More than half of stocks on WallStreetBets lead to losses
20:03, 21 December 2021
Investing in the stocks most mentioned on Reddit’s WallStreetBets resulted in a loss at least half the time, and the losses only mounted the longer investors held, according to a new data set compiled by Capital.com.
The analysis covers 4,851 stocks mentioned on WallStreetBets and listed on the Nasdaq, New York Stock Exchange and American Stock Exchange. Capital.com found that 50% of those stocks produced a positive return when holding for three days after the initial hype day.
The chances of producing a positive return only decreased the longer investors held. At one week out, 49% produced a positive return, at one month 41% were positive, and at three months 34% were positive.
However, there are some notable high-profile standouts from this list.
Someone who invested in GameStop one day before the company made it to the daily top five most-mentioned stocks on WallStreetBets gained 875% on their investment after holding for three months. Even if someone invested in GameStop one month after that hype day, they would have been up 94.5% on their investment after holding for three months.
AMC managed to sustain its gains even longer. Someone who invested in the stock one day before its hype day would have made a 228% gain on their investment three months out. Even those who bought three months after the hype day would be up 272% when holding for three months.
Only a select few others mentioned on WallStreetBets sustained positive gains when holding for at least three months. Most of those names are already blue-chip companies including Nvidia, Microsoft, Facebook and Toronto Dominion Bank.
Canadian pharmaceutical and cannabis company Tilray was one of the 12th most mentioned stock on WallStreetBets this year and produced some of the worst returns.
Someone who invested in Tilray one day before its hype day and held for one week would have made a 39.1% gain on their investment, but if that same investor held for three months they would have lost 47.3%. Even investing just one day after the hype day would have resulted in a 76.5% loss on that investment when holding for three months.
Other lessor hyped stocks on WallStreetBets such as Plug Power, Riot Blockchain, Brooklyn Immuno Therapeutics and Beach Body all produced significant losses when holding for three months.
Investors who managed to get in early and sold on these stocks within the day or week did make significant gains. But the further out from the initial hype day and the longer investors held the more likely it was to incur a loss, the data finds.