During the pandemic, many of us were stuck at home with time on our hands and government stimulus checks burning a hole in our pockets.
So it’s no surprise that day trading surged. Many people who had never traded a single stock before in their lives were suddenly opening up brokerage accounts.
And commission-free apps like Robinhood made this kind of trading easy – buying and selling stocks was almost like a game.
But rather than focusing on traditional metrics, many of these investors turned to social media sites like Reddit to discover which “exciting” stocks were about to “go to the moon.”
As buzz around a particular stock grew, more and more investors would pile in, often sending the stock flying higher.
In sum, we’ve witnessed the rise of “meme stocks.”
But while the meme stock craze has made it seem like it’s easy to make money in the market by buying into each new hyped stock, don’t fall for the trap…
Because when these meme stocks come crashing down to earth, it won’t be pretty…
Stocks That Break the Mold
My name is Jason Bodner, and for years now, I’ve been helping regular investors uncover “outlier” stocks in the markets.
Outliers are things that break the mold… For example, think of the best all-time athletes like Michael Jordan, Wayne Gretzky, or Babe Ruth. Each won multiple championships in his respective sport.
Jordan has more combined achievements – including number of titles and Finals MVP awards won – than any other NBA player.
Gretzky is by far the leading point-scorer in NHL history. In more than 1,500 games across 20 regular seasons, he averaged two points per game.
And as one of baseball’s most legendary players, Ruth’s career record of 714 home runs took over 30 years to break.
Compare this to the stats of their peers: A few players are terrible. But most are average, with the typical ups and downs in their careers. And then just a few, like the men I just listed, stand head and shoulders above all the rest.
These are the outliers we want to pay attention to.
Outliers in the stock market are much the same. Historically, only 4% of stocks have been responsible for all of the market’s gains over Treasury bonds.
That means the other 96% of stocks either met the returns or underperformed U.S. Treasurys. In other words, you’re wasting your time as an investor if you’re not involved in outlier stocks.
And I identify these winners by looking for strong fundamentals… solid technical setups… and most importantly, significant “Big Money” buying from institutional players.
With these factors in mind, I’ve been able to deliver incredible returns to my readers like 135%… 306%… 422%… and 553%.
So now let’s dive into what some investors might be wondering… Aren’t meme stocks outliers?
Steer Clear of These Stocks
The most iconic meme stock moment we’ve seen this year was the GameStop (GME) debacle.
Back at the start of the year, shares of GME traded just under $20. But the now-infamous “short squeeze” by traders on social media forced the price up to a peak of $483. That’s a more than 2,300% return.
AMC Entertainment (AMC) has had another exciting ride this year on the meme stock rollercoaster. At the start of the year, the movie theater company traded for under $2.50. At its peak, it hit $72.62 – a more than 2,800% return.
And we’ve watched similar “meme” stories in the cryptocurrency space… Dogecoin (DOGE) went from around $0.009 to an all-time high of $0.74. That’s a 8,100% gain.
But GameStop, AMC, and Dogecoin weren’t truly the kinds of outliers we like to look for…
While the incredible returns on these stocks are undeniable, there are a few reasons I’ve recommended my readers steer clear.
Let me break them down…
First and foremost, these companies gain popularity almost inexplicably… and certainly not because they have the numbers to support their sudden price surges.
The meme stock trend has divorced a stock’s price from its fundamentals – or how strong and healthy the company really is.
GameStop, for example, was a brick-and-mortar video game retailer. The pandemic and the rise of direct downloads for games were both headwinds for the company, and its business has struggled for some time.
AMC, likewise, saw attendance at its theaters crash during the pandemic… and it’s struggling to maintain relevance in a world where more and more people are turning to streaming content.
Dogecoin was actually created as a joke. Its creators simply wanted to poke fun at bitcoin and other cryptos, and it has no real purpose.
The run-up in these stocks is based on pure speculation. And while a little speculation isn’t a bad thing… it’s not something we should be basing a significant part of our investment strategy on.
More critically… this kind of rampant speculation makes it hard for investors to make thoughtful decisions.
If you’re buying something purely because other people are buying it… how do you know when to sell? At the outset, buying meme stocks might seem “easy”… but it makes this kind of decision much more difficult.
And as we’ve seen, this kind of dramatic growth can quickly reverse. Both AMC and GME have seen their peak prices get cut in half. Dogecoin has fallen more than 70% since May.
If you’re operating only off public sentiment, you can easily get caught up when everyone starts rushing for the door at the same time. As easily as these stocks shoot up, they can also fall… especially if interest wanes or there’s a bad piece of news.
Investors might be able to easily make some money with meme stocks… but they can just as easily lose it.
So what should we do instead?
A Stock Market “Glitch”
The good news is… there are ways investors can make extraordinary gains without relying on risky meme stocks…
In fact, Jeff Brown – founder of Brownstone Research – has recently discovered an opportunity that should be on every investor’s radar…
He’s calling it a “glitch” in the markets… something that lets us know when a stock is about to experience a rally – even weeks in advance. His research shows that this glitch identified 17,000 different opportunities that could have doubled investors’ money… or more.
This is one of the most guarded secrets of the financial elites. And Wall Street doesn’t want you to know about it.
But this Wednesday, at 8 p.m. ET, Jeff is going to break his silence… and show everyone how they can profit using this stock market glitch.
He’ll even reveal the name and ticker of a “glitch” stock attendees can buy right away.
I’ve known Jeff for a while now… and the one thing I’m certain of is that he’s someone worth listening to.
So if you’re looking for a way to make more from your investments… instead of riding the meme stock rollercoaster… then please go right here for all the details.
Talk soon,
Jason Bodner
Editor, Outlier Investor