Meme Stock Activity Slowing Down on Reddit, Here are New Stocks to Watch According to BofA

June 17, 2021 7:37 AM EDT
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BofA Securities' quant Jill Carey Hall has noted a slowdown in Reddit activity concerning meme stocks, although mentions of AMC (NYSE: AMC) are still quite high.

BofA's team of analysts is regularly monitoring top-mentioned SMID cap (Russell 2500) stocks within the top 100 posts on Reddit’s WallStreetBets forum.

“While conversations generally accelerated for most stocks on our screen last week, overall WallStreetBets conversations have barely risen in recent weeks, and retail options usage remains well-below 1Q21, suggesting broader participation beyond just retail. Additionally, using AMC as a case study, the latest rally saw more short-dated call strikes available for trading and a more balanced volume between calls and puts, suggesting a reduced capacity for gamma squeezes* via call options in pushing up shares during the latest rally,” the strategist said in a note to clients.

Carey Hall also updated the list of top 20 mentioned Russell 2500 stocks on Reddit’s WSB forum, which saw the inclusion of Petco (NASDAQ: WOOF) and B&G Foods (NYSE: BGS). AMC remains the No.1 most-discussed stock.

“Virgin Galactic Holdings (NASDAQ: SPCE) was the only stock on our screen this week which saw declining mentions on Reddit, and discussion activity has fallen for the past two weeks (shares most recently peaked on June 8). And SMID caps that fell off the top-mentioned list this week: Zillow (NASDAQ: Z), Beyond Meat (NASDAQ: BYND), Alcoa (NYSE: AA) and BioCryst (NASDAQ: BCRX).”

During BofA’s talks with institutional investors, these key discussion highlights were recorded:

1) Some of the rise in retail trading is likely here to stay, BofA expects some simmering amid re-opening/back-to-work/peak stimulus; 2) increasing use of options has been a trend today by retail; 3) greater fragility for Reddit SMID caps; 4) while some Reddit stocks are now among the largest SMID caps, small/SMID benchmarks are much less concentrated at the top vs. large caps and we do not see broad “investability” risk to SMIDs; 5) clients are increasingly interested in tracking alt data sets such as this, 6) what’s different today vs. January = others beyond Reddit users/retail contributing to driving up stocks.

Clean Energy Fuels (NASDAQ: CLNE) saw the biggest surge in mentions and jumped to No.2 position behind AMC, while Cleveland Cliffs (NYSE: CLF) is No.4.

Zillow (NASDAQ: Z), Beyond Meat (NASDAQ: BYND), Alcoa (NYSE: AA) and BioCryst (NASDAQ: BCRX) are not on the Top-20 list anymore.

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