When the stock market is rising in value, people want to be involved and one motivating method was to be involved with wallstreetbets which helped encouraged individuals or retail clients to be involved. One Wall Street, the dominant players are institutional, but to help drive markets up the market needs individuals. Although everyone invests for the same reason – to make more money, the reasons for investing are different for institutional and retail investors. Often times there are more restrictions on what institutions can and should not or can not be doing or flexibility is a hallmark of retail investors. Often retail investors start out as momentum investors but hopefully learn along the way because what goes up does come down.
In an article by David Randall and John McCrank of Reuters, the bears are shorting meme stocks GameStop and AMC Entertainment Holdings. According to data from S3 Partners, the percentage of company’s float that is short was 24% for GameStop and 22% for AMC.
You may remember there were short squeezes on these stock and the price soared into the hundreds from the teens or less. Retail investors caught the bug, some made money but many bought when the stock was rising, held on and the stock dropped below their buy in position and now if they still hold the stock there are losing money.
The S&P 500 is down 13.5% while GameStop is down 13.7% and AMC down 56%. According to Peng Cheng, head of big data and AI strategies at JPMorgan, retail investors have been net sellers of single stocks for the past 8 weeks.
Many institutional investors examine GameStop and AMC and see the companies operating on smaller footprints in the future or the business will not be growing. While retail investors see something else?
Linking to dividend paying stocks, it is wonderful when you make an investment and the stock rises in the near future, however if your buy stocks for dividends you are expecting the stock price to maintain or rise in the long term which translates into a total return from stock price increases plus dividends to rise. The market brings many people together looking for reasons why a stock price should increase, but buying profitable stocks which pay dividends helps ensure you are correct many more times than you are not correct.
There are more questions than answers, till the next time – to raising questions.