Markets closed out a wild week of trade with all three major stock averages falling 2% on Friday. All three major averages would turn in their worst week since October with the Nasdaq dropping 3.5%, the S&P falling 3.3% and the Dow declining 3.3%. There were plenty of headlines creating volatility with a notable sell-the-news reaction to big cap tech earnings and a dovish Fed. A key catalyst is, of course, the mayhem around the retail crowd.
- Trivia Question- February is the second month of the presidential cycle, what is the average market loss for this month? (Answer below)
Gamestop (GME) was the talk of the town. If you are a Financial Advisor, chances are you had multiple friends and clients contact you the past week, asking you questions about the short squeeze frenzy that was garnering all the market- and mainstream- headlines. It probably will not come as a surprise that this group of stocks was at the center of attention for the retail space.
The size of the impact on the market from these events is debatable. On a pure dollar-basis, the level of money at play was negligible for a stock market that has an overall valuation of approximately $33 trillion. But the ramifications from hearings on Capitol Hill will keep FAs glued to the seats. We will continue to talk about the fallout from the events in coming newsletters and tomorrow’s ETF Spotlight will shine on some of the volatility funds that were being researched by peers. In today’s Advisors in Focus, we will take a look at some of the short squeeze names garnering attention from your clients.
TrackStarIQ Data
Here are some highlights from Retail searches this week –
| Rank | TOP STOCKS – BY Retail (Total Traffic) This Past Week | Ticker | TOP STOCKS- BY RETAIL (Total Traffic) Two Week Ago | Ticker | TOP ETFs By RETAIL (Total Traffic) This Past Week | Ticker |
|---|---|---|---|---|---|---|
| 1 | Gamestop Corp | GME | Tesla Inc | TSLA | SPDR S&P 500 ETF | SPY |
| 2 | Amc Entertainment Holdings Inc | AMC | Churchill Capital Corp IV Cl A | CCIV | Invesco QQQ | QQQ |
| 3 | Nokia Corp | NOK | Bionano Genomics Inc | BNGO | ARK Innovation ETF | ARKK |
| 4 | Blackberry Ltd | BB | Gamestop Corp | GME | ProShares Ultra VIX Short-Term Futures | UVXY |
| 5 | Churchill Capital Corp IV Cl A | CCIV | Nio Inc | NIO | ARK Genomic Revolution ETF | ARKG |
| 6 | Apple Inc | AAPL | Apple Inc | AAPL | VanEck Vectors Semiconductor ETF | SMH |
| 7 | Tesla Inc | TSLA | Alibaba Group Holding | BABA | Invesco Solar ETF | TAN |
| 8 | Express Inc | EXPR | Tesla Inc | TSLA | iShares Silver Trust | SLV |
| 9 | Naked Brand Group Inc | NAKD | Apple Inc | AAPL | iShares Russell 2000 ETF | IWM |
| 10 | Atossa Genetics Inc | ATOS | Gevo Inc | GEVO | ProShares UltraPro QQQ | TQQQ |
| 11 | Bionano Genomics Inc | BNGO | Ocugen Inc | OCGN | iPath Series B S&P 500 VIX Short-Term Futures ETN | VXX |
| 12 | Gevo Inc | GEVO | Bionano Genomics Inc | BNGO | iShares Global Clean Energy ETF | ICLN |
| 13 | Nio Inc | NIO | Gevo Inc | GEVO | Technology Select Sector SPDR Fund | XLK |
| 14 | Sundial Growers Inc | SNDL | Nio Inc | NIO | Direxion Daily Semiconductor Bull 3x Shares | SOXL |
| 15 | Adv Micro Devices | AMD | Aerocentury Corp | ACY | SPDR Gold Trust | GLD |
| 16 | Castor Maritime Inc | CTRM | Blackberry Ltd | BB | ProShares UltraPro Short QQQ | SQQQ |
| 17 | Koss Cp | KOSS | Amazon.com Inc | AMZN | Energy Select Sector SPDR Fund | XLE |
| 18 | Workhorse Grp | WKHS | Zomedica Pharmaceuticals Corp | ZOM | SPDR Dow Jones Industrial Average ETF | DIA |
| 19 | Microsoft Corp | MSFT | FUBOTV INC. | FUBO | VanEck Vectors Gold Miners ETF | GDX |
| 20 | Eversource Energy | ES | Visa Inc | V | ARK Fintech Innovation ETF | ARKF |
- Gamestop (GME); #1 Top Stocks by Retail Total Traffic- The poster child for the retail short crusher movement. The squeeze will be the stuff of legend as it has driven GME’s market cap to approximately $25 bln, making it bigger than half the companies in the S&P and the largest stock in the S&P Small Cap and second largest in the Russell. The short bet was basically against brick and mortar retail as same store sales have been declining the past couple of years. GME recently entered into an agreement with activist investor RC Ventures which was pushing GME to make changes to its digital sales footprint. GME was making investments in the space and was seeing some improvements by leveraging its loyalty programs. The bigger item for the retail vigilantes was of course the short interest which was larger than the float. This will remain a volatile name and likely be uninvestable in terms of a buy and hold, but FAs should be prepared for a steady flow of questions from clients on this name. GME’s quarter closed on Friday and there is some speculation the company could offer an update on its business this week.
- AMC Entertainment (AMC); #2 Top Stocks by Retail Total Traffic- The movie theater has been one area negatively impacted by the coronavirus. Limited capacity has driven down sales as theater-goers avoid closed in areas. Warner Brothers announced in early December that it would release its entire 2021 catalog of movies on its HBO Max streaming service, presenting another challenge for the industry. This led hedge fund managers to bet against the company as it held a Total Debt to EBITA of 21.6x. A 101 million float and a 43% short interest brought it to the attention of the Reddit crowd and squeezed shares from the $4 area all the way to $20. The stock has pulled back to $13.26 at the close of the week. AMC will report earnings on February 25.
- Nokia (NOK); #3 Top Stocks by Retail Total Traffic- Nokia does not fall into the same category as other names. NOK shares soard 107% on Wednesday as trading volume spiked up to 1.14 billion shares which was a record and dwarfs the average trading volume of 447.3 million shares. NOK saw its shares get halted five times for volatility last week. The company came out with a statement saying it was unaware of any news that would be behind the volatility. It does not fit the profile of the Reddit crowd as its short interest is only 1.11%. Nokia will report earnings on Thursday, February 4. Volume suggests it will garner plenty of attention as it sits right around the key psychological $5 trading area.
- Blackberry (BB); #4 Top Stocks by Retail Total Traffic- Another telecom play seeing volatility is Canadian-based Blackberry. BB shares picked up in December after announcing a partnership with Amazon (AMZN) Web Services. The stock jumped again in mid-January after announcing it sold a number of patents to Huawei. It followed up that announcement by reaching another automotive deal with Baidu (BIDU) which is integrating BB’s QNX into maps for electric vehicles. BB shares jumped to $29 on Wednesday before slipping back to the $14 level. It certainly got caught up in the flurry of short squeezes (BBs short interest is 7%) but there does appear to be other business at hand that makes this an intriguing name.
- Express, Inc (EXPR); #8 Top Stocks by Retail Total Traffic- Another brick and mortar retail play that has trailed its peers in the move to a digital economy. The stock has a float of 62 million and carries an 11.5% short interest. Shares rallied 150% to $14 but pulled back to the $6 level as of Friday. The company recently announced it received $140 million in financing from Sycamore Partners and Wells Fargo which will help in the turnaround. But the squeeze in the shares will have longer-term investors cautious at these levels.
- Naked Brand Group (NAKD); #9 Top Stocks by Retail Total Traffic- Retail play that carries a 41 million float and a 75% short interest. The short interest certainly highlights why it was on so many radars. Last week, the company announced a restructuring plan that will focus on its e-commerce turnaround. This week, the company took advantage of the rally and announced it entered into a securities purchase agreement and sale for approximately 29 million shares at a price of $1.70 per share, leaving aggregate proceeds of approximately $50 million. We would look for other companies to follow suit and try and raise cheap capital in this frenzy.
- Koss Corporation (KOSS); #17 Top Stocks by Retail Total Traffic- Company designs stereo headphones and related accessories. While we can appreciate this as a potential COVID-19 winner, a rally from $3 to the $125 area was unwarranted. This is an extremely low float with only 1.37 million shares. It’s short interest is actually small, sitting at 1.93%. KOSS did release earnings on Thursday and they did show promise, with sales increasing 18% year-over-year and the company was able to surprise by flipping a profit of $508,890 after posting a $215K loss in the prior year. But this volatile name has driven well past any reasonable market cap in this frenzy.
Trivia Answer- The euphoria of a new president usually gets reigned in for February as it has averaged a decline of 1.1%.