Risky “meme stocks”: Analyst warns: Investors could be in GameStop and AMC without knowing it | message
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• GameStop and AMC with incredible price gains
• Volatility poses a risk for investors
• Analyst warns: Investors should know what they are invested in
One of the top stock market topics of this year is certainly the struggle between hedge funds, which speculate on falling prices for individual troubled companies, and private investors, who have exchanged views on the papers via Reddit and other Internet forums. With concerted purchases of so-called “meme shares”, such as shares in the US video game retailer GameStop or the cinema chain AMC, share prices were driven up and caused heavy losses and even near ruin for some hedge funds.
Against this background, GameStop shares have increased by around 1,092 percent since the beginning of the year, while AMC shares even climbed by more than 2,820 percent (as of June 17, 2021). However, numerous experts have since warned that these share prices no longer reflect business developments but are overvalued.
ETFs at a glance
Nancy Tengler, Chief Investment Officer of Laffer Tengler Investments, told the US broadcaster “CNBC” that investors could be exposed to the opportunities and risks associated with these two “meme stocks”, without even acknowledging them knowledge.
Tengler pointed out that both stocks are among the largest components of the IWM Russell 2000 ETF, which tracks the globally respected stock index for small caps. GameStop is also included in the S&P Retail ETF. Because ETFs (Exchange Traded Funds) are funds that map an underlying index as precisely as possible – in the best case 1: 1. They are therefore also called index funds. Their composition is determined by the composition of the index that they represent – so no fund manager is busy constantly monitoring the ETF and actively adapting it to the current market situation.
Although the two ETFs mentioned have benefited significantly from the rally at GameStop and AMC in the year to date, the high volatility also poses a major risk. Nancy Tengler emphasized that investors should find out what they actually own, because especially with AMC, the risk would far outweigh the opportunities. As a justification, she referred to the hunger for capital and the negative results of AMC. “Given this situation, I would sell and invest as soon as possible [
] should be aware of what the largest positions in their ETFs are. ”
Ari Wald, head of technical analysis at Oppenheimer, does not see the threat to investors as completely black. He pointed to the upcoming June 25th rebalancing of the Russell 2000, which would reduce some of the risk. “The rebalancing will solve some of the problems for investors on their own. These two stocks together make up just two percent of the ETF that tracks the Russell 2000. That’s the beauty of diversified ETFs, you get a little bit of that and a little bit of that, “Wald told CNBC.
In addition, stock market expert Jim Cramer emphasized in his “CNBC” program “Mad Money” that the private investors organized through the Reddit sub-forum WallStreetBets continue to watch over their protégés. The WallStreetBets members act for idealistic reasons, not because they are convinced of the fundamentals: “I’ve never seen anything like this: a group of buyers who don’t care about the price,” said Cramer. The WallStreetBets members simply like the two companies and are ready to do anything to protect them from short sellers.
Finanzen.net editorial team
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