Meme stocks make a comeback, but blue chips deliver better returns for traders

According to data from high-growth trading platform Capital.com, meme stocks have surged in popularity once again, with increased trading activity among retail traders. However, despite the renewed focus on stocks like GameStop and AMC, blue-chip stocks such as Tesla, Apple, and Coinbase have provided traders with better returns over the last three months, especially when paired with stop-loss protection.

The data — based on the trading activity of 33,500 global traders who were actively trading equities on the Capital.com platform between 18 June 2024 and 18 to September 2024 —show that while meme stocks remain popular, they have been less profitable for traders compared to more established blue-chip companies. GameStop (GME) was the third most traded stock on the platform over the summer, after Tesla and Nvidia. AMC Entertainment Holdings Inc (AMC) was also among the top 10 most traded stocks over the same period.

Despite heightened trading activity in the popular meme stocks , less than half (44%) of all AMC trades during this period were profitable, while trading GME saw a modest 51% profit rate among Capital.com traders. Meme stocks also had the lowest adoption of stop-loss protection, with just 13% of AMC and 19% of GME positions utilising the risk management tool. Stop-loss orders help traders limit losses or lock in profits by automatically closing trades when prices hit predetermined levels.

In contrast, traders who used stop-loss orders and focused on blue-chip stocks like Tesla, Coinbase, and Apple experienced higher share of profits. Tesla trades posted a 60% win rate, with 22% of those trades using stop-loss protection, making it the most profitable equity trade of the summer.

Our analysts overview 

Commenting on the renewed interest in meme stock trading, Daniela Sabin Hathorn, Senior Market Analyst, Capital.com, said:

“After the initial hype in May, some traders maintained interest in these highly speculative meme stocks throughout the summer, despite waning momentum. While AMC and GME have offered some intraday trading opportunities, they have not delivered long-term price appreciation, and the low use of stop-loss protection indicates traders were looking to exploit short-term volatility rather than hold for extended periods. This reinforces the importance of incorporating stop-loss protection, especially in a highly dynamic market environment.”

Stop loss strategies yield better risk-adjusted returns

Following closely behind Tesla’s top spot as the summer’s most profitable trade were Coinbase and Apple, reporting profit rates of  59%  and 57%, respectively. Like Tesla, trades in Coinbase and Apple used a larger share of stop-loss strategies compared to trades in meme stocks.

While traders were overwhelmingly ‘buyers’ of AMC and GME during the summer, trading sentiment in both Tesla and Coinbase was less bullish, reflected by its lower share of long position trading.  Just 63% of trades in Tesla and Coinbase were long position trades. By comparison, 86% of AMC trades and 73% of GME trades had a long direction bias.

“Tesla's ability to keep price momentum high has kept it at the top of the most traded stocks list throughout the year. The stock is known for its dynamic price moves, with another significant comeback in August and September. Meanwhile, Apple remains promising, despite the August pullback driven by market jitters following weaker-than-expected US economic data. While the tech sector has generally lagged smaller-cap stocks during the latter part of the summer, interest in Apple remains strong, particularly with the unveiling of new iPhone models. Although the stock has recovered from the August dip, some analysts, including those at JPMorgan, have expressed disappointment with the slower-than-expected progress in the AI cycle. Nevertheless, Citi and BofA Securities have reaffirmed their Buy rating on Apple,”  added Hathorn. 

Who had the best risk-adjusted returns?

The data also revealed that Advanced Micro Devices Inc (AMD) and Nvidia provided traders with some of the best risk-adjusted returns. AMD, with 27% of trades using stop-loss protection, had the lowest closeout rate among all equities during the period and achieved a 56% profit rate. Nvidia followed with a 55% profit rate, and 23% use of stop loss orders, further highlighting the value of stop-loss tools in volatile markets.

“As we move into the next quarter, with a lower interest rate environment expected, smaller cap stocks have been making advances over high speculative and large tech stocks. That said, a slowing economy could put downside pressure on market sentiment, so we could see traders trying to find value elsewhere,” said Hathorn.

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