Meme Stocks Are Back, Short Sellers Beware: The Quick-Hit Playbook For 2023

Bankruptcy concerns? Buy it! A slight mention of artificial intelligence? Yes, please! Cryptocurrency collapse? Smells like opportunity!

A lot of the stocks that got squashed last year and left short sellers fat and happy are leading the charge higher to start 2023. Here's a look at what's going on.

To the Moon! Unprofitable high-growth names are back in favor to start the year, but several of the biggest movers don't really fit into the growth category. Those names are usually termed "meme stocks" — a basket of companies that have developed a strong following from retail traders and are touted across social media platforms. 

As Bed Bath & Beyond Inc BBBY prepared for potential bankruptcy at the start of the year, the stock soared as traders latched onto high short interest in the name.

Carvana Co CVNA is up more than 100% since the turn of the calendar page and Beyond Meat Inc BYND is up more than 40% in the face of Jim Chanos' warning that both companies are headed for bankruptcy.

Check This Out: Jim Chanos Says Tesla Is An Overhyped 'Chinese Car Company,' Carvana, Beyond Meat Are Going Bankrupt: Why The 'Nirvana' Won't Last

A lot of the retail crowd likes to target heavily shorted stocks in an effort to induce short squeezes. 

That's been one of the main plays in the playbook ever since several retail traders banded together on Reddit's r/wallstreetbets in early 2021 and sparked a massive short squeeze in original meme stocks, AMC Entertainment Holdings, Inc AMC and GameStop Corp GME. 

Both of these names are up significantly to start the year, with AMC leading the way, trading more than 30% higher. Gamestop is up close to 20%. 

The short-squeeze play was successful in this duo because the majority of the retail traders involved were only focused on these two names. Now with so many speculative bets being made on anything that looks like it can make a massive move, the retail group isn't concentrated enough to repeat the craze from two years ago.

Such is evidenced by the wide array of names that seem to move for no good reason. Although most can't hold the gains, many stocks are skyrocketing for days or weeks at a time. 

AI Buzz: The latest trend was set when Microsoft Corp MSFT-backed OpenAI's ChatGPT took the world by storm. Once people got a taste of what AI could do, they started bidding up stocks with "AI" in their names. Several companies then started mentioning the use of AI in their own applications and those stocks began running — and some still are. 

Micro-cap Amesite Inc AMST soared more than 100% this week after it said it added ChatGPT capabilities to its toolkit for customers. UiPath Inc PATH climbed higher just yesterday after the company wrote a blog post about what it can do with AI.

Risky Coins In Favor: Crypto coins have held up well in 2023, especially considering the collapase of FTX late last year and the ongoing saga of the face of the once fast-growing firm, Sam Bankman-Fried. Interestingly enough, some of the smaller, more risky coins seem to be the ones in favor. 

Bitcoin BTC and Ethereum ETH/USD are trending on stocktwits at the time of writing, but so are smaller "meme coins" like Dogecoin DOGE/USD and Floki Inu FLOKI/USD. 

Space Stocks: This week, however, space stocks have captured the spotlight amid spy balloon talk and new launch contracts. Virgin Galactic Holdings Inc SPCE is up 80% year-to-date, Sidus Space, Inc SIDU climbed 30% just this week and Redwire Corp RDW has skyrocketed close to 90%.

Benzinga's Take: The retail crowd seems to be back in full force, but the dispersion is leading to short-lived moves. As traders continue to try to be among the first in names to rocket higher, they are more quickly booking profits and searching for the next opportunity. 

The retail crowd's dollars are spread thin, but don't count them out. Despite calls from several big names that the retail crowd was just a symptom of restlessness during the pandemic, it appears the pool of individual traders is here to stay.  When their efforts are aligned, we've seen they can make quite the splash. 

Photo: Sergei Tokmakov from Pixabay.