The recent revival of investor interest in so-called "meme stocks" like US cinema chain AMC (AMC) and retro smartphone maker BlackBerry (BB) may already be over, according to analysis of retail trading flows.
Vanda Research said on Friday that its proprietary tools tracking retail investor flows in the US and UK suggested interest in meme stocks "probably peaked on Wednesday."
AMC's stock close to doubled on Wednesday amid a flurry of interest in the stock from day traders and other amateur investors, many of whom share ideas on the Reddit forum r/WallStreetBets. AMC has become an in vogue stock among this band of investors and this week's price action recalled similar retail price action seen in GameStop's (GME) stock at the start of the year.
Read more: UK investors at risk as Brits pile into meme stock AMC
In total, retail investors put $345m (£245m) into AMC over the last five trading days, according to Vanda. That was 328% above the one-month average.
AMC's share price surge came as the company announced it was raising new cash and deepening its relationship with retail investors though initiatives including free popcorn. But even AMC was alarmed by its stock movements — the company on Thursday said its share surge appeared to be "unrelated to our underlying business" and warned people not to buy its stock "unless you are prepared to incur the risk of losing all or a substantial portion of your investment."
The warning appears to have worked, with Vanda reporting a major drop-off in retail buying on Thursday. The stock sunk 17% and was down another 9.8% in the pre-market on Friday.
"AMC, by far the stock with the largest retail purchases, received $66m in new inflows, less than half of the $136m it had averaged from Monday to Wednesday," said Ben Onatibia, a senior strategist at Vanda.
"Some of the slack was picked up by BlackBerry, which experienced the largest day of retail buying this year ($110m). This behaviour reminds us of the crypto bubble, where investors rotated from Bitcoin (BTC-USD) to Dogecoin (DOGE-USD) when momentum started to fade. When Dogecoin struggled, latecomers bought Ethereum (ETH-USD) at the peak before all cryptocurrencies collapsed."
BlackBerry rose 4.1% on Thursday but was down 1.7% in the pre-market on Friday.
As interest in meme stocks fades, retail investors are turning to cannabis companies.
"As opposed to BlackBerry, we think the rotation into cannabis stocks has a lot more room to run," Onatibia said. "Inflows into Tilray (TLRY) and Sundial (SNDL) rose to $28.6m on Thursday, the largest number since the rally in Q1. As we pointed out on Wednesday, this rotation happened in the exact same way in Jan-Feb, so we wouldn’t be surprised to see a repeat of that."
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