Requiem for a meme
Bed Bath & Beyond Hope?
Remember when some meme stock investors thought Ryan Cohen was going to save Bed Bath & Beyond? (Cue the Ron Howard “Arrested Development” narrator voice: “He didn’t.”) Bed Bath and Bankrupt filed for Chapter 11 on Sunday.
Shares of BBBY, which inexplicably soared as high as $30 last summer, are now trading just slightly north of 20 CENTS. The lesson here, in case the “Apes” crowd of social media traders hasn’t learned it yet, is that struggling companies — especially in the cutthroat world of retail, where profit margins tend to be razor thin even in good economic times — should not get caught up in Reddit hype.
We’ve seen this before. Shares of unprofitable movie theater company AMC and GameStop, which Ryan Cohen actually is involved with, have both tumbled sharply from their 52-week and multi-year highs.
There’s even an ETF for meme stocks. (Of course there is.) And it hasn’t fared much better lately. The Roundhill MEME ETF, which lists AMC as a top holding and also owns big stakes in Bitcoin miner Marathon Digital, World Wrestling Entertainment, Airbnb and fintech SoFi, has fallen nearly 25% in the past 12 months.
Investing in memes is a recipe for disaster unless you are willing and able to make quick trades. Even then, getting in and out at the right time is not easy. So for long-term investors, fundamentals still matter. If you’re looking for a potential winner, read income statements and balance sheets…not posts on some shadowy subreddit promising you huge returns on the next great meme.