FINRA Investor Education Foundation and CFA Institute (2023) revealed that ~37% of Gen-Z investors in the US and ~38% in the UK come to social media influencers regarding investment decisions. Therefore, it is important to explore the role finfluencers (influencers sharing financial advice on social media) play in providing investment information and how Gen-Z investors engage with finfluencers. Young investors are considering memes and viral videos as the primary source of investment advice.
Social Media and Investments: Do They Complement Each Other?
Experts believe that retail or non-professional investors are now becoming dependent on digital channels, like social media platforms such as TikTok, when it comes to investing.
FINRA revealed that ~60% of US investors under age 35 believe that social media can be used as a source of investment information. This compares to ~57% who use finance professionals. This increase is probably because digital channels are becoming easily accessible, with ~60% of the global population utilizing social media (as per DataReportal).
Quick-scroll websites are now considered the go-to spot for investment ideas and inspiration. This is because of their bite-sized format and easy access. Ofcom, which tracks news consumption in the UK – revealed that TikTok’s reach for news went up from ~1% in 2020 to ~7% in 2022. This was mainly seen in younger folks aged between 16 – 24 years. Pew Research mentioned that, in the US, this increased from ~3% in 2020 to ~10% in 2022.
Financial advice content, which is shared on social media, has been contributing to the growth of the “creator economy,” which is pegged at ~$127 billion globally (as per Coherent Market Insights). This is expected to reach US$528.39 billion by 2030, with growth stemming from higher demand for user-generated content and increased monetization opportunities. Financial institutions and investment advisory companies are now focusing on creating pathways from social media to their product and services to exploit strong market opportunities. Therefore, most retail investors continue to make investing decisions under social media’s influence.
Retail Traders Making a Significant Portion in The US Stock Options
JPMorgan Chase & Co. highlighted that non-professional investors are now making a bigger part of the US options market as they continue to pour money mainly into short-term bets and technology stocks. The bank highlighted that retail traders accounted for ~18.3% of the total options activity in June. Social media and online investing communities have influenced retail investors to the extent that these investors don’t shy away from making investments in the downturn.
In late July and early August 2024, when there was a sharp decline in popular technology shares, retail investors turned out to be net buyers.
Vanda Research mentioned that individual investors, who were caught up in the market downturn, continued to be net buyers of shares of leading technology and AI-related companies. Just to balance out the risks, retail investors directed significant buying to an ETF tracking 20-Y Treasury bonds. Wall Street experts and enthusiasts believe that this confidence comes from the online investing communities and social media platforms, where there were discussions about going long on leading technology shares as they were trading at “decent levels.”
Our methodology:
We sifted through active subreddits and narrowed our list to the 10 best stocks by selecting the trending ones. Finally, these have been ranked in ascending order of their hedge fund sentiment, as of Q2 2024.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10) Intuitive Machines, Inc. (NASDAQ:LUNR)
Number of hedge fund holders: 11
Intuitive Machines, Inc. (NASDAQ:LUNR) is a diversified space company, which is focused on space exploration. The company provides and supplies space products and services that enable sustained robotic and human exploration to the Moon, Mars, and beyond.
It is the only commercial operation that has a proven lunar capability. This gives the company a first-mover advantage in the growing lunar industry. Moreover, the company’s success in its first lunar mission further validates the technology and business model. Intuitive Machines, Inc. (NASDAQ:LUNR)’s strength of first-mover advantage is backed by strong links it has with NASA and proven earth-to-moon capability. Moreover, the company secured ~$70 million in new backlog, which provides some revenue visibility.
Intuitive Machines, Inc. (NASDAQ:LUNR) is the only company that has a lunar-to-earth commercial communications system, a well-established operational mission control building, and patent-protected technologies.
The company’s revenues are expected to be aided by promising joint ventures. It owns ~90% of Space Network Solutions, which won an OMES III contract to offer servicing of NASA’s LandSet-7, a satellite launched in 1999. Next, Jacobs Engineering Inc. and Intuitive Machines, Inc. (NASDAQ:LUNR) have entered into a partnership under a subcontracting agreement for NASA’s JSC engineering and Science program. Intuitive Machines, Inc. (NASDAQ:LUNR) expects full-year 2024 revenue of $210 million – $240 million, which exhibits 2.6x – 3x of its prior-year sales.
The company’s 2Q 2024 results highlighted its competitive advantages in offering delivery, data transmission, and autonomous operations. These are the 3 pillars of space commercialization. In 2Q 2024, the company’s revenues came in at $41.4 million, reflecting a rise of 130% year-over-year. This growth stemmed from the OMES, LTVS, and JETSON low-power nuclear satellite projects. The revenues included the effect of changes in estimates associated with NASA CLPS contract modifications.
Analysts at Benchmark restated a “Buy” rating on the shares of Intuitive Machines, Inc. (NASDAQ:LUNR), giving it a price target of $10.00 on 14th August. Intuitive Machines, Inc. (NASDAQ:LUNR) had 11 hedge funds long its stock in the second quarter, with a total stake value of ~$7.36 million.
9) AST SpaceMobile, Inc. (NASDAQ:ASTS)
Number of hedge fund holders: 15
AST SpaceMobile, Inc. (NASDAQ:ASTS) is a satellite designer and manufacturer. The company is focusing on building a global cellular broadband network in space to operate directly with standard, unmodified mobile devices based on extensive IP and patent portfolio.
AST SpaceMobile, Inc. (NASDAQ:ASTS)’s scalability and advantageous cost position are expected to act as tailwinds over the medium term. Their satellite constellation’s design enables scalability regarding coverage area and number of users served. This allows them to grow as and when demand increases. By using existing mobile infrastructure and focusing on improving connectivity in areas that are underrepresented in network coverage, AST SpaceMobile, Inc. (NASDAQ:ASTS) can potentially provide cost-effective solutions compared to building new infrastructure from scratch. Also, vertical integration of 95% of satellite subsystems provides the company control over IP and manufacturing.
AST SpaceMobile, Inc. (NASDAQ:ASTS) is also expected to benefit from the recent announcement of a strategic partnership with Verizon Communications Inc. (NYSE:VZ). Apart from securing additional capital through prepayments and convertible notes, this partnership should accelerate AST SpaceMobile, Inc. (NASDAQ:ASTS)’s mission to eliminate connectivity gaps throughout the US. The company now seems to be strategically positioned to achieve the strong feat as it targets 100% geographical coverage throughout the continental U.S., which is the most valuable wireless market globally.
The company continues to work on the production and deployment of Block 2 satellites, with adjusted cash operating expenses to remain in the range of $30 million and $35 million per quarter for the rest of the year.
Scotiabank upped their target price on shares of AST SpaceMobile, Inc. (NASDAQ:ASTS) from $28.00 to $45.90, giving it a “Sector outperform” rating on 26th August.
8) Rocket Lab USA, Inc. (NASDAQ:RKLB)
Number of hedge fund holders: 15
Rocket Lab USA, Inc. (NASDAQ:RKLB) is engaged in space, building rockets, and spacecraft. The company offers end-to-end mission services which provide frequent and reliable access to space for civil, defense, and commercial markets.
The tiny rocket maker has made a strong start as it focused on getting closer to one of the most important customers: the U.S. government. This was evident when Rocket Lab USA, Inc. (NASDAQ:RKLB) decided in 2019 to invest millions of dollars in establishing a Launch Complex 2 (LC-2) in the US near the NASA facility on Wallops Island in Virginia. The investment indeed paid off as, in late 2023, the US Space Force named the company as one of its prime contractors. This led the company to fetch a $515 million contract to build satellites for a new missile defense system.
Recently, Space Force awarded Rocket Lab USA, Inc. (NASDAQ:RKLB) $14.5 million to launch an experimental “DISKSat” disk-shaped satellite. The new mission is under the scope of the Space Force’s Assured Access to Space program.
Rocket Lab USA, Inc. (NASDAQ:RKLB) is second only to SpaceX with respect to launching rockets for commercial use. Since SpaceX mainly focuses on larger payloads, Rocket Lab USA, Inc. (NASDAQ:RKLB) has a near monopoly in the small payload market. The company’s electron rocket has been able to establish itself as a leader in launch frequency and precision, while the upcoming Neutron vehicle should help the company expand its market presence. The development of the Neutron medium launch vehicle continues to progress on schedule, and the first launch is expected in the middle of the next year.
For 3Q 2024, the company expects revenue of between $100 million and $105 million. Notably, 4 analysts have given a “Hold” rating on the shares of Rocket Lab USA, Inc. (NASDAQ:RKLB), and 6 analysts gave a “Buy” rating. In the second quarter, 15 hedge funds had stakes worth $95.2 million in Rocket Lab USA, Inc. (NASDAQ:RKLB).
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