- Meme stocks have exploded in popularity in 2021, and investors are on the hunt for the next one.
- It can be hard to tell whether Reddit stock posts are real and which are from bots or spammers.
- Travis Rehl shared how to tell the difference and which meme stocks have the most loyal fanbases.
- See more stories on Insider’s business page.
Despite no shortage of headlines about the economic reopening, generous fiscal stimulus packages, and the
‘s monetary policy, meme stocks have stolen the spotlight in the investing world this year.
Shares of GameStop and AMC Entertainment have risen by 807% and 1,580%, respectively, in 2021 after an army of small-time retail investors sparked a rebellion against Wall Street hedge funds in January through posts on online forums like Reddit.
The eye-popping gains have inspired legions of hopeful successors to the original meme stocks, and sifting through the noise of online stock manipulation has never been harder.
New users flocked to popular investing subreddits like r/WallStreetBets and tried hijacking them in hopes of persuading others to send stocks “to the moon.” WallStreetBets has 10.7 million members, up from 1.8 million in late 2020, according to Subreddit Stats.
HypeEquity, a site that monitors and analyzes posts on investing forums on Reddit, aims to help investors discern the difference between memeification and manipulation. Founder Travis Rehl built the site in February after a winning trade on GameStop, using his software engineering background to help himself and others find stocks with legitimate meme momentum.
The site scans conversations on investing subreddits and tracks changes in social volume, or how many Redditors are posting about a stock and how often they’re doing so, and social score, or whether sentiment is positive or negative, as well as if spammers or bots are driving the conversation.
“Is it a true and honest conversation around something, or are there bad actors who are trying to influence it in a particular way?” Rehl said.
HypeEquity is free to use, but only paid subscribers can get detailed information on particular stocks — including whether the hype driving them is legit or not. The site does this by analyzing what percentage of posts about a stock are coming from one user.
Stock manipulation on Reddit surged in May, Rehl said, adding that it took time for spammers and bots to learn the intricacies of investing subreddits’ rules and find loopholes. Reddit’s WallStreetBets page bans users that post “false or misleading information” and promoters of “any other worthless securities that are susceptible to scams or pump & dump schemes.”
But lesser-known investing subreddits can be plagued by manipulators like spammers and bots. The former are “bagholders” who made an ill-timed purchase and repeatedly post about a stock to boost its price so they can sell it higher, Rehl said. They’re “not a bad person, they’re just in a bad spot,” he added.
Bot manipulation, where automated accounts post and upvote others’ posts on one’s behalf, is more malicious and harder to prove, Rehl said. So-called “bot farms,” where people pay for fake accounts in the dozens, hundreds, or even thousands, plague the internet, and Rehl said it can be hard to tell if accounts are real or fake. Bots avoid spamming to outsmart subreddit moderators.
“Over time, just like offense and defense, offense slowly learns what defense doing,” Rehl said, with the “defense” the team of subreddit moderators tasked with keeping forums clean.
Rehl and subreddit moderators aren’t the only ones keeping a close eye on meme stock manipulation. The Justice Department and the San Franciso US attorney’s office are both investigating the events of this January to determine if the sudden surge in GameStop shares constitutes market manipulation. The Commodities Futures Trading Commission is conducting a similar investigation regarding the prices of silver futures.
Manipulation on investing subreddits is down sharply in the last two weeks, Rehl noted, adding that there’s no guarantee that the bad actors are gone for good. The HypeEquity founder listed some tips for spotting the difference between memeification and manipulation before naming which meme stocks have had the most loyal fanbases throughout 2021.
How to spot meme stock manipulation
The first telltale sign of meme stock manipulation are sudden spikes in posts about a stock that disappear as quickly as they come, Rehl said. Spammers come out of the woodwork, often after previously getting banned, and copy-paste conversations to generate awareness about a stock they want to push, which is atypical for most conversations on Reddit.
By contrast, a legitimate meme stock movement is typically accompanied by a slow rise in posts and interest that catches fire and takes off, like with GameStop in late January.
Rehl recommends that investors looking for the next meme stock subscribe to subreddits and scroll through to find conversations about a stock. Then, click on the user’s profile and look for how old their account is, how long they’ve been a member of that page, which pages they’re a member of, and what they post about. Be wary of users who repeatedly echo one message.
Conversations on Reddit about highly manipulated stocks tend to evaporate quickly and seldom repeat, but several meme stocks have loyal, fervent fanbases.
Here are nine such stocks that have had sticking power throughout the year, according to Rehl: AMC Entertainment (AMC), GameStop (GME), Corsair Gaming (CRSR), Clover Health (CLOV), Virgin Galactic (SPCE), BlackBerry (BB), Tesla (TSLA), Palantir (PLTR), and Tilray (TLRY).