In this article, we discuss the 10 stocks both Reddit’s WallStreetBets and hedge funds love.
The stock market battle between retail investors on internet platform Reddit, most popular through the ten million strong WallStreetBets group, and hedge funds has shaped market dynamics in the first half of the year. Retail investors have mostly tried to spoil the short-selling attempts of hedge funds, driving up the prices of stocks being sold short to deliver devastating losses to some of the biggest hedge funds. Earlier this month, London-based White Square Capital, that bet against WallStreetBets, announced that it would close down for good.
Some of the stocks presently popular on the forum include Tesla, Inc. (NASDAQ: TSLA), Advanced Micro Devices, Inc. (NASDAQ: AMD), ContextLogic Inc. (NASDAQ: WISH), and Palantir Technologies Inc. (NYSE: PLTR), among others. These stocks can offer handsome returns to investors in the coming months as hedge funds are also bullish on them. Since they do not represent an avenue for the retail investor versus hedge fund battle, they will be safe from perhaps the most influential market force of the year, affording these firms breathing space compared to others.
Last month, a report in a popular news publication revealed that hedge funds had lost close to $12 billion in this battle against retail investors over the past six months. According to the publication, Financial Times, this had forced big finance to reconsider investment strategy, balancing risks by monitoring Reddit forums to keep tabs on the stocks occupying the interest of retail investors. It remains to be seen who eventually comes out the winner in this stock market war. Retail investors have the edge at the moment, but that could soon change.
Calls for regulation around internet-based stock trading, which Redditors employ through the use of applications like Robinhood, have been growing in recent months. Robinhood has been forced to halt trading in some highly volatile stocks over the past few months despite strong protest from retail investors as the application, which has more than 13 million users – mostly around 30-years-old – realizes the responsibility it has to provide a level playing field to everyone in the marketplace, be it Redditors or billion dollar hedge funds.
The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
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Our Methodology
In this list we mentioned the stocks that are very popular on Reddit’s WallStreetBets, as well as among the 800+ hedge funds tracked by Insider Monkey. With each stock we mentioned the total number of hedge funds having stakes in it as of the end of the first quarter based on our data.
With this context in mind, here is our list of the 10 stocks both Reddit’s WallStreetBets and hedge funds love.
Stocks Both Reddit’s WallStreetBets and Hedge Funds Love
10. GameStop Corp. (NYSE: GME)
Number of Hedge Fund Holders: 13
GameStop Corp. (NYSE: GME) is a video game retailer that also sells other entertainment products. It is placed tenth on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The company’s shares have offered investors returns exceeding 4,869% over the course of the past twelve months. Over the past month, the stock has rallied more than 30% as it trends heavily on the WallStreetBets platform on Reddit.
On June 28, investment advisory Baird suspended coverage of GameStop Corp. (NYSE: GME) stock, saying that it wanted to more fully understand the new business strategy of the firm before advising investors on it.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in GameStop Corp. (NYSE: GME) with 3.2 million shares worth more than $620 million.
Just like Tesla, Inc. (NASDAQ: TSLA), Advanced Micro Devices, Inc. (NASDAQ: AMD), ContextLogic Inc. (NASDAQ: WISH), and Palantir Technologies Inc. (NYSE: PLTR), GameStop Corp. (NYSE: GME) is one of the stocks both Reddit’s WallStreetBets and hedge funds love.
In its Q1 2021 investor letter, Rhizome Partners, an asset management firm, highlighted a few stocks and GameStop Corp. (NYSE: GME) was one of them. Here is what the fund said:
“The first quarter saw some bizarre market reactions. Game Stop is a heavily shorted legacy video game retailer that saw its stock price rise from $17 to a peak of $483 within a month. It appears that retail investors on a Reddit.com forum called WallStreetBets used memes to create a viral feedback loop of forced buying. Game Stop reached $20 billion in market cap and had more daily trading volume than Apple at one point. The Game Stop short squeeze became a black swan event for the short sellers. Large hedge funds such as Melvin Capital suffered 50% losses during a short period and required emergency capital injections that resulted in costly dilution. Shorting is difficult and introduces a risk of ruin. This is especially true in situations where a large percentage of the float is shorted. We want to remind you that we hedge our portfolio via index puts, sector puts, and sometimes buying puts directly in our own portfolio companies. However, we rarely short because 1) we are not good at it 2) the potential for brain damage is too high and 3) we want to avoid the risk of ruin.”
9. Virgin Galactic Holdings, Inc. (NYSE: SPCE)
Number of Hedge Fund Holders: 17
Virgin Galactic Holdings, Inc. (NYSE: SPCE) is ranked ninth on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The company operates as a private spaceflight firm that aims to take tourists into space one day. The stock has offered investors returns exceeding 175% over the course of the past year. On June 30, the founder of the firm, Richard Branson, told news platform CNBC that he was waiting for approval from his engineering team to take his first flight into space.
On June 30, investment advisory Bank of America downgraded Virgin Galactic Holdings, Inc. (NYSE: SPCE) stock to Underperform from Buy on the back of increased competition in the private space market as more firms go public.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in Virgin Galactic Holdings, Inc. (NYSE: SPCE) with 2.8 million shares worth more than $86 million.
Just like Tesla, Inc. (NASDAQ: TSLA), Advanced Micro Devices, Inc. (NASDAQ: AMD), ContextLogic Inc. (NASDAQ: WISH), and Palantir Technologies Inc. (NYSE: PLTR), Virgin Galactic Holdings, Inc. (NYSE: SPCE) is one of the stocks both Reddit’s WallStreetBets and hedge funds love.
8. UWM Holdings Corporation (NYSE: UWMC)
Number of Hedge Fund Holders: 19
UWM Holdings Corporation (NYSE: UWMC) is a company that offers loans for residential mortgages. It is placed eighth on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The company’s shares have returned 10% to investors in the past three months. The company has been regularly mentioned on the WallStreetBets forum in the past month, resulting in a stock rally that has seen share price climb 52% in four weeks.
On June 23, investment advisory Jefferies initiated coverage on UWM Holdings Corporation (NYSE: UWMC) stock with a Hold rating and a price target of $9.5 on the back of fierce and uncertain competition in the market.
At the end of the first quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth $76.6 billion in UWM Holdings Corporation (NYSE: UWMC).
Just like Tesla, Inc. (NASDAQ: TSLA), Advanced Micro Devices, Inc. (NASDAQ: AMD), ContextLogic Inc. (NASDAQ: WISH), and Palantir Technologies Inc. (NYSE: PLTR), UWM Holdings Corporation (NYSE: UWMC) is one of the stocks both Reddit’s WallStreetBets and hedge funds love.
7. Clover Health Investments, Corp. (NASDAQ: CLOV)
Number of Hedge Fund Holders: 23
Clover Health Investments, Corp. (NASDAQ: CLOV) is a health insurance company based in Tennessee. The stock has returned 19% to investors in the past twelve months. It is ranked seventh on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The company has been trending heavily on the WallStreetBets forum and on June 22, the number of mentions of the firm on the forum climbed to their highest in more than a week, sending the stock soaring more than 6% over seven days.
On June 24, Clover Health Investments, Corp. (NASDAQ: CLOV) stock soared by over 8% as the firm announced plans to expand into more than 200 new counties across nine different states in the United States.
Out of the hedge funds being tracked by Insider Monkey, San Francisco-based investment firm Greenoaks Capital is a leading shareholder in Clover Health Investments, Corp. (NASDAQ: CLOV) with 96.3 million shares worth more than $728 million.
Just like Tesla, Inc. (NASDAQ: TSLA), Advanced Micro Devices, Inc. (NASDAQ: AMD), ContextLogic Inc. (NASDAQ: WISH), and Palantir Technologies Inc. (NYSE: PLTR), Clover Health Investments, Corp. (NASDAQ: CLOV) is one of the stocks both Reddit’s WallStreetBets and hedge funds love.
6. BlackBerry Limited (NYSE: BB)
Number of Hedge Fund Holders: 24
BlackBerry Limited (NYSE: BB) is placed sixth on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The company’s shares have returned more than 151% to investors in the past year. The firm makes and sells security software and other services to businesses and governments around the world. Despite the massive interest around the company on WallStreetBets, the company has been getting bearish ratings from investment advisors on the back of the recent earnings report.
In quarterly earnings results, posted on June 24, BlackBerry Limited (NYSE: BB) reported earnings per share of -$0.05 for the first quarter of 2021, in line with market predictions. The revenue over the period was $174 million, down 15% year-on-year.
Out of the hedge funds being tracked by Insider Monkey, Canada-based investment firm Fairfax Financial Holdings is a leading shareholder in BlackBerry Limited (NYSE: BB) with 46 million shares worth more than $392 million.
Just like Tesla, Inc. (NASDAQ: TSLA), Advanced Micro Devices, Inc. (NASDAQ: AMD), ContextLogic Inc. (NASDAQ: WISH), and Palantir Technologies Inc. (NYSE: PLTR), BlackBerry Limited (NYSE: BB) is one of the stocks both Reddit’s WallStreetBets and hedge funds love.
5. ContextLogic Inc. (NASDAQ: WISH)
Number of Hedge Fund Holders: 25
ContextLogic Inc. (NASDAQ: WISH) is ranked fifth on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The stock has offered investors returns exceeding 55% over the course of the past four weeks. The firm operates an online ecommerce platform. On June 21, the share price of the firm jumped more than 18% in a single day as the hype around the company reached fever pitch on the WallStreetBets forum. The firm has become a favorite on the forum as hedge funds attempt to short the stock and retail investors buy it up.
On June 14, ContextLogic Inc. (NASDAQ: WISH) stock surged more than 5% after the firm announced that it had partnered with PrestaShop, an ecommerce platform, to make the merchandise on the latter available on the former.
Out of the hedge funds being tracked by Insider Monkey, New York-based firm JS Capital is a leading shareholder in ContextLogic Inc. (NASDAQ: WISH) with 8.3 million shares worth more than $131 million.
4. NIO Inc. (NYSE: NIO)
Number of Hedge Fund Holders: 28
NIO Inc. (NYSE: NIO) is a Chinese electric vehicle manufacturer. It is placed fourth on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The company’s shares have offered investors returns exceeding 475% over the course of the past twelve months. NIO is a favorite stock among Redditors and hedge funds. The company has managed to deal with auto supply chain problems better than competitors like Tesla and is expected to have a strong vehicle delivery year.
On July 1, NIO Inc. (NYSE: NIO) posted vehicle delivery numbers for the month of June, reporting more than 8,000 deliveries, up more than 20% compared to the deliveries in May and representing an increase of 116% year-on-year.
At the end of the first quarter of 2021, 28 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in NIO Inc. (NYSE: NIO), down from 34 in the preceding quarter worth $2.6 billion.
In its Q2 2020 investor letter, McLain Capital, an asset management firm, highlighted a few stocks and NIO Inc. (NYSE: NIO) was one of them. Here is what the fund said:
“Nio, Inc. (NIO): It’s stock up 360% since the beginning of June on no news, and one of our more troublesome short positions, the Chinese electric vehicle manufacturer is valued at a whopping $17bln on trailing revenue of only $1.1bln. In 2019, the business ran a -17% gross margin, a -140% EBITDA margin & burned ~$1.5bln in cash in 2019. The stock has become one of the most popular stocks among retail traders with approximately 250,000 accounts holding the name just on the popular Robinhood trading platform.”
3. Palantir Technologies Inc. (NYSE: PLTR)
Number of hedge fund holders: 32
Palantir Technologies Inc. (NYSE: PLTR) is a software firm that specializes in big data analysis and works closely with the intelligence community in the United States. It is ranked third on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The stock has returned 8.8% to investors in the past year. The number of mentions of the firm on the WallStreetBets forum have been increasing in the past few days, leading to a steady increase in the share price.
On June 18, the Federal Aviation Authority in the United States awarded Palantir Technologies Inc. (NYSE: PLTR) a contract for a data analytics tool that will help the agency improve aviation safety and security around the country.
At the end of the first quarter of 2021, 32 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in Palantir Technologies Inc. (NYSE: PLTR), down from 38 in the preceding quarter worth $1.9 billion.
In its Q4 2020 investor letter, Guardian Fund, an asset management firm, highlighted a few stocks andPalantir Technologies Inc. (NYSE: PLTR) was one of them. Here is what the fund said:
“In October, we bought a stake in Palantir. Earlier, in June, our concentrated Tech Fund, which has a mandate to also buy shares in the secondary market, bought shares of Palantir from insiders, before the direct listing. At the price we bought, the equity had much more upside than downside. Palantir is operating a software platform that functions as the digital infrastructure for data-driven operations and decision making. The software helps to structure and capture context in data of large corporations. Governments are increasingly realizing that they have to deal with serious data challenges and cyber risk. As most governments cannot attract the most talented software engineers, they need private enterprises such as Palantir to help them build solid infrastructure. Foundry, Palantir’s software for enterprises, is used by companiesto make safer cars and airplanes or to accelerate cancer research. The speed to bring new clients on board is improving and revenues will grow faster than expenses. Palantir has a long runway of growth ahead.”
2. Advanced Micro Devices, Inc. (NASDAQ: AMD)
Number of Hedge Fund Holders: 62
Advanced Micro Devices, Inc. (NASDAQ: AMD) is placed second on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love.The company’s shares have returned 79% to investors in the past twelve months. The firm makes and sells semiconductor chips. AMD stock has been gaining in recent weeks amid a global shortage of chips that has led to an increase in chip prices. The number of mentions of the firm on the WallStreetBets forum has been increasing too.
On June 30, the European Union granted Advanced Micro Devices, Inc. (NASDAQ: AMD) unconditional approval for the purchase of Xilinx, a semiconductor manufacturing company, for a reported $35 billion deal.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Advanced Micro Devices, Inc. (NASDAQ: AMD) with 25 million shares worth more than $1.9 billion.
1. Tesla, Inc. (NASDAQ: TSLA)
Number of Hedge Fund Holders: 62
Tesla, Inc. (NASDAQ: TSLA) is a California-based electric vehicle maker. It is ranked first on our list of 10 stocks both Reddit’s WallStreetBets and hedge funds love. The stock has returned 181% to investors in the past year. The company has been a favorite of the WallStreetBets forum since more than a year, and retail investors on the forum helped the company register a record rally over the past year that saw share price soar more than 700% before slowing down in April as vehicle deliveries slow down.
On June 30, investment advisory Deutsche Bank maintained a Buy rating on Tesla, Inc. (NASDAQ: TSLA) stock but lowered revenue and earnings per share estimates for the second quarter results. The bank expects Tesla to report 200,000 vehicle deliveries for the second quarter, down from 207,000 in the previous quarter.
At the end of the first quarter of 2021, 62 hedge funds in the database of Insider Monkey held stakes worth $10 billion in Tesla, Inc. (NASDAQ: TSLA), down from 68 in the preceding quarter worth $12 billion.
Here is what Baron Partners Fund has to say about Tesla, Inc. (NASDAQ: TSLA) in its Q1 2021 investor letter:
“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, energy storage solutions, and battery cells. The stock fell during the quarter as a result of general market dynamics and a potential production slowdown due to parts shortages. A refreshed S/X and China Model Y ramp could also have a negative impact on margins in early 2021. We anticipate strong growth and improved margins driven by new production capacity, manufacturing efficiencies, localization of its manufacturing and supply chain, and maturation of Tesla’s full self-driving technology.”
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Disclose. None. 10 Stocks Both Reddit’s WallStreetBets and Hedge Funds Love is originally published on Insider Monkey.
