Hedge Fund Hatred Isn’t Enough To Reach “Meme Stock” Status Anymore

Hedge Fund Hatred Isn’t Enough To Reach “Meme Stock” Status Anymore
Andrew Rummer

over 2 years ago1 min

Mentioned in story

A fresh wave of interest – and cash – is flooding into cult stocks like retailer GameStop and movie theater chain AMC Entertainment, and investors are once again scouring lists of the most-shorted companies for signs of who might be the next to surge. 

Since early this year, these so-called “meme stocks” have been periodically swept higher by small investors banding together to force short sellers to close their positions. 

But just because many investors are betting on a stock’s decline, it doesn’t mean crowds of retail investors will automatically come running. As you can see in the chart above, there’s actually been a fairly weak correlation between short interest and retail buying over the past month. For example, a company like Lordstown Motors (ticker: RIDE) has seen a lot of purchases despite only moderate short interest, while Ra Medical Systems (ticker: RMED) has left smaller investors cold – even with a short interest of nearly 40%. 

And, equally, some of the most-discussed stocks on Reddit’s influential WallStreetBets forum this week have relatively low short interest. Burger chain Wendy’s, iron ore producer Cleveland-Cliffs, and the company behind the Wish e-commerce platform, ContextLogic, have all stormed into the daily charts compiled by Quiver Quantitative, despite short interest of 4%, 12%, and 6% of freely traded shares respectively. 

Perhaps, then, the already well-worn narrative that these investors only target the most-hated stocks to force a so-called “short squeeze” is already out of date…

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