Melbourne, 28 July 2021; Trading and wealth management infrastructure fintech OMG (Openmarkets Group) has analysed the share price of 12 “meme stocks” (stocks whose share prices skyrocketed due to social media hype, not fundamentals) and uncovered that every single one of them left investors in the red.
Every single one of the 12 stocks analysed dropped in value from the time they became a meme stock, on average by 16 per cent and 34 per cent after 1 month and 3 months respectively.
The biggest losses over 3 months were by 88 Energy, Douugh, and Digital Wine Ventures, with 71 per cent, 50.7 per cent, and 50.3 per cent respectively.
To identify the meme stocks for analysis, OMG searched Reddit, Twitter, and trading-focused Facebook groups to find the 12 most talked-about meme stocks, and cross-referenced them with Google Trends to confirm they were genuinely trending.
The 12 stocks selected were, in order of meme-worthiness, 88 Energy (88E), Creso Pharma (CPH), Douugh (DOU), Lake Resources (LKE), Brainchip (BRN), Vulcan Energy (VUL), Digital Wine Venture (DW8), Zip Co (Z1P), Cirralto (CRO), Mesoblast (MSB), Latin Resources (LRS), and GME Resources (GME).
OMG stresses that the stocks themselves are not necessarily bad investments, as some do have the potential to deliver positive returns over the long-term if a responsible and strategic approach to investing was employed in line with professional advice.
Rather, the process of following “advice” in the form of uninformed social media hype is what can cause investors to hemorrhage money.
As an example, if an investor had managed to buy these same 12 stocks in equal amounts as a portfolio one month before they became memes, OMG also calculated that the portfolio would have increased by 110 per cent by 30 June 2021.
These findings clearly highlight the risks of investing based on uninformed social media hype, says OMG CEO, Ivan Tchourilov, who is urging younger investors to instead take a long-term portfolio approach to investing in Australian equities, and to base that strategy on affordable professional advice.
“We are currently facing an unprecedented scenario in Australian markets,” said Mr. Tchourilov.
“On the one hand, we are seeing the largest intergenerational transfer of wealth in history. On the other, the financial advice industry is on its way to halving in size by 2023, while quality advice becomes too expensive for many in the wake of new restrictions imposed after the Hayne Royal Commission.
“As a result, more money than ever is hitting unadvised and inexperienced investors in particular, driving them to resort to unreliable and unaccountable sources like online forums.
“This opens up a significant need for scalable online solutions that can be provided to online traders in the comfort of their own homes by well-informed and experienced advisers, brokers, and fintechs.”
OMG’s analysis process:
OMG searched Reddit, Twitter, and trading-focused Facebook groups to find the 12 most interesting trending stocks that came with rocketship emojis, the symbol currently being used to indicate “strong buy”, then cross-referenced the stocks with Google Trends to confirm they were genuinely trending.
OMG then assessed their price one month before they became online-popular, at the height of their online popularity, and then one and three months after this height and also as at 30 June 2021.
The clear finding was that by the time a stock becomes popular online, i.e. when it’s “memeing”, it’s already too late. An investor is likely to buy the stock at a high price which will fall soon after, leaving them in the red and almost guaranteed to lose money.
For more information, please visit: www.openmarkets.group
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OMG (Openmarkets Group) (www.openmarkets.group) is an Australian, independent trading and wealth management fintech, providing a full suite of technologies and market infrastructure to investment professionals and connecting consumers with investment and advice.
OMG consists of two enterprises:
Openmarkets is one of Australia’s largest independent retail brokers and provides technology solutions across wholesale execution, order and risk management, advice, and CRM, enabling investment professionals to connect to markets and deliver white-labelled services for their customers.
Opentrader is Australia’s most competitive self-directed retail trading platform for professional traders and those who want to trade like a professional; from only $5 per trade.
