7 Meme Stocks to Avoid So You Don’t Get Caught Holding the Bag

While it may seem like “meme-stock mania” is over, several of these names are still up triple digits this year. In fact, much-maligned meme stocks are not losing steam as the more than 10 million members of Reddit’s r/WallStreetBets (WSB) community continue to push shares upward…

However — as is the case with most companies on these kinds of lists — these stocks do not have good fundamentals. And, they have not done well for quite some time now. But Redditors are not joking around. Of the 50 stocks that Robinhood originally put on its restricted list, roughly a third have doubled or more in price in 2021.

For this article, I have curated a list of some of the most sought-after meme stocks and taken a look at their financial performance. Unfortunately, though, meme stocks aren’t governed by a company’s fundamentals. So, it’s altogether better to go ahead and exit your position in these names if you value fundamental strength.

  • Gamestop (NYSE:GME)
  • AMC Entertainment (NYSE:AMC)
  • Naked Brand (NASDAQ:NAKD)
  • Castor Maritime (NASDAQ:CTRM)
  • Sorrento Therapeutics (NASDAQ:SRNE)
  • Canoo (NASDAQ:GOEV)
  • Clover Health (NASDAQ:CLOV)

Meme Stocks to Avoid: Gamestop (GME)

Year-to-date (YTD) change: 1122%

Gamestop is one of the original meme stocks. As such, shares of the embattled video-game retailer have become synonymous with the Reddit community. Strings of rocket emojis imply how WSB wants to send GME stock’s price “to the moon.” Likewise, users encourage each other to have “diamond hands,” holding onto the stock until the bitter end and not caving under the pressure.

However, the larger issue with this name is whether GME can turn around its fortunes despite its old-fashioned brick-and-mortar business model. Yes, the company does deserve credit for trying to transform itself into a digital enterprise. But that’s easier said than done. Not to mention, the retailer is up against the likes of Amazon (NASDAQ:AMZN) and Ebay (NASDAQ:EBAY), among others.

If you have money invested in GME stock, I believe it’s time to take profits and invest in other, more stable gaming spaces.

AMC Entertainment (AMC)

Year-to-date (YTD) change: 2586%

AMC was struggling with mounting debt before the pandemic. However, things went into overdrive when the novel coronavirus struck in full force. With Americans under instructions to stay at home for much of 2020, profits and sales plummeted. So, it was not surprising that many analysts felt the next logical step for AMC was Chapter 11.

However, Redditors flew in at the start of 2021 and gave this company a new lease on life. They pumped up the AMC stock price massively — to as high as $72.62 on Jun. 2 — when the movie-theater chain really should have been restructuring. Still, AMC has raised a lot of cash due to its prime meme-stock status. The money raised will go a long way in ensuring AMC can survive and can transform itself.

But the writing is on the wall. When it comes down to it, streaming is the future and you can see that with the outsized returns of stocks like Netflix (NASDAQ:NFLX), Disney (NYSE:DIS) and Amazon. As media and entertainment companies evolve their plans and invest heavily in streaming, what the future holds for movie theaters in America is really anyone’s guess.

Meme Stocks to Avoid: Naked Brand (NAKD)

Year-to-date (YTD) change: 255%

Until a few months ago, it was a given that Naked Brand would go belly up. Nevertheless, much like several other ailing companies, Reddit changed the equation. As several posts on WSB encouraged users to buy NAKD stock, the share price made an extraordinary recovery. If you ever needed to understand just how powerful the average retail investor has become, look no further than this intimate apparel company.

On a positive note, NAKD is now pursuing a…

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