In this article, we discuss the 10 trending stocks on Reddit.
The finance world has been rocked in recent months by the dramatic influx of retail investors on the marketplace. According to a report by professional services firm Deloitte, the COVID-19 pandemic played a central part in this story, as more than 10 million Americans opened a brokerage account in 2020. In January 2021, at the height of a GameStop short squeeze saga, nearly six million Americans downloaded an online trading application. These retail investors strategize on social media platforms like Reddit.
Reddit forums have thus gained in importance around Wall Street and even hedge funds have started monitoring them to keep abreast of trending stocks. Data intelligence firm Morning Consult revealed in a report last year that individual investors were responsible for more than 20% of all stock trading last year, a value that has more than doubled when compared to ten years ago. The dynamics within the retail investor boom also make for interesting reading. A Charles Schwab survey claims that 50% of all new investors are millennials.
These investors favor pouring money into growth stocks. Some of the top trending stocks on Reddit include Apple Inc. (NASDAQ: AAPL), Advanced Micro Devices, Inc. (NASDAQ: AMD), Tesla, Inc. (NASDAQ: TSLA), and Chewy, Inc. (NYSE: CHWY), among others. Robinhood, the most popular stock trading application, has tens of millions of funded accounts, but smaller brokerage firms like Schwab, Vanguard, and Fidelity have also reported a dramatic increase in young users trading through their platforms.
There is little doubt that retail investors have transformed the financial landscape. 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 July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). 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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With this context in mind, here is our list of the 10 trending stocks on Reddit. They were picked keeping in mind the hype around the companies on Reddit forum WallStreetBets.
The hedge fund sentiment around the stocks was gauged using data of 873 hedge funds tracked by Insider Monkey. The list is compiled according to the hedge fund holders in each stock.
The analyst ratings of the companies and their basic business fundamentals are also discussed to provide readers with some more context for their investment decisions.
Trending Stocks on Reddit
10. Tattooed Chef, Inc. (NASDAQ: TTCF)
Number of Hedge Fund Holders: 7
Tattooed Chef, Inc. (NASDAQ: TTCF) is placed tenth on our list of 10 trending stocks on Reddit. The firm markets plant-based foods and operates from California.
In earnings results for the second quarter, posted on August 12, Tattooed Chef, Inc. (NASDAQ: TTCF) reported a revenue of more than $50 million, up close to 46% compared to the revenue over the same period last year.
At the end of the second quarter of 2021, 7 hedge funds in the database of Insider Monkey held stakes worth $38 million in Tattooed Chef, Inc. (NASDAQ: TTCF), down from 10 in the preceding quarter worth $58 million.
Just like Apple Inc. (NASDAQ: AAPL), Advanced Micro Devices, Inc. (NASDAQ: AMD), Tesla, Inc. (NASDAQ: TSLA), and Chewy, Inc. (NYSE: CHWY), Tattooed Chef, Inc. (NASDAQ: TTCF) is gaining in popularity on Reddit forums.
9. Lithium Americas Corp. (NYSE: LAC)
Number of Hedge Fund Holders: 9
Lithium Americas Corp. (NYSE: LAC) is ranked ninth on our list of 10 trending stocks on Reddit. The firm operates as a resource company and is headquartered in Canada.
On August 30, investment advisory Cowen maintained an Outperform rating on Lithium Americas Corp. (NYSE: LAC) stock and raised the price target to $19 from $17, noting the high pricing of lithium products as a major growth catalyst for the firm.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Axel Capital Management is a leading shareholder in Lithium Americas Corp. (NYSE: LAC) with 408,130 shares worth more than $6 million.
Alongside Apple Inc. (NASDAQ: AAPL), Advanced Micro Devices, Inc. (NASDAQ: AMD), Tesla, Inc. (NASDAQ: TSLA), and Chewy, Inc. (NYSE: CHWY), Lithium Americas Corp. (NYSE: LAC) is also occupying retail investor interest on Reddit forums.
In its Q1 2021 investor letter, Massif Capital, an asset management firm, highlighted a few stocks and Lithium Americas Corp. (NYSE: LAC) was one of them. Here is what the fund said:
“Lithium Americas: The volatility noted above in LAC has resulted in solid returns via our options trades around our core equity position. At the current time, we are short calls on LAC, as we have done multiple times throughout the position’s life, expiring on May 21, 2021, at a $17.5 and $22.5 strike price. The volume of contracts sold at each strike corresponds to the size of the equity position we want should the calls expire in the money, and the underlying equity gets called away from us. The thought process behind this trade construction is that if we know the size of the position we want at a particular price point, there is no reason not to accumulate additional returns by pre-selling the stock we would have sold anyway.
High levels of volatility positively impact the price of options, increasing the premium we can earn from selling covered calls. To date, we have sold covered calls on LAC that have expired worthless four times, yielding a roughly 7% return on the equity position’s current value or 71bps for the portfolio overall. The outstanding covered calls appear to be trending towards a similar worthless expiration. If they do, the covered call trades on LAC will result in us owning the shares with committed capital of -$0.28 per share.
Although we believe in the fullness of time LAC warrants a $30+ valuation, the prices achieved in early January of this year were not justified by the underlying fundamentals. Some will argue we should have sold down our position. We had already established our option positions and believe LAC is an emerging major in the lithium mining industry. Thus, we decided to maintain the position unchanged. Although still relatively high, the current $15 per share valuation is not crazy compared to where we think the firm should be trading based on fundamentals, so we are no longer overly concerned with the position as is.
LAC management also took advantage of the volatility issuing stock on January 22 for $22 a share. The ~$400 million in proceeds will be used to develop Thacker Pass, the US-based clay lithium deposit, which will likely be the largest producing Lithium mine in America when turned on. In our opinion, the stock issuance could not have come at a better time. LAC management has advanced the project through various development stages (de-risking), but with the share issuance, they have significantly reduced the need to bring in an outside partner to develop the asset as the first phase of the project is expected to cost roughly $581 million. After-tax and at an 8% discount rate, the Thacker Pass project’s present value is approximately $2.6 billion (the firm’s current market capitalization is $1.5 billion). Although the share issuance was dilutive, increasing the total shares by 17%, we believe it will, in the long run, prove a forward-looking, value-additive decision by management.
The lithium market remains an area of interest and focus for us. This reflects our belief that the most exciting investment opportunities to capture secular trends in EV’s and batteries are found upstream in the mining industry. It is also a reflection that there is a greater diversity of lithium investment opportunities relative to other battery metals.”
8. McAfee Corp. (NASDAQ: MCFE)
Number of Hedge Fund Holders: 18
McAfee Corp. (NASDAQ: MCFE) is a California-based integrated security solutions provider. It is placed eighth on our list of 10 trending stocks on Reddit.
On June 17, investment advisory Mizuho kept a Buy rating on McAfee Corp. (NASDAQ: MCFE) stock and raised the price target to $30 from $28, citing appreciation of comp multiples as the reason behind the ratings update.
At the end of the second quarter of 2021, 18 hedge funds in the database of Insider Monkey held stakes worth $125 million in McAfee Corp. (NASDAQ: MCFE), up from 17 in the previous quarter worth $174 million.
In addition to Apple Inc. (NASDAQ: AAPL), Advanced Micro Devices, Inc. (NASDAQ: AMD), Tesla, Inc. (NASDAQ: TSLA), and Chewy, Inc. (NYSE: CHWY), McAfee Corp. (NASDAQ: MCFE) has been one of the most hyped stocks on Reddit in recent weeks.
7. SmileDirectClub, Inc. (NASDAQ: SDC)
Number of Hedge Fund Holders: 19
SmileDirectClub, Inc. (NASDAQ: SDC) is a Tennessee-based oral care company. It is ranked seventh on our list of 10 trending stocks on Reddit.
On August 5, investment advisory Credit Suisse assumed coverage of SmileDirectClub, Inc. (NASDAQ: SDC) stock with an Outperform rating and a price target of $11. Vik Chopra, an analyst at the firm, issued the ratings update.
At the end of the second quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth $135 million in SmileDirectClub, Inc. (NASDAQ: SDC), down from 21 in the preceding quarter worth $177 million.
Apple Inc. (NASDAQ: AAPL), Advanced Micro Devices, Inc. (NASDAQ: AMD), Tesla, Inc. (NASDAQ: TSLA), and Chewy, Inc. (NYSE: CHWY) are some of the trending stocks on Reddit, along with SmileDirectClub, Inc. (NASDAQ: SDC).
6. DTE Energy Company (NYSE: DTE)
Number of Hedge Fund Holders: 32
DTE Energy Company (NYSE: DTE) is placed sixth on our list of 10 trending stocks on Reddit. The firm generates and distributes electricity. It is headquartered in Michigan.
On August 5 investment advisory Mizuho maintained a Buy rating on DTE Energy Company (NYSE: DTE) stock and raised the price target to $126 from $123, appreciating the earnings results of the company for the second quarter of 2021.
At the end of the second quarter of 2021, 32 hedge funds in the database of Insider Monkey held stakes worth $469 million in DTE Energy Company (NYSE: DTE), up from 26 in the preceding quarter worth $205 million.
Apple Inc. (NASDAQ: AAPL), Advanced Micro Devices, Inc. (NASDAQ: AMD), Tesla, Inc. (NASDAQ: TSLA), and Chewy, Inc. (NYSE: CHWY) are trending on Reddit, just like DTE Energy Company (NYSE: DTE).
5. Novavax, Inc. (NASDAQ: NVAX)
Number of Hedge Fund Holders: 37
Novavax, Inc. (NASDAQ: NVAX) is ranked fifth on our list of 10 trending stocks on Reddit. The firm operates as a biotechnology company focused on vaccine development. It operates from Maryland.
On June 15, investment advisory Cantor Fitzgerald kept an Overweight rating on Novavax, Inc. (NASDAQ: NVAX) stock and raised the price target to $272 from $217, noting the progress of pipeline drugs for the firm.
At the end of the second quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth 1.1 billion in Novavax, Inc. (NASDAQ: NVAX), down from 38 in the previous quarter worth $1.2 billion.
4. Chewy, Inc. (NYSE: CHWY)
Number of Hedge Fund Holders: 43
Chewy, Inc. (NYSE: CHWY) is a Florida-based ecommerce company famous for retailing pet products. It is placed fourth on our list of 10 trending stocks on Reddit.
On August 4, investment advisory Credit Suisse initiated coverage of Chewy, Inc. (NYSE: CHWY) stock with an Outperform rating and a price target of $121. Katie Tryhane, an analyst at the firm, issued the ratings update.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Chewy, Inc. (NYSE: CHWY) with 1.4 million shares worth more than $115 million.
In its Q4 2020 investor letter, Nelson Capital Management, an asset management firm, highlighted a few stocks and Chewy, Inc. (NYSE: CHWY) was one of them. Here is what the fund said:
“One of our investment themes over the last several years has been the “humanization of pets,” which refers to the increasing amount of time and money that people are devoting to their animals. This theme has become even more evident during the pandemic, as many families and individuals have adopted pets while spending more time at home. Today, more than 85 million US households have pets. In 2015, roughly 7% of pet products in the U.S. were bought online. By 2019, that number had increased to 22%. Moreover, the pandemic has caused pet parents, new and experienced alike, to sign up for delivery of pet supplies in order to avoid trips to physical stores. 72% of pet owners made at least one online purchase for their pets in the past 12 months and 39% of those were subscription-based purchases.
Chewy (tkr: CHWY) is the largest pure-play pet “e-tailer” in the world, offering “the personalized service of a neighborhood pet store combined with the convenience and speed of e-commerce.” The company was founded in 2011 and was bought by PetSmart in 2017, for $3 billion. In June, 2019, Chewy went public. All of its sales are currently U.S.-based. The company has co-headquarters with one facility in Dania Beach, Florida and one in Boston, Massachusetts, and employs about 12,000 people. Chewy offers a selection of high-quality pet food, treats, supplies, and pet healthcare products.
In addition to one-time sales, Chewy is creating a recurring revenue model through its “autoship” program. This is essentially a subscription service for products that are sent at intervals specified by customers and includes such items as food and medicine. Customers are more profitable the longer they stay with the company, as their “lifetime value” grows. The company is organized around providing an exceptional customer experience. Chewy has 10 fulfillment centers scattered across the US, which enable cost-efficient overnight shipments to about 80% of the U.S. population and cost-efficient two-day shipments to nearly 100%. This allows Chewy to provide excellent service to the company’s more than 12.7 million active users.
Chewy’s ability operate profitably in the future hinges on two key variables: growing its customer base and more efficiently managing its fulfillment costs through automation of its fulfillment centers, thereby decreasing labor costs. Chewy has a smart, experienced management team and the company is expected to become profitable at the end of this fiscal year.”
3. Tesla, Inc. (NASDAQ: TSLA)
Number of Hedge Fund Holders: 60
Tesla, Inc. (NASDAQ: TSLA) is a California-based electric vehicle and clean energy firm. It is ranked third on our list of 10 trending stocks on Reddit.
On August 20, investment advisory Wells Fargo reiterated an Equal Weight rating on Tesla, Inc. (NASDAQ: TSLA) stock with a price target of $660, highlighting that a 2022 Bot launch plan by the firm “seemed optimistic”.
At the end of the second quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $9 billion in Tesla, Inc. (NASDAQ: TSLA), down from 62 in the previous quarter worth $10 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.”
2. Advanced Micro Devices, Inc. (NASDAQ: AMD)
Number of Hedge Fund Holders: 63
Advanced Micro Devices, Inc. (NASDAQ: AMD) is placed second on our list of 10 trending stocks on Reddit. The company makes and sells semiconductors and is headquartered in California.
On August 9, investment advisory BMO Capital upgraded Advanced Micro Devices, Inc. (NASDAQ: AMD) stock to Market Perform from Underperform and raised the price target to
$110 from $80, underlining that the shares looked more reasonably valued.
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 28 million shares worth more than $2.6 billion.
In its Q4 2020 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Advanced Micro Devices, Inc. (NASDAQ: AMD) was one of them. Here is what the fund said:
“We also exited our positions in Advanced Micro Devices. Our investment campaign in Advanced Micro Devices (AMD) began in the second half of 2018, and we have seen a new management team reinvigorate the company’s product portfolio of microprocessors for PCs and servers, graphics processors, and video game consoles. These new, higher-margin products have helped the company partially close its margin gap with peers and capture share from market leader Intel. While we believe there is meaningful runway for further share gains and margin expansion, AMD has appreciated far beyond our mid-cap market cap mandate, and we exited our position.”
1. Apple Inc. (NASDAQ: AAPL)
Number of Hedge Fund Holders: 138
Apple Inc. (NASDAQ: AAPL) is ranked first on our list of 10 trending stocks on Reddit. The firm operates as a diversified technology company and is based in California.
On July 28, investment advisory Loop Capital maintained a Buy rating on Apple Inc. (NASDAQ: AAPL) stock and raised the price target to $165 from $150, noting that the firm had delivered a second straight quarter of material upside across the board.
At the end of the second quarter of 2021, 138 hedge funds in the database of Insider Monkey held stakes worth $145 billion in Apple Inc. (NASDAQ: AAPL), up from 127 in the preceding quarter worth $131 billion.
In its Q1 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ: AAPL) was one of them. Here is what the fund said:
“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ‘20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”
You can also take a peek at 15 Most Valuable Lithium Companies in the World and 10 Best Nickel Stocks to Buy Now.
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Disclosure. None. 10 Trending Stocks on Reddit is originally published on Insider Monkey.
