GameStop’s Drop Top; Bed, Bath and BlackBerry; AMC’s Lifeline
GameStop and the Great Awakening
If I asked you who holds power on Wall Street, what would you say? Hedge funds? Goldman Sachs? Maybe the Federal Reserve?
Back in the “old days,” you’d be right. Massive banks and hedge funds ruled the roost … and created a massive mess of the whole thing back in 2009, I might add. Retail investors like us had only one choice back then: bend over, grin and bear it.
But what if I told you that this is no longer the case? What if I told you that the true power on Wall Street finally shifted to retail investors? That because of Robinhood, Charles Schwab and every other discount broker on the planet … you, Great Ones, are now the real power driving Wall Street?
You’d call me crazy, right? Mr. Great Stuff has lost his ever-loving mind. Well … if I’ve lost my mind, so has The Street’s Tim Collins:
Two weeks ago, I told you that bitcoin had value “because enough investors decided it has value.” This, Great Ones, is the current market paradigm.
Investments have value because you decide they do — not some Wall Street talking head. Remember, Jim Cramer was against GameStop (NYSE: GME) before he was for it … or is he against it again? I can’t keep track.
Stocks and assets like bitcoin rally not because Goldman Sachs or hedge funds decided they have value, but because retail investors did. In the past year, we’ve seen companies like GameStop, BlackBerry (NYSE: BB) and Hertz (OTC: HTZGQ) soar not because Goldman saw “strategic cost-effective synergies that could create shareholder value.”
We saw these stocks rally because enough investors decided they could create value … on their own. This is true regardless of fundamentals. I mean, Hertz filed for bankruptcy, and people still bought the stock.
This isn’t a new trend on Wall Street either. Back in 2017, Bloomberg columnist Tracy Alloway coined the phrase “Flows before pros” to describe lofty stock valuations. If only she knew about 2020…
In that article, Citigroup’s Matt King opines that “markets used to be self-limiting.” In other words, the Goldmans of the market used to dictate asset prices based on fundamentals and unattractive yields.
But the influx of retail investors has thrown that logic out the window. Because of the pandemic, we have a veritable herd of bored retail investors, flush with stimulus cash … apparently, enough cash to break short sellers (I’m looking at you, GME).
So, what you’re telling me is that I need to jump on Reddit, follow the herd and start trading? Maybe YOLO some GME calls?
What? No, no, no … that’s decidedly not what I’m saying. Are you trying to lose your retirement? Seriously.
What I’m saying is that with the power structure changing on Wall Street, you need an investment guide now more than ever! Especially if you’re considering GME calls … please get help.
Luckily for you, I have just the solution. Yes, you too can revel in the newfound power of retail investors. You can trade call options and shoot for huge returns without the massive insanity that drives many YOLO stocks on Wall Street.
Wanna know how? Are you serious about tapping into this new era of retail investing?
The Good: Picking Berries
Do you Baidu (NYSE: BIDU)? BlackBerry du … er… does.Long gone are the days of making blocky, keyboard-laden smartphones. BlackBerry is now a global leader in artificial intelligence (AI) driven cybersecurity.
Now, there are a lot — and I mean a lot — of cybersecurity firms out there. But BlackBerry took things to a new level, which is precisely why internet and AI pro Baidu is partnering with the company.
You see, BlackBerry’s security begins at the operating system (OS) level. It’s not a program you install over Windows. BlackBerry’s OS is the cybersecurity software. Combine this with the company’s deep understanding of AI, and we see why Baidu expanded its partnership with BlackBerry today.
Baidu’s Senior Director of Intelligent Driving noted: “The BlackBerry QNX software performs well in functional safety, network security and reliability, while Baidu has achieved long-term development in artificial intelligence and deep learning.”
Baidu will implement BlackBerry’s software in self-driving AI systems rolling out via Guangzhou Automobile Group, one of China’s biggest automakers. Guangzhou also makes the Hycan 007 electric vehicle (EV) in a partnership with Nio (NYSE: NIO).
AI, self-driving cars, EVs and Nio? No wonder BB stock is so hyped lately! Whether or not BB deserves its current valuation is a matter of opinion (see my comments on that above), but the company certainly has a bright future if it keeps signing deals like this.
The Bad: Bed Bath & Bouncing
Break shorts, you say? Y’all have never seen “guns like this,” you say? You’d think The War of the Worlds had begun, but nope. Take a guess what made Jim Cramer squawk like mad yesterday…
Bed Bath and Beyond (Nasdaq: BBBY) … yes, really. I hope you haven’t had your fill of short seller induced YOLO bets yet.
BBBY is up over 78% so far this year. It must be powering through the pandemic, right? No, far from it. The “Beyond” part of BBBY isn’t translating to “beyond the physical store.” Who impulse-buys a new towel set online, anyway?
What sent the stock soaring is that sweet, sweet short squeeze. With over 64% of its shares sold short, BBBY exploded over the past two weeks as shorts bought back in to cover their tails.
Even analysts bullish on Beyond’s turnaround plan had to U-turn, save face and cover their bases. One downgrade came from UBS, calling for investors to take profits and run. Raymond James hit BBBY with a double downgrade from strong buy to market perform for the same reason — the shares are just too dang high.
Though profit-taking had BBBY down 30% by yesterday’s close, it left just enough wiggle room for a few more YOLOers to squeeze the stock up another 2% today.
The Ugly: Cinema Shakeout
You ever get in a tizzy about nearly $1 billion in debt? AMC Entertainment (NYSE: AMC) did.
A much-needed capital transfusion came through for AMC this week. The company announced it had scrounged together $917 million in debt, equity and sticky change found between the cinema seats. For AMC holders and gamblers alike, this also means 164.7 million new shares on the market.
But, much like GameStop’s fundamentals or the “don’t stick in your ear” label on Q-Tips … none of this really mattered.
AMC shot up over 30% so far this week, and something tells me this won’t be the last time we see this much hype over share dilution. But hey, whatever keeps the optimism going, am I right? Let’s just keep stringing AMC’s bloated corpse along until we’re able to stream films directly to your brainbox…
And AMC would still keep hanging on, like a post-nuclear war roach.
The more I watch the market’s reaction to AMC’s painful throes at the hands of streaming, the more I’m convinced that AMC could win big post-pandemic … if it can avoid bankruptcy for now.
Here is a YOLO story, a story of utter nihilism. You know this story. This story is perhaps best told with a series of rocket emojis, but let’s try words instead…
— Matt Levine, “The GameStop Game Never Stops”
OK, you knew I couldn’t resist one last parting shot at GameStop.
Great Ones, I’ve talked about GME’s valuation. I’ve talked about the company’s failing business model. I’ve also talked about the potential for GameStop to rise from the ashes like a phoenix. I honestly don’t believe that last scenario, but anything is possible.
The thing is … it doesn’t matter if GameStop’s failure becomes a fact. It doesn’t matter if I haven’t shopped there in years … don’t know anyone who has shopped there in years … will never shop there, or if nobody ever shops there again. GME shares will rise and fall based on public sentiment.
But the broader story — the one I wrote about in today’s opener — is one of awakening by the retail public. You now hold the power to break short selling hedge funds, apparently.
So, my question to you, Great Ones is this: What will you do with your newfound power?
Or email me at GreatStuffToday@BanyanHill.com and tell me what you really think!
Great Stuff: Game On!
Like I said, if you haven’t dropped us a line to tell us your true thoughts — and nothing but your true thoughts — you’re missing out!
All your fellow Great Ones have filled our inbox up with rants that leave us raving, stock questions we crave and memes we can’t quite share in good conscience.
Why don’t you join the fun now? Send a quick memo to GreatStuffToday@BanyanHill.com and let us know what you think of short squeezes, the last legs of retail or whatever else you have on your mind.
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Until next time, stay Great!
Editor, Great Stuff