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More than half of stocks on WallStreetBets lead to losses

By William Hoffman

20:03, 21 December 2021

 WallStreetBets logo on cell-phone screen
Despite higher stocks prices, more than half of stocks on WallStreetBets lead to losses - Photo: Shutterstock

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.

Largest returns

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.

Gold

2,233.43 Price
+1.740% 1D Chg, %
Long position overnight fee -0.0188%
Short position overnight fee 0.0106%
Overnight fee time 21:00 (UTC)
Spread 0.80

BTC/USD

69,894.65 Price
-1.040% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

US100

18,249.40 Price
-0.200% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 7.0

ETH/USD

3,528.59 Price
-0.560% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

Biggest losses

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.

 

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that Capital.com believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

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