Tracking Reddit has become one of the most prominent investing strategies in the world. The 10 million members of Reddit’s r/WallStreetBets community have challenged conventional investing wisdom and made some nice moolah along the way. That is why even the staunchest critics now pay attention to Reddit stocks.
It doesn’t matter that these traders are concentrating on executing targeted buying campaigns in the most heavily shorted stocks around. If you have been following their story, you know that the strategy has worked in spades.
Hedge funds have seen catastrophic losses due to the market movements induced by the stock-trading Reddit community known as WallStreetBets. Congress has debated this issue. And it will undoubtedly be a sticking point as we move forward.
But until there is some concrete legislation, you can not afford to ignore Reddit stocks. So here are the 10 most prominent ones generating the most chatter.
- Rocket Companies (NYSE:RKT)
- Tesla (NASDAQ:TSLA)
- Apple (NASDAQ:AAPL)
- Nvidia (NASDAQ:NVDA)
- GameStop (NYSE:GME)
- Advanced Micro Devices (NASDAQ:AMD)
- Palantir Technologies (NYSE:PLTR)
- AMC Entertainment Holdings (NYSE:AMC)
- Airbnb (NASDAQ:ABNB)
- Air Products & Chemicals (NYSE:APD)
Now, let’s dive in and take a closer look at each one.
Reddit Stocks: Rocket Companies (RKT)
Rocket Companies is a favorite among Reddit traders. It may seem strange at first, considering Reddit traders are millennials. So why would they be interested in a holding company that operates an online mortgage platform? Would they not want to buy a hotshot tech stock instead?
Well, you could make the same argument for GameStop, which had its heyday at least a decade ago. But, at least with RKT stock, you have a company with sound fundamentals, an asset-light strategy and strong tailwinds.
The company’s main claim to fame is the Rocket Mortgage online platform, which allows users to take care of various aspects of the mortgage process. For example, you can apply for a mortgage, upload documents, e-sign documents, get statements and execute monthly payments — all through one app.
Rocket Companies operates under two business segments: Direct to Consumer and Partner Network. The former is a more direct and hands-on approach, and the latter deals with bolstering the brand through consumer-focused influencers and marketing partnerships.
It hasn’t been a historically impressive stock, but Rocket is generating great profits on the back of a booming U.S. housing market. Plus, shares are down 21% in a month, which means you could snap these up at affordable rates.
As one of the more controversial Reddit stocks, Tesla had an amazing 2020. Buoyed by investor enthusiasm for the electric vehicle (EV) industry, TSLA stock made record gains last year. And even though shares have cooled off, they are still up 280% in one year.
Coming back to the company itself, there are two reasons why the EV giant lost a bit of steam. Firstly, as vaccines roll out, we are finally returning to some normalcy. So, investors are moving towards recovery stocks and safer bets.
Secondly, Tesla itself has not done a lot to impress investors. Its latest quarterly results leave a lot to be decided, and Elon Musk’s erratic behavior does not help matters. So, all things considered, TSLA is one of the riskiest bets out there. But the WallStreetBets community is still buzzing about the EV giant.
Reddit Stocks: Apple (AAPL)
Our next entry is a sharp rebuke to those who say Reddit stocks are all about risk.
Apple is a bellwether of the tech world and is a “best in class” blue-chip tech stock. Most recently, the Cupertino, Calif.-based tech giant recorded a 54% year-over-year increase in revenue and $23.6 billion in net income in its fiscal second quarter. It is also aggressively pursuing its strategy to become net cash-neutral, announcing a new $90 billion buyback program in its latest quarterly results.
Moreover, AAPL stock is similar to TSLA stock in that the main conversation surrounding it is valuation these days. However, one must remember that AAPL stock is trading at 28.1x trailing price-earnings (P/E) and TSLA trades at 575.1x P/E.
Still, investors are hoping the stock will lose a bit more steam. Yet, Reddit traders seem to have a different opinion, believing that the stock has room to grow still after falling 5.5% in a month.
Readers of this space know how bullish I am on Nvidia. The world’s leading semiconductor company is supplying cutting-edge technology for several artificial intelligence applications and is constantly building out its portfolio to diversify investments.
The recent quarterly results reinforce how dominant it is in the chip space. In the fourth fiscal quarter, the American multinational technology company reported $5 billion in revenue, up 61% from $3.11 billion a year earlier.
Non-GAAP earnings per diluted share came in at $3.10, up 64% from $1.89 a year earlier, handily beating Wall Street analyst forecasts of $2.81 per share by 10.3%. This marks the ninth quarter in a row where the company has delivered a ‘positive’ earnings surprise.
Gaming and data centers remain the lynchpin of its success. Data centers, artificial intelligence, and the automotive segment are poised to become major growth drivers moving forward as Nvidia invests heavily in the space.
These are all high-margin businesses, so Nvidia’s future is secure. The only sticking point, I would say, is valuation. Although the stock price has fallen in the last few months, shares are still trading at high price multiples. But hey, Reddit traders do not seem to think so.
Reddit Stocks: GameStop (GME)
If there is one name that is synonymous with Reddit stocks, it is GameStop. The perennially troubled video game retailer got a new lease of life thanks to enthusiastic newbie traders. But, unfortunately, they did not invest based on fundamentals.
Instead, they believed they were doing a social service by saving the retailer from bankruptcy. Along the way, they badly damaged hedge funds that had shorted the stock, reinforcing how this is the age of the retail trader.
Regardless, it has been a few months since this unique phenomenon started. The interesting part? The momentum shows no signs of stopping. In the last three months alone, shares are up 113%.
It’s useless to talk fundamentals here. When you think Reddit stocks, I am pretty sure the first name that comes to mind is GameStop. Reddit traders have made GME stock a matter of prestige, so expect this one to stay popular with them for some time to come.
Advanced Micro Devices (AMD)
Nvidia and Advanced Micro Devices are the two most prominent semiconductor companies out there.
Much like Nvidia, AMD is a solid performer, and you will not have any sleepless nights if you decide to park your capital here.
In the last five years, AMD has outperformed the S&P 500 by 1692.1% and its sector by 1545.7%. That kind of price momentum highlights the company’s strong performance over a long period of time.
Coming back to the present day, both Ryzen 3000-series SKUs and next-gen Zen 3-based CPUs continue to sell at breakneck speed.
In addition, AMD is benefitting massively from the renewal of one of the oldest rivalries in tech — Sony’s (NYSE:SONY) PlayStation versus Microsoft’s (NASDAQ:MSFT) Xbox. Both of these consoles use chips made by AMD, so it really doesn’t have a horse in this race. Instead, it’s just sitting back and enjoying the success of these two launches.
Much like NVDA stock, though, there are only two things you need to worry about when investing in AMD stock. The first is overvaluation concern. The stock trades at 35.8 times forward P/E. The second is the chip shortage and how that will affect performance.
For now, it seems safe to say the company is managing the situation well. AMD CEO Lisa Su, the first woman to head a major semiconductor company, isn’t flustered by chip shortage and believes that GPU and processor stock will improve throughout 2021.
Reddit Stocks: Palantir Technologies (PLTR)
One of the more controversial Reddit stocks out there is Palantir. But like several other entries on this list, this is a solid performer that will make its place in any growth-focused investor’s portfolio.
The big data analytics founded by Peter Thiel has a close relationship with the U.S. military and the Immigration and Customs Enforcement (ICE). Understandably, some members of Congress are miffed with this close association. However, from a fundamentals perspective, there is nothing to dislike about this one.
Every quarter, Palantir manages to bag major contracts due to its impressive data analytics capabilities.
It has two software platforms, Gotham and Foundry. Gotham is for defense and intelligence agencies, and Foundry is for commercial customers. Both these business segments are doing exceedingly well, leading to the stock becoming a favorite among analysts, and apparently Reddit folk.
AMC Entertainment Holdings (AMC)
Unsurprisingly, Reddit traders found AMC stock enticing at a time when most movie theaters were shuttered. As the movie theatre chain struggled to survive and shore up cash, Reddit investors rescued the company from the depths of bankruptcy.
AMC has chosen to make hay while the sun shines, raising substantial cash through equity issues. However, the important thing to note here is that even before the novel coronavirus pandemic struck, AMC was suffering. It was having trouble competing with streaming giants as movie content shifted online.
The situation hasn’t changed much. In fact, movie studios are increasingly leaning towards streaming options as an answer to their woes, meaning things will not look up for the company any time soon with streaming giants like Netflix (NASDAQ:NFLX) gaining ground.
Reddit Stocks: Airbnb (ABNB)
Airbnb has cooled off a bit after a blockbuster debut. However, shares are down 33%, and the stock is still overvalued in my eyes because of the sector in which it operates.
Travel and tourism took a big hit last year. And although airline traffic is returning, it’s still not at the level where Airbnb can justify a market cap of $83.4 billion.
So, at a time when most airline stocks are taking massive hits and just struggling to survive, ABNB stock is trading at massive price multiples while still being unprofitable. Yes, it has a different business model that is less capital intensive. But still, the valuation is too high.
However, again, this doesn’t faze Reddit traders at all, who are willing to hold onto this one with “diamond hands,” a fact that should help keep this one on your radar.
Air Products & Chemicals (APD)
Allentown, Pennsylvania-based Air Products & Chemicals is one of the more conventional stocks on this list. Its principal business is selling gases and chemicals for industrial uses. Not what you were expecting on the WallStreetBets subreddit? Well, the Reddit investing world is full of surprises.
Regardless, this is a pretty boring, stable investment, one that will get a massive boost once the economy starts whirring at full steam again. Consensus estimates tracked by Refinitiv call for an increase of 12.2% and 22.3% in fiscal 2021 and 2022, respectively.
Again, valuation is a bit high, not surprising since the stock has been on a bull run as of late. Still, it would be best if you wait for this to cool down a bit before buying.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.