In this article, we discuss the 10 stocks Redditors are buying for 2022.
Internet platforms like Reddit and the retail investors who use them to exchange investment ideas have perhaps been the biggest story in the finance world this year. At the beginning of 2021, the “Reddit crowd” was responsible for a short squeeze involving GameStop, a retailer for gaming products, and AMC Entertainment, a movie theatre business, that resulted in losses worth at least $12 billion to institutional investors like hedge funds. The Alternative Investment Management Association, a hedge fund-led body, called the frenzy a “market distortion”.
Over the past twelve months, as vaccine deployment improved and the economy reopened, many experts had predicted that this retail investing boom would steadily fizzle out. However, it seems like the opposite has happened. According to David Kostin, the chief US equity strategist at investment bank Goldman Sachs, the retail investor buying frenzy at the market is just getting started and renewed volatility will be one of the defining characteristics of this trend.
Heading into 2022, analysts expect retail investors to once again fade into the background as average growth and inflation fears “bore” them out of the market. Reddit discussion threads and the enthusiasm that these retail investors portray for the market, on the other hand, would suggest otherwise. Some of the stocks presently popular on Reddit include Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), among others discussed in detail below.
Our Methodology
These stocks were selected based on the hype around the companies on different Reddit forums. The analyst ratings and business fundamentals of each stock are also discussed in a bid to weed out “meme stocks” and provide readers with some informed context for their investment choices. Hedge fund sentiment was included as a classifier as well.
The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
Speedcurve Performance Analytics
Stocks Redditors are Buying for 2022
10. Piedmont Lithium Inc. (NASDAQ:PLL)
Number of Hedge Fund Holders: 6
Piedmont Lithium Inc. (NASDAQ:PLL) explores for and develops resource projects. In late August, the company completed the $196 million acquisition of Sayona Mining, an emerging lithium producer, after gaining regulatory approvals. The purchase creates a lithium production hub in the Abitibi region of Quebec. Redditors expect the firm to grow as lithium demand rises in North America, especially in the context of EV production.
In October, Loop Capital analyst Christopher Kapsch maintained a Buy rating on Piedmont Lithium Inc. (NASDAQ:PLL) stock and raised the price target to $108 from $86, noting increased demand, surging prices, and emerging trends from China as growth catalysts for Piedmont.
At the end of the third quarter of 2021, 6 hedge funds in the database of Insider Monkey held stakes worth $16 million in Piedmont Lithium Inc. (NASDAQ:PLL).
Just like Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), Piedmont Lithium Inc. (NASDAQ:PLL) is one of the stocks trending on Reddit.
9. Lithium Americas Corp. (NYSE:LAC)
Number of Hedge Fund Holders: 12
Lithium Americas Corp. (NYSE:LAC) is a diversified metals and mining firm with core interests in lithium. A record rally in the prices of lithium over the past few weeks has pushed the stock higher, attracting the attention of the Reddit crowd which views the firm as one of the leading plays in the lithium mining market.
In mid-November, Lithium Americas Corp. (NYSE:LAC) announced that it had agreed to purchase Millennial Lithium, another lithium firm, for $400 million. The acquisition provides the firm with regional growth opportunities in South America, an important lithium mining area.
Among the hedge funds being tracked by Insider Monkey, Singapore-based investment firm Himension Capital is a leading shareholder in Lithium Americas Corp. (NYSE:LAC) with 2.2 million shares worth more than $50 million.
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 Lithium Americas Corp. (NYSE: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 Lithium Americas Corp. (NYSE: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. Energy Fuels Inc. (NYSE:UUUU)
Number of Hedge Fund Holders: 13
Energy Fuels Inc. (NYSE:UUUU) operates as a uranium recovery firm. The stock has surged in the past few weeks after Kazakhstan, the largest producer and seller of uranium, said it would soon be launching a physical uranium fund.Energy Fuels Inc. (NYSE:UUUU) stock has registered gains of more than 200% in the past twelve months and looks to rise further in the coming months as Redditors pile into the stock to ride this rally.
In earnings results for the third quarter, posted in early November, Energy Fuels Inc. (NYSE:UUUU) reported a revenue of $0.7 million, up over 46% year-on-year and smashing analyst expectations by $0.02 million.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Driehaus Capital is a leading shareholder in Energy Fuels Inc. (NYSE:UUUU) with 2.2 million shares worth more than $15 million.
7. United Microelectronics Corporation (NYSE:UMC)
Number of Hedge Fund Holders: 13
United Microelectronics Corporation (NYSE:UMC) owns and runs a semiconductor wafer foundry. The stock is gaining traction on Reddit as one of the “undervalued” names in the semiconductor market that has registered incredible gains this year because of a chip shortage that is expected to last well into 2022.
Citi analyst Roland Shu recently upgraded United Microelectronics Corporation (NYSE:UMC) stock to Buy from Neutral and raised the price target to NT$70 from NT$65, appreciating the quarterly earnings of the firm amid strong demand and tight supply.
At the end of the third quarter of 2021, 13 hedge funds in the database of Insider Monkey held stakes worth $151 million in United Microelectronics Corporation (NYSE:UMC), up from 10 in the preceding quarter worth $141 million.
6. BlackBerry Limited (NYSE:BB)
Number of Hedge Fund Holders: 20
BlackBerry Limited (NYSE:BB) provides security software and services to enterprise clients. The stock has been one of the most discussed on popular Reddit forum WallStreetBets for most of this year, and the heavy trading volume, based on retail investor interest, has helped the share price soar by over 41% year-to-date.
In early October, BlackBerry Limited (NYSE:BB) announced that it had signed a partnership deal with market research firm Deloitte to provide original equipment manufacturers with the protection they needed to secure software supply chains.
Among 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 $454 million.
Alongside Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), BlackBerry Limited (NYSE:BB) is one of the stocks popular among the Reddit crowd.
5. Magnite, Inc. (NASDAQ:MGNI)
Number of Hedge Fund Holders: 26
Magnite, Inc. (NASDAQ:MGNI) owns and runs an independent advertising platform. As adtech giants like Google and Meta face the brunt of antitrust motions, smaller adtech companies have gained in importance this year. The surge in spending on digital by enterprise clients, in the wake of the pandemic, has also helped the stock. Reddit forums are full of discussions around Magnite as well.
Magnite, Inc. (NASDAQ:MGNI) recently posted earnings for the third quarter, reporting a revenue of $131 million, up more than 116% compared to the revenue over the same period last year and beating estimates by $16.7 million.
Among the hedge funds being tracked by Insider Monkey, Texas-based firm Nine Ten Partners is a leading shareholder in Magnite, Inc. (NASDAQ:MGNI) with 1.8 million shares worth more than $51 million.
In its Q1 2021 investor letter, Alger, an asset management firm, highlighted a few stocks and Magnite, Inc. (NASDAQ:MGNI) was one of them. Here is what the fund said:
“Magnite, Inc. was among the top contributors to performance. Magnite is an advertising technology company serving as a supply side platform for publishers. The platform helps publishers such as network television stations or cable news providers automate the sale of digital advertising inventory across different formats and channels, like desktop, mobile, video, audio, connected TV and over-the-top TV. Publishers monetize their digital advertising inventory by using Magnite’s platform to access a global market of ad buyers, including advertising agencies that use supply side platforms. Magnite also helps sellers decrease costs and protect their brands and user experience.
Magnite receives ad inventory from sellers and optimizes publishers’ revenue yields by processing the highest buyer bids. Currently, Magnite keeps approximately 14% of ad spend as revenue (i.e. take rate) and passes on the remainder of the ad spend to publishers. Magnite’s clients include many of the world’s leading publishers of websites and mobile applications and the company believes that its platform reaches approximately 1 billion individuals globally. Shares of Magnite outperformed in the first quarter due to stronger-than-expected fourth quarter results driven by a rapid recovery in digital advertising. Additionally, the company acquired SpotX, its largest competitor in connected TV. The combination makes Magnite the industry’s largest independent supply side platform and a much larger connected TV player. We believe connected TV is the most exciting part of the digital ad market and is in the early days of growth, including capturing market share from linear TV.”
4. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Holders: 27
UiPath Inc. (NYSE:PATH) is an application software firm that provides robotic process automation. The firm recently teamed up with cloud giant Snowflake to integrate the UiPath products onto the Snowflake platform, a collaboration that will help business clients store and analyze their data more securely. The partnership has garnered lots of interest among Redditors.
On December 3, investment advisory Morgan Stanley upgraded UiPath Inc. (NYSE:PATH) stock to Overweight from Equal Weight with a price target of $74, noting that the firm was executing growth strategies well and was “clear” about the path forward in the automation market.
At the end of the third quarter of 2021, 27 hedge funds in the database of Insider Monkey held stakes worth $3.6 billion in UiPath Inc. (NYSE:PATH).
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and UiPath Inc. (NYSE:PATH) was one of them. Here is what the fund said:
“We participated in the IPO of UiPath, a developer of software for robotic process automation that uses AI, natural language processing and design to streamline complex processes across a variety of technology environments. The company is an industry leader with a superior solution for leveraging software to optimize workloads. Organizations around the world are beginning to understand the power of automation, with momentum picking up toward fully automating business processes, a $60 billion market today that could grow to $200 billion or more by 2030. UiPath has a unique pricing model, broad partner ecosystem and thoughtful management team supporting one of the strongest growth profiles in technology. Risks we are watching include a partial cloud transition ahead and increased competition from larger software platforms over time.”
3. Azenta, Inc. (NASDAQ:AZTA)
Number of Hedge Fund Holders: 29
Azenta, Inc. (NASDAQ:AZTA) provides life sciences products and services. The firm was previously known as Brooks Automation and recently changed its name to Azenta after selling the semiconductor solutions business to Thomas Lee Partners for $3 billion back in September. The sale attracted the attention of the Reddit crowd, which has been bullish on the company since.
Azenta, Inc. (NASDAQ:AZTA) recently announced that Azenta Life Sciences, a subsidiary of the firm, had been contracted to provide vaccine storage and distribution services for the United States Department of Defense.
At the end of the third quarter of 2021, 29 hedge funds in the database of Insider Monkey held stakes worth $577 million in Azenta, Inc. (NASDAQ:AZTA).
2. Cloudflare, Inc. (NYSE:NET)
Number of Hedge Fund Holders: 50
Cloudflare, Inc. (NYSE:NET) owns and runs a cloud platform that provides network services. The company recently announced that it was entering into email security and revealed that it had also teamed up with Microsoft to aid with search engine results. The new ventures are seen as growth catalysts for the company on Reddit.
Cloudflare, Inc. (NYSE:NET) posted earnings for the third quarter in early November, beating market predictions on earnings per share by $0.04. The revenue over the period was $172 million, up over 50% year-on-year and beating estimates by $6.6 million.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Cloudflare, Inc. (NYSE:NET) with 1.1 million shares worth more than $129 million.
In its Q4 2020 investor letter, Alger Mid Cap Focus Fund, an asset management firm, highlighted a few stocks and Cloudflare, Inc. (NYSE:NET) was one of them. Here is what the fund said:
“Cloudflare. Inc. provides a broad range of network services to businesses of all sizes across the world. Cloudflare’s intelligent global network spans more than 200 cities in over 100 countries. It offers network security, performance and reliability to a growing portion of global web traffic. Today. over 15% of global internet requests go through Cloudflare. Cloudflare’s serverless network design allows this global network to be a key component layer as new developments for edge computing. 5G and Internet of Things increase the importance of secure. reliable edge networks. Cloudflare stock outperformed in the fourth quarter following the announcement of Cloudflare One, a cloud-bas. network-as-a-service platform designed to replace the traditional enterprise network infrastructure. The Cloudflare One solution merges existing Cloudflare access and security solutions along with new enterprise-specific features into a unified Zero Trust network that can be managed through a single “pane of glass.” or display screen. With the rapid shift to remote work caused by the pandemic, this product increases Cloudflare’s potential for winning business from enterprise customers seeking to adapt to this new business environment.
While Cloudflare One adoption is still early. Cloudflare has already started to demonstrate an improved ability to sell to large customers. When discussing its third quarter results. Cloudflare said that it is continuing to sign up larger enterprise customers. including its first client to generate more than $10 million in annual recurring revenue. Cloudflare has just started to better monetize its more than 100.000 paying customer base. which along with continued product innovation, gives the company strong growth potential.”
1. Square, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 98
Square, Inc. (NYSE:SQ) provides payments technology solutions. The company has been a Reddit favorite for most of this year as retail investors back the company as a disruptor in the payments market where crypto-heavy players are steadily gaining in relevance. Square has over $400 million invested in crypto assets.
UBS analyst Rayna Kumar recently initiated coverage of Square, Inc. (NYSE:SQ) stock with a Buy rating and a price target of $322, lauding the “transformational” purchase of Afterpay, another payment firm, as a growth catalyst for Square in the long-term.
At the end of the third quarter of 2021, 98 hedge funds in the database of Insider Monkey held stakes worth $8 billion in Square, Inc. (NYSE:SQ), up from 94 the preceding quarter worth $10 billion.
In its Q1 2021 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Square, Inc. (NYSE:SQ) was one of them. Here is what the fund said:
“We established a position in leading Financial Technology provider Square during the quarter. Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers).
The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion (due to pass through costs, gross profit is more reflective of top-line growth) and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown
from nothing in 2015 to $1.2 billion gross profit last year) has a particularly large opportunity with its powerful ecosystem of digital financial services including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app.
We estimate that the company can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while most of the company’s current profit is from its Seller Business, we believe most of Square’s future value will be from its Cash App business.”
You can also take a peek at 10 Companies that Benefit From Crypto Mining and 12 Best Artificial Intelligence Stocks To Invest In Right Now.
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Disclosure. None. 10 Stocks Redditors are Buying for 2022 is originally published on Insider Monkey.
