Stock market enthusiasts often come across the term “meme stocks”. You may not know what meme stocks are: they are stocks that go viral through online propagation, which causes their price to rocket.
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Lots of new buyers are attracted to stocks that have been heavily shorted after good news or a catalyst. In this scenario, short-sellers are forced to cover their positions (are squeezed out) which causes more buying, causing the stock price to surge rapidly and significantly.
Meme stocks have increasingly gained popularity in the past few years. Shares of GameStop (GME) soared in January 2021, causing a great deal of publicity. Traders at WallStreetBets have picked up shares of GME after hedge funds announced they are shorting the stock.
Factors like growth in production are less influential on meme stock prices than the rise in popularity of online forums and social media platforms. Often, these stocks become overvalued due to the rapid increase in their valuations. Let’s analyze these two hot meme stocks to keep an eye on.
AMC Entertainment Holdings Inc.
AMC Entertainment Holdings Inc. (AMC) is the world’s largest movie exhibition company as well as a stock market meme stock. With over 900 cinemas and 10,000 screens, it has a global footprint. Its stock price has been pushed up by retail traders who have back the company, like GameStop. This has led to gains of over 700% in AMC stock over the past year.
AMC stock has achieved a 5-day range of $41.28 to $47.85, with a total performance of +7.79% during that period. Meanwhile, in the past month of trading, this stock has traded in the range of $28.91 to $48.30, generating a +31.05% change during the period. In the past three months, this stock’s price has changed by -14.26%, trading in the range of $28.91 to $64.96.
Workhorse Group Inc. (NASDAQ: WKHS)
Workhorse Group Inc. (NASDAQ: WKHS) situation is impossible to ignore. A major blow to WKHS stock came in February when the company lost out to Oshkosh (NYSE: OSK) over the United States Postal Service (USPS) contract.
Overall, Workhorse seemed to be the clear front-runner among the bidders. With its EV technology, the company appeared to be a real contender among the three finalists. Around a month before the contract was awarded, the president of the United States pledged to replace government fleets with electric vehicles. EVs were also generally seen as good by the public at the time.
Another look at the stock price also shows it trading +3.69% above its three-month low. Broader in scope, the stock is trading -79.05% below its 52-week high and 27.32% above its 52-week low price. However, when Workhorse failed to win, its shares dropped into a steep decline. The situation has not improved. But WKHS stock is warranted some attention for a number of reasons.
Richard Dauch became the company’s new CEO at the beginning of August. He has been a senior executive at several automotive companies over the years and his father was even inducted into the Automotive Hall of Fame in 2019. There is actually no way to overstate how knowledgeable this new CEO is about the industry.
Therefore, we can be optimistic. Also, meme stocks may experience persistent short squeezes in the future. WKHS has seen its short interest hover between 30% and 40% over the past few months. These reasons make Workhorse one of the best companies to watch at the moment.