WallStreetBets Goes Nuclear: Are Nuclear Stocks The Perfect Contrarian Retail Stock?
WallStreetBets Goes Nuclear:
Somehow, one of the still underappreciated aspects of 2021 is just how much retail investors have changed financial markets.
Case in point was last week's headline that one of the world's better investors took massive losses foolishly trying to be the hero and short the theater chain AMC ($AMC).
Odey Asset Management didn't just take a short position in one of the most popular "meme" stocks; it then announced that fact in its quarterly investor letter and noted that it had profited handsomely as the stock had fallen from near $60 to below $30.
In retrospect, this was a mistake.
What happened then?
The stock immediately began soaring.
Why? What gives?
Well, the minute Odey's position became public (August 5, 2021) people began betting that retail investors and the WallStreetBets community of online speculators would furiously rally together to buy shares.
They likely did but more importantly, other investors and traders thought they would and so tried to pile in ahead of time.
The bizarre social media fueled phenomenon that has been the 2021 meme stock wars means that there is now a self-fulfilling prophecy around some of these companies. The fact that other market watchers expect something to occur thanks to retail investors will often now make it so because other classes of investors either buy (or rush to close their shorts, thereby buying back the stock).
Famous investor George Soros calls this phenomenon the theory of reflexivity.
Besides shaking our heads in wonder and also wincing at the brazen foolishness of Odey, we are left marveling at just how much retail flows combined with social media networks have changed investing in such a short time.
It is safe to say that paying close attention to what regular investors think or like (or dislike) has not been a high priority on Wall Street for really ever. Markets have changed.
In practical terms, there is also the question of where is the WallStreetBets crowd turning now?
While a lot of the focus has been on GameStop's earnings or Crypto's resurgence back above 40 (or 50K) there have been other things going down on Reddit's WallStreetBets.
One big theme is the Green Revolution and companies poised to take advantage of that. Microvast - a small and ambitious battery manufacturer - has been heavily mentioned according to one analysis of the WallStreetBets subreddit.
But the big surprise recently has been publicly traded nuclear companies (or uranium miners).
The concept is pretty simple. If we are going to get serious about climate change then it is very likely that nuclear power will be a big part of that. Despite the fact that much of the world is going in exactly the opposite direction there is an argument - not just on WallStreetBets either - that eventually nuclear power will be a big part of the story.
The rises have been broad as well as sharp.
Peninsula Energy, Bannerman Energy and Energy Resources of Australia are all Australian listed miners that have all risen over 100%+ this year. Cameco, a Canadian-listed miner has been one of the most talked about stocks on WallStreetBets according to one analysis.
One of the significant drivers of this trend could be a newly launched ETF - the Sprott Physical Uranium Trust - that must buy physical uranium when investors inflows occur. Steady buying has tightened an already tight global market.
Unsurprisingly, price of uranium yellowcake has also risen. Earlier this summer it began to steadily increase from around $30 a pound to over $40 and then kept going to over $48 this past week.
It is quite a chart.
So in conclusion, the gambling continues, to paraphrase Norm Macdonald, but it is moving industries - from companies that might benefit from re-opening to instead taking advantage of the effort to combat climate change.
One last thought: if you are tempted to buy a niche Uranium ETF - watch out for high fees or niche structures. Do your research.
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