, if the opportunity seems right. So in 2021, I decided to join the meme stock craze that was taking Wall Street by storm and helping some intrepid day traders get rich.

Game retailer GameStop (GME) to be first stock memewith trader Keith Gill giving the first time to why stocks could soar in August 2020, on Reddit channel WallStreetBets. Almost no one noticed Gill’s offering until the stock really exploded five months later. Part of Gill’s strategy is to look for bearish stocks with high short-term yields and bet on “short squeeze“that can cause an exponential rise in stock prices.

It happened. Prior to Gill’s offering, GME was trading at around $1. It rallied slowly towards the end of 2020 and then rallied wildly, peaking at a closing price of $87 on January 27, 2021. What’s more remarkable than the gains is the fact that it doesn’t seem relevant. nothing to do with GME’s financial performance, it’s dismal. Instead, institutional retail investors on social media seem to have sent prices skyrocketing simply by rushing into the stock and creating a spike in demand.

AMC series (AMC) to the next. Right around the time GME peaked, AMC stock started to reverse its four-year downtrend and became seething. Shares rose from a closing low of $1.98 in early January 2021 to nearly $20 just three weeks later. It wobbled for a while, then exploded, peaking at $64 on June 2, 2021. The gradual end of the COVID pandemic could be a bullish signal for the stock, as people will start to go. watch movies again. But that doesn’t explain the 31-fold increase in the stock price. AMC remains a huge loser, with no near-term prospects for profit. Again, a large influx of community buyers seems to have fueled the spike.

The Reddit logo is seen on a smartphone in front of the Wall Street Bets logo shown in this illustration taken January 28, 2021. REUTERS/Dado Ruvic/Illustration

The Reddit logo is seen on a smartphone in front of the Wall Street Bets logo shown in this illustration taken January 28, 2021. REUTERS/Dado Ruvic/Illustration

[Did you lose money on meme stocks? We’d love to hear your story.]

This is the period I care about. I’m not as stupid as I look, and I’m fully aware that meme stocks can plummet as quickly as they skyrocket. In fact, I expected that. But people also make real money on these bubble stocks, if they know when to sell. Unlike some Bahamian crypto tokens, the normal price of GME and AMC is the real price someone is willing to pay in real dollars that you can bank and spend.

I’m willing to experiment and see what happens. One thing that I have discovered as an investor is that it is psychologically easier to buy stocks than to sell them. When a stock drops 20% or 30% off, your primitive bargain-hunting engines kick in, making you feel comfortable buying. Stocks often go up in price over the long term, so the odds are that the market will one day justify your buying decision, if only default. But if the value of a stock you hold has increased, it can be difficult to sell and profit if you could lose out on even larger profits in the future. If you lose money buying a stock, it’s even harder to sell that stock, because closing in on those losses means admitting defeat.

I don’t want to buy GME or AMC, because those shares are probably already bought out. What could the next meme stock be? I’ve researched WallStreetBets and everyone seems to be talking about the old cell phone company, Blackberry (BB). I studied stock history. From 2003 to 2008, when the ticker was RIM, the Blackberry was a high-grossing product, and for good reason. The Blackberry phone was a phenomenon in the early days of the smartphone, a product that really generated huge profits. Then iPhone and Android devices effectively killed the Blackberry. The stock has fallen from a high of $148 in 2008 to a low of nearly $3 in 2020.

There was a surge of excitement in January 2021, when GME and AMC took off. BB rallied as high as $25 in one day, then dropped to the $10 range. At the time I reviewed it, the stock was priced at about $14.

Is BB the next meme stock? Or has it been used? Its bottom-to-top gain is 633%, based on the $3 bottom and $25 top. But that was only for one day. GME has rallied 8,600% from bottom to top. AMC’s bottom-to-top gain is 3,000%. Both are down from the highs but much higher than the pre-meme levels. Blackberry’s 633% gain, in just one day, is tiny by comparison. It will probably go much higher, once the WallStreetBets flood in. This is my great opportunity.

I’m willing to commit $2,500. If BB becomes the next GME and I sell at the top, I will make over $200,000. If it was the next AMC and I sold at the top, my profit would be $75,000. If it is kept in mind and I sell at average instead of at top, then I still have enough money to buy a new sports car – although perhaps used, not new. And if BB fails, then at least I can write a story about it.

Since you’re reading the same story now, you know what happened. In June 2021, I bought 171 shares of Blackberry at $14.60 a share, total investment of $2,496.60. Blackberry never memed once I bought it. Maybe that short-lived 633% gain is all it has in it. It turned out that I was buying high, and the only way to make money by buying high was to sell higher.

I have never had a chance to sell higher. A month after I bought BB, it was down 27%. A year after I bought, BB was down 58%. As 2022 was coming to an end, I decided BB would never use the meme and I should just admit my madness and cut my losses. I sold all 171 shares at $4.31 per share, 70% less than what I paid. My total loss is $1,760.

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My decision to buy a Blackberry probably felt like a blunder. When I told Brian Sozzi, the securities expert at Yahoo Finance that I was going to write this story, he yelled, “Dude! Tell me you don’t buy a Blackberry!” So sure, feel free to laugh. But I don’t think it’s a mistake. First of all, I could have wasted more money, including the money I needed, than the savings I could have lost, no matter how much I hated losing it. If I take a foolish risk, it is also a measured risk.

Should I pay more attention to Blackberry fundamentals? Is not! And if I have it won’t matter if I do. Unlike GME and AMC, Blackberry actually made a small profit in its most recent financial year – however, the stock has fallen back into the dungeon anyway. This is always about trying to capitalize on a market phenomenon – speculative bubbles – not trying to discover undervalued value.

Are there some great lessons here? Beat me. Memorable moment seems to have passed, as many experts predict it will happen. GME is still higher than its meme price, but the curtain is falling with AMC, and a few other little memes that quickly go unremembered. If you visit WallStreetBets these days looking for stock tips, you’re likely to find plenty of lamentations about the woes at Tesla and Twitter and a dismal Christmas due to investment losses.

I have no regrets trying to make money in a speculative bubble. I know it’s a bubble and I won’t buy for long. I bought short, hoping the stock would go up in price and I could sell it to some schlub that came later than me. Instead, I turned out to be a scholar. Maybe next time I have a get-rich-quick plan, I should join sooner. Or force yourself to ignore it.

Rick Newman is a senior columnist for yahoo finance. Follow him on Twitter at @rickjnewman

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