The meme actions resurface. The values promoted by retail investors organized from social networks or internet portals have found new protagonists in Tupperware, WeWork or Yellow. With the memory of the GameStop video game chain or the AMC theaters of the first wave, the names differ, but the risk is the same, extreme, for the retail investor. With daily increases that can exceed 100%, strong revaluations push you to try your luck, but it can end very badly.
“Getting quick money tempts many. But without financial knowledge, the risk is well above the ability to assume losses, and you can end up with nothing”, warns Eduardo Irastorza, a professor at EAE Business School. More than an investment, meme actions are seen as bets. "In these cases we should talk about betting, these are companies that lack the slightest accounting or economic foundations that justify investor interest," says Antonio Castelo, an analyst at iBroker. By way of example, recently the coworking space firm WeWork sank 39% after doubting its viability, to rise 44% the next day boosted by retailers. Tupperware rose 300% in just five sessions in July... despite acknowledging that its financial situation does not guarantee its continuity.
What some hide is that equally powerful falls have followed, from 20% in one day for WeWork or 32% for Tupperware. The Yellow shipping company, which filed for bankruptcy in July, rose 450% in a few days after the news. Shortly after it was worth 75% less. Jumping on the bandwagon at the wrong time, or jumping on it directly, can be ruinous.
Coordinated and buying theoretically doomed securities – in crisis or bankruptcy – retailers seek the so-called short squeeze, catching short investors, who benefit from the fall of a company. First they buy en masse by increasing the price, which forces the shorts to buy to cover their positions.
Between one and the other they end up catapulting the value. “It is a snowball effect. Without respecting the basic investment principles, an inefficiency in the market is taken advantage of to try their luck. But it is not consistent in the long term, and many go bankrupt”, explains Marc Ribes, professor of stock market and investment at Deusto Formación and co-founder of Blackbird Bank.
With meme stocks none of the basic advice is followed when investing, be warned. Companies are not known or information is sought, they do not have a history of growth or stable finances, emotions guide decisions, they do not diversify and they look at the short term. “Like all bets, they can go well in some cases, but in most they go wrong,” says Castelo. “There is no logic or justification. It becomes a kind of lottery ”, compares Ribes.
The distortion of the increases leads to inflated values whether it is solvent or not. Without a minimum analysis, there is a danger of being trapped in a company with no future. The Bed, Bath Chain
Instead of being carried away by fashion, there are plenty of trends to ensure the shot. In iBroker they mention investment in technology and innovation, where "there are always new opportunities", health, education and consumption. From EAE they target the arms, food and distribution sectors, both physical (such as Amazon) and information (Google). Ribes favors mobility, with an eye on the railway (he mentions Stadler, Talgo, CAF, Alstom) and the electric car (VolksWagen, Porsche). Artificial intelligence is also popular, but "it's already expensive," he says.
