Just when you thought S&P 500 investors finally came to their senses, this happens: Meme stocks are up an average 133% this year.
The meme stock rally is as definitive as it is powerful. Ten stocks in the Roundhill Meme Stock ETF, including Carvana, Coinbase and Tesla, have doubled or more this year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That makes the S&P 500's 19% rise this year look puny. And the meme stock averages obscure some of the most head-turning gains, such as Carvana's 876% rise this year.
The second-wind rally in stocks popular on online discussion groups shows how speculation is back following 2022's massive crash in most of these same stocks.
"The recent market strength is being driven by FOMO (Fear of Missing Out) by both retail and institutional investors," said James Demmert, chief investment officer, Main Street Research.
Meme Stocks On Fire
It's not just the top-performing meme stocks that are racing higher either. The Roundhill ETF, which equal weights the 25 stocks popular with the Reddit crowd, is up nearly 61% this year. That even tops the red-hot 41% jump this year by Invesco QQQ Trust, which gained so much this year that a special rebalancing was done to cap the leaders.
Some of the meme stock gains are perplexing investors who focus on profit growth and more stable S&P 500-like stocks. Carvana, an online seller of cars, has seen its shares shoot up more than 80% in the past 12 months. Who cares the company is expected to lose money until 2026?
"Has everybody lost their minds?" wrote Herb Greenberg in Empire Financial Daily. "It's great that Carvana pulled off such a stock-goosing magic trick, but lost in all of the mania of the market is that the viability of the company's business remains a question mark ... and until proved otherwise, investing in Carvana continues to be a dash for trash." Keep in mind the stock tanked 98% in 2022.
But it's not simply beginning investors capitalizing on the meme rush. Cathie Wood's ARK Innovation ETF plunks more than 8.6% of its portfolio in Coinbase shares. And that's been a boon this year with shares of the digital wallet firm rising 182%. The company isn't expected to make a dime until 2027.
Some Old Speculative Plays Perk Up Too
It would be simplistic, though, to say meme stocks are the only points of speculation to take off this year.
ARK Innovation itself is up more than 50%, making it the top-performing U.S. diversified ETF. And remember ProShares Bitcoin Strategy ETF? It's up roughly 49% this year as the prices of crypto currencies shake off 2022's drop. The Bitcoin ETF fell 64% in 2022.
And don't overlook Tesla, perhaps the Blue Chip of the meme stocks. Shares of Tesla are up 118% this year, helping to undo the 65% implosion in 2022. Investors don't seem to think the influx of hundreds of new electric vehicle models, many priced below Tesla, will make any difference.
Maybe investors are right: This time is different. But if speculation runs out again, some investors results might be another big reminder of risk.
Biggest Meme Stock Gainers
Based on stocks in Roundhill Meme ETF
| Company | Ticker | 2022 | YTD % ch. | Sector |
|---|---|---|---|---|
| Carvana | -98.0% | 875.7% | Consumer Discretionary | |
| Riot Platforms | -84.8 | 413.7 | Information Technology | |
| Marathon Digital | -89.6 | 377.9 | Information Technology | |
| Upstart Holdings | -91.3 | 307.5 | Financials | |
| Coinbase Global | -86.0 | 179.5 | Financials | |
| DraftKings | -58.5 | 168.7 | Consumer Discretionary | |
| Palantir Technologies | -64.7 | 154.3 | Information Technology | |
| Carnival | -59.9 | 121.2 | Consumer Discretionary | |
| Tesla | -65.0 | 118.5 | Consumer Discretionary | |
| SoFi Technologies | -70.8 | 104.9 | Financials |
