Meme stock investors are probably high-fiving each other for GameStop's 179% rally this week. But that's nothing compared to some other fast gains outside the S&P 500.
Two stocks in the S&P Completion Index or S&P 1500, including Faraday Future Intelligent Electric and Cheetah Net Supply Chain Service, both smoked GameStop's gains this week, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSurge. They're up 518.7% and 412%, respectively this week.
Interestingly, neither stock is one caught up in the last meme-stock craze of 2020. But in the case of Faraday Future, it's easy to see why traders targeted it: high short interest.
The Short-Squeeze Play
Much of the meme-stock rally takes advantage of flooding heavily shorted stocks with buying. That upward pressure on thinly traded stocks heavily bet against by short sellers can spark a squeeze — forcing the shorts to buy the stock.
That appears to be at play with Faraday Future, a money-losing electric vehicle company. More than 95% of the company's shares available for trading are controlled by short sellers. It doesn't take much buying to send the shorts running to buy the stock to stop their losses from ballooning.
There's certainly no fundamental reason to buy the stock. The company lost $535.5 million in the 12 months ended in September 2023. And there are no major analysts covering the stock now either.
It's similar to how solar firm SunPower's shares rallied more than 95% this week. With shorts controlling 94% of its shares, it's the most heavily shorted company in the S&P 500.
But reasons driving some other meme rallies are less apparent.
Other Meme Stories
The 412% jump by Cheetah Net Supply is more perplexing. Short sellers only control 0.4% of the company's shares available for trading.
The U.S.-China automobile import and export firm loses money, too. It lost $367 million in the 12 months ended in March. This year, analysts think the company will make a penny a share. If there's any bright spot, it's that the company is expected to make 12 cents a share in 2025.
Meanwhile, struggling movie theater chain AMC Entertainment has seen its shares rise 135% this week. But only about 18% of its float is controlled by the shorts. Amazingly, even after that rally shares are only up 12% this year.
Who knows if the Meme Stock rally of 2024 will continue. But it will be interesting to see the next targets.
Biggest Gainers During Meme Rally
Among S&P 1500 and Completion Index this week
| Company | Ticker | Short selling of float | Meme rally | Sector |
|---|---|---|---|---|
| Faraday Future Intelligent Electric | 95.3% | 518.7% | Consumer Discretionary | |
| Cheetah Net Supply Chain Service | 0.4 | 412.0% | Consumer Discretionary | |
| GameStop | 24.0 | 179.2% | Consumer Discretionary | |
| AMC Entertainment | 18.8 | 135.4% | Communication Services | |
| SunPower | 94.0 | 90.9% | Industrials | |
| Koss | 0.2 | 92.3% | Consumer Discretionary | |
| Intrusion | 5.5 | 60.2% | Information Technology | |
| Tupperware Brands | 23.2 | 59.7% | Consumer Discretionary | |
| Novavax | 36.2 | 51.8% | Health Care | |
| ProKidney | 22.4 | 46.6% | Health Care |
