Not only did I think of this saying again today, I also felt it fitting that it was paraphrased from a movie – in this case the Disney (NYSE: DIS) animated movie Moana.

That is because, as I woke up this morning and checked the overnight news, I saw that the share price of American cinema company, AMC Entertainment (NYSE: AMC), increased by over 78% overnight.

On a whim, I then looked at the share price of GameStop (NYSE: GME), a company whose story is now intrinsically linked with AMC Entertainment. Yep, it too saw its share price rise dramatically overnight. In this case 75%.

It appears the "meme stock" days are back.

My first feeling was one of sadness.

I hoped that this was a saga that we left back in the dark days of the COVID pandemic. Whilst many saw it as an entertaining side show, or even a David vs Goliath story, I saw it differently. I knew that a lot of regular people were going to lose a lot of money that they couldn't afford to lose.

I watched with horror as people, many who were entering the markets for the very first time, piled into, what I believed to be, "bad" companies.

I've seen this film before. I know how it ends and I don't like it.

Unsurprisingly, fast forward a few years later, and the share price of AMC Cinemas is down over 99% and GameStop down 59% from their 2021 peaks. I am sure many of those who were wiped out will never trust the share market again despite it being, overall, a great tool for people looking to build wealth.

So, it is again I feel my stomach churn seeing the potential sequel with people piling into companies which, in my opinion, have really bad fundamentals and are suffering from an enormous list of structural headwinds that they will struggle to overcome.

I could go on and on about the various tips, techniques and lessons that I have learned to become the investor I am today. I could also go on for pages highlighting why I personally wouldn't touch the shares of the above businesses with a 100-foot pole. However, in this case, I feel there is only one thing to remind you all…

Whilst the share market can, and will, do almost anything in the short term. Over the long term, share prices tend to, almost always, track the fundamentals of the underlying business.

Some meme stockers will tell you that fundamentals don't matter. They are playing a different game. They'll tell you to just trust them. That I am part of the enormous Wall Street conspiracy looking to keep the regular folk down.

But fundamentals do matter. In fact, if you plan on holding for years, you can argue that they are the only thing that matter.

So, if you find yourself looking at the recent share price rise of companies like AMC Entertainment and GameStop and getting tempted to press "Buy", ask yourself, do I think these companies have good fundamentals? Do I think these companies are going to be earning significantly more revenue and profits in 2, 3, 5, 10 years' time than they are today?

If you, like a lot of others, think the answer is no. Then don't buy.

There are countless other opportunities (both from listed companies and passive investment vehicles like ETFs) that offer high quality, growing and profitable opportunities. So, don't waste your time trying to ride a wave of what many consider to be irrationality.

All you really need to do is buy great companies, at fair prices, and hold on to them for as long as they remain great companies.

It is that simple.

This is also the best way to make a short seller's life miserable, much better than trying to outsmart them by trying to fight them directly when the fundamentals are against you.

The post Invest in quality, not meme stocks appeared first on The Motley Fool Australia.

Penny stocks are shares in companies that trade for less than $5.00 per share. With a current price of $6.67, AMC Entertainment (NYSE: AMC) isn't far from that mark. And while the stock might look like a good deal, it is cheap for a reason. Let's explore why the struggling movie theater operator looks poised for more downside over the long term.

Profitability challenges and weird managerial decisions

We all know the COVID-19 pandemic devastated in-person entertainment venues like movie theaters, which saw their locations closed for much of 2020 and 2021. Now that the industry is back on its feet, sales are soaring -- but profitability has been slower to return. AMC's third-quarter earnings report highlights this challenge. While revenue jumped 162% year over year to $1.17 billion, the company generated a net loss of $121.6 million mainly because its operating expenses outstripped its sales. 

But management's questionable decision to purchase a 22% stake in precious metals company Hycroft Mining is also contributing to the problem -- generating a $57.3 million investing expense (a non-cash loss) in the period. It is unclear what relation an asset like Hycroft has to AMC's core movie theater business, and the acquisition showcases a pattern of unorthodox and arguably reckless managerial decision-making at the company. Unfortunately for investors, it doesn't end there. 

Alarming levels of equity dilution 

Other pandemic losers, such as cruise operator Carnival Corporation undertook vast amounts of long-term debt to survive the crisis. AMC had a different approach: equity dilution. The company raised capital by issuing more of its stock -- a process that increased its shares outstanding from 135,528 in the second quarter of 2019 to 516,821 in the corresponding period of 2022, an increase of 281%. 

From a management perspective, this was probably the right move. AMC's stock price has been artificially inflated by the meme stock movement. And the dilution allowed the company to quickly raise cash without undertaking the solvency risk that would have come with debt financing. But there is no such thing as free money. Equity dilution is a problem for investors because it reduces their claim on current and future earnings. This can lower the fundamental value of their shares. 

AMC's management also seems to be taking their dilution habit too far. 

In April, the company announced a special dividend of preferred shares called AMC Preferred Equity (NYSE: APE) units at a rate of 1 for 1 with the company's common stock outstanding. Management promptly began diluting the new equity by agreeing to sell 425 million of the new shares in September. On the surface, APE may look like a way to sell more shares without diluting the original AMC equity, but there is a catch. 

APE shares have full voting rights and can become convertible to AMC common stock if shareholders approve. With the number of APE shares rising quickly, the dilutive chickens could eventually come home to roost. 

AMC is cheap for a reason 

While AMC's low stock price might catch the attention of bargain-hungry investors, it pays to look before you leap. Even if the company's operational challenges are eventually resolved, management's questionable decision-making and relentless equity dilution are major red flags for long-term investors. Continued declines look likely.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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With the market in a jittery mood thanks to ongoing inflation, interest rate hike mania, and geopolitical instability, nobody can blame investors who are wringing their hands anxiously in anticipation of a potential market crash. Thankfully, the chances of a crash happening are too difficult to determine with any certainty, so it doesn't make much sense to worry at any particular time. 

That probably isn't very reassuring. But what will be reassuring is if you have a plan for what to do and what not to do in the event of a crash. For now, let's work on three things you definitely shouldn't do if there's chaos in the market. 

1. Sell your stocks in a panic

The first (and most important) thing you shouldn't do if the stock market crashes is to sell all of your stocks to try to avoid experiencing any further losses. The problem with panic selling is that it feels like the right move. After all, if you can cut your losses fast enough, the market's downward move to the tune of 30% might only lead to losses of 10% for you.

Selling eases the sense of anxiety you have about your lack of control over the situation and your fear of losing money. And if you hear from friends or relatives about how much they got whacked by holding on to their shares, you might even give yourself a pat on the back. 

But you'll probably end up missing out on the rebound afterward. And in many cases, that means you'll make less money than if you'd simply stayed the course. Let's examine AbbVie's (NYSE: ABBV) performance during the coronavirus crash in March 2020 as an example.

^SPX data by YCharts

As you can see, AbbVie's shares took a beating during the crash, as did the market. But as the catalyst for the crash, the pandemic, didn't actually do much to affect the company's ability to do its business of developing and commercializing drugs, its stock quickly bounced back.

Within a couple of months, it was outperforming the market, and its earlier damage was entirely reversed. The stock even ended the year significantly above where it started, and you'd have missed out on that gain if you had sold your shares. Even if you tried to restart your position, you'd struggle to time it correctly and you'd almost certainly be missing out on some upside. 

There's absolutely no guarantee that every stock will behave the same as AbbVie's did during every market crash, and many will not. In cases where the crash isn't caused by anything that fundamentally impacts a company's ability to make money as efficiently as it currently does, however, selling is likely to be a poor decision.

2. Dramatically change your investing strategy without good reason

In keeping with the above, the second thing that you shouldn't do if the stock market crashes is to switch up your game plan for investing without noodling on it for a good while. It's a fact of life that crashes are often precipitated by economic or global events. Nonetheless, if you have a properly diversified portfolio, it should be unlikely that any specific trend or happening makes all of your stocks genuinely vulnerable to further declines all at once. And that means any changes to your approach should be at the margin, even after a crash.

For example, let's say before the pandemic you held AMC Entertainment (NYSE: AMC) for exposure to the entertainment industry in the same portfolio as your AbbVie shares. The market's collapse in March was caused by fears of the coronavirus, and AMC's share price was hit plenty hard. As an intelligent and far-sighted investor, you held on to your shares at the time. But during your quarterly assessment of your positions, you decide that movie theaters are probably not going to be making a strong comeback for as long as the coronavirus is afoot, and you opt to sell your shares.

So far, so good -- it's important to make adjustments to your strategy when new information makes your original investing thesis incorrect or irrelevant.

Where many investors might go wrong, however, is to then do something like take their proceeds from the sale of AMC and invest them in a way that reduces their portfolio's level of diversification, perhaps by buying more shares of AbbVie. Such an action is a major departure from your prior approach of buying an entertainment industry stock to give yourself exposure to that industry's future growth. And by doing so, you're throwing the baby -- your well-reasoned desire for diversification -- out with the bathwater, which in this case is AMC's poorly performing stock in the wake of the crash. 

3. Stay on the sidelines

The final thing investors shouldn't do if the market crashes is to stay on the sidelines and wait for calmer waters. Instead, they should take action to buy while shares are cheaper than normal. And that's especially true if you plan to dollar-cost average to build up your positions. For those who have some capital saved up, sharp and panic-driven downturns are opportunities to shore up your holdings with deeply discounted shares -- once again, assuming that your original investing thesis about why they're worth buying is still valid. 

If you do decide to sit on the sidelines during a crash or correction, you won't be actively harming your portfolio's value, but you'll likely be missing out on growth. It's frightening to buy more shares of a stock when it's down and when it seems like the sky is falling, but famous investors like Warren Buffett do it. And for companies that pay a dividend, like AbbVie, buying rather than idling means that you'll be securing shares with higher dividend yields than you could normally get, so you'll get paid for your smart decision to take a hot bargain for years down the line.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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While GameStop led the meme stock movement a year ago, today it's gains actually trail that of Bed Bath & Beyond and AMC, indicating that it might not be the focal point of the Wall Street Bets traders that it was early last year. The stock also trailed its meme stock peers on Friday, gaining only 4.3% in the previous session compared to double-digit gains for Bed Bath & Beyond and AMC.

What happened

Shares of GameStop (NYSE: GME) were rising today as part of a broader two-day rally in meme stocks, including AMC Entertainment Holdings (NYSE: AMC) and Bed Bath & Beyond (NASDAQ: BBBY). 

There was no particular news out on the video game retailer today. Instead, traders on Reddit's WallStreetBets teamed up to push the stock higher in a move reminiscent of GameStop's massive gains early last January.

As of 2:44 p.m. ET on Monday, the retail stock was up 8.1%.

So what

GameStop traders are trying the same play again. On WallStreetBets, traders are talking up GameStop and piling into the stock after shares have fallen back down to earth after a dramatic run-up last year.

GameStop stock is also not as heavily shorted as it once was. As of July 15, 22% of the float is sold short, meaning a substantial (but not overwhelming) percentage of investors are betting on the stock to fall.

Now what

Ironically, GameStop's meme bounce is coming at the same time as a sector slowdown in gaming. The NPD Group reported that consumer spending on video gaming fell 13% in the second quarter, and today, NVIDIA (NASDAQ: NVDA) stock fell after the chipmaker issued a disappointing second-quarter forecast due to a shortfall in gaming revenue. The video gaming industry was a big winner from the pandemic, so those headwinds are only natural as the pandemic effects fade.

GameStop stock rallied last year in part because Chewy Inc. (NYSE: CHWY) co-founder Ryan Cohen had begun accumulating a stake in the company, and he later joined the board, pushing the company to move deeper into e-commerce and areas like non-fungible tokens (NFTs). Though GameStop posted modest revenue growth in its most recent quarter, the company's losses actually widened, casting doubt on any potential turnaround.

While the stock could continue to rally with help from the WallStreetBets crowd, the fundamental case seems thin at this point.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why GameStop stock is gaining today appeared first on The Motley Fool Australia.

During the first half of 2021, meme stocks like GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC) took the financial world by storm. Individual investors piled into shares of a handful of companies -- particularly beaten-down, heavily shorted stocks -- quickly making huge gains. As the stock prices soared, many of these traders used social media platforms to celebrate and to urge others to continue buying.

Over the past year, though, meme stocks have lost much of their lustre. Indeed, meme stocks' best days are probably behind them. In the long run, they simply cannot escape the underlying companies' poor performance.

Maintaining excitement is hard

The surge in meme stocks last year was surprising, but it wasn't unprecedented. There have been many such stock market 'bubbles' over time. However, these bubbles pop sooner or later.

In the early days of the meme stock craze, watching stocks like GameStop and AMC rocket higher was exciting. As the stocks rose, they gained more mainstream interest, leading to additional buying and even bigger gains.

But as time went by and meme stocks' gains slowed, most investors began to tune out. The resulting stock price declines made meme stocks even less exciting to the average American, as they no longer seemed like a ticket to quick riches.

The need for a devoted band of followers to prop up the share price has already doomed lesser meme stocks. For example, shares of Bed Bath & Beyond, Virgin Galactic, and BlackBerry made big gains during the peak of the meme stock craze. But over the past year, all three stocks have plummeted below pre-pandemic levels.

Three-year performance of selected meme stocks, data by YCharts.

Even AMC stock has risen less than 20% over the past three years, underperforming the broader market. Only GameStop has maintained big gains compared to 2019. And despite being the most popular meme stock, GameStop shares have fallen more than 70% from the all-time high of $483 they reached in January 2021.

A stag hunt doomed to fail

The "stag hunt" scenario from game theory also helps explain why meme stocks are poised for losses over time. In a stag hunt, everyone must work together to achieve the best outcome (capturing a stag). The risk is that some people settle for a sure thing with a smaller reward (catching a hare) and allow the stag to escape.

By acting as a group to buy (and not sell) shares of GameStop, AMC, and other names, meme stock investors generated huge paper profits last year. Even today, meme stock bulls continue to urge other investors to buy and "hold on for dear life" no matter what.

Maintaining this kind of cooperation over time is hopeless, though. Eventually, some people will choose to sell, perhaps to make a big purchase or perhaps simply to take some risk off the table. That's exactly what has happened over the past year, bringing meme stocks back to earth.

No substance to these stocks

Many years ago, investing legend Benjamin Graham aptly described the phenomenon behind meme stocks' performance. According to his most famous student -- Warren Buffett -- Graham said, "In the short run, the market is a voting machine ... but in the long run, the market is a weighing machine."

In other words, at any moment, a stock can be popular or out of favour for no good reason. But over time, a company's fundamental performance (i.e. revenue, earnings, and cash flow) is the main driver of its share price. Meme stock investors are learning this lesson the hard way.

Even at today's levels, shares of GameStop and AMC are extremely overvalued. GameStop is deeply unprofitable and burning cash rapidly. Its main growth initiative -- an NFT marketplace -- seems unlikely to fix things, given that crypto giant Coinbase's NFT marketplace has been a bust. GameStop's intrinsic value is probably closer to $1 billion than its current market cap of $10 billion.

Meanwhile, AMC would have trouble supporting its $5.5 billion debt load even if revenue and earnings returned to 2019 levels. And while theater attendance is improving, revenue remains well below pre-pandemic levels. That makes AMC's $6 billion-plus market cap very hard to justify.

In short, while the past year has been rough for meme stock investors, the future could be even worse, barring an unlikely surge in profits at GameStop and AMC.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Meme stocks are doomed (in the long run) appeared first on The Motley Fool Australia.

Since CommSec is one of the most widely used brokers in Australia, this trading data gives us an interesting window into what kinds of US shares Aussie investors are taking a closer look at.

So here are the top 10 US shares from CommSec last week. This week's data covers 23-27 August.

Alibaba shoots to the top of the pile

1. Alibaba Group Holding Ltd (NYSE: BABA) – representing 3.9% of total trades with an 86%/14% buy-to-sell ratio.
2. Tesla Inc (NASDAQ: TSLA) – representing 3.2% of total trades with a 65%/35% buy-to-sell ratio.
3. GameStop Corp (NYSE: GME) – representing 2.9% of total trades with a 78%/22% buy-to-sell ratio.
4. Apple Inc (NASDAQ: AAPL) – representing 2.7% of total trades with a 74%/26% buy-to-sell ratio.
5. Microsoft Corporation (NASDAQ: MSFT) – representing 1.9% of total trades with an 86%/314% buy-to-sell ratio.
6. Pfizer Inc (NYSE: PFE)
7. NVIDIA Corp (NASDAQ: NVDA)
8. Amazon.com, Inc. (NASDAQ: AMZN)
9. AMC Entertainment Holdings Inc (NYSE: AMC)
10. Alphabet Inc Class C (NASDAQ: GOOG)

What can we learn from these trades?

Chinese e-commerce giant Alibaba has shot to the top of the pile as CommSec's most popular share last week. The Chinese behemoth behind Alipay, AliExpress, and Ant Financial took home a total of almost 4% of all CommSec international trades last week.

It even pipped the perennially popular Tesla, the electric car and battery manufacturer helmed by Elon Musk. What's more, an overwhelming majority of 86% of all trades were on the buy side.

It's not hard to see why ASX investors might have suddenly developed an appetite for Alibaba shares. This company has been on a steep decline all year, losing around 24% of its value over 2021 so far. Alibaba is also down more than 44% from its all-time high from October last year. It seems a number of Australian investors are sensing a bargain buy here.

In other news, we still see enduring demand for shares like GameStop and AMC, long held up as examples of 'meme stocks'. GameStop shares are now up almost 40% over just the past fortnight, so it's easy to see where this optimism is coming from.

We also see continuing interest in the big tech blue-chip shares like Apple, Microsoft, Amazon, and Google-parent Alphabet. These companies have generally been hitting new all-time highs of late, but that's nothing new for the FAANGs.

Finally, it's interesting to see vaccine maker Pfizer here too. With 86% of trades on the buy side, it seems some investors may be so inspired by a recent vaccine that they have been compelled to invest in the company too.

The post ASX investors were buying Alibaba, Pfizer shares last week appeared first on The Motley Fool Australia.

CommSec is one of the most popular brokers in Australia. Because of this, CommSec's trading data gives us a useful insight into the US shares that ASX investors are finding interesting right now. 

So here are the top 10 international shares that CommSec-ers were trading last week. This week's data covers 2-6 August.

Robinhood and Square make their presence known to ASX investors

1. Tesla Inc (NASDAQ: TSLA) – representing 3.7% of total trades with a 60%/40% buy-to-sell ratio.
2. GameStop Corp. (NYSE: GME) – representing 2.9% of total trades with a 93%/7% buy-to-sell ratio.
3. Amazon.com, Inc. (NASDAQ: AMZN) – representing 2.5% of total trades with an 86%/14% buy-to-sell ratio.
4. Apple Inc (NASDAQ: AAPL) – representing 2.4% of total trades with a 65%/35% buy-to-sell ratio.
5. Robinhood Markets Inc (NASDAQ: HOOD) – representing 1.9% of total trades with a 72%/28% buy-to-sell ratio.
6. Square Inc (NYSE: SQ)
7. AMC Entertainment Holdings Inc (NYSE: AMC)
   
8. Advanced Micro Devices, Inc. (NASDAQ: AMD)
9. Moderna Inc (NASDAQ: MRNA)
10. Alibaba Group Holding Ltd (NYSE: BABA)

What can we learn from these trades?

We see some interesting movements in this week's list. Firstly, it's worth noting that the perenially popular shares of Tesla and GameStop remain at the top of this pile, cementing a trend we have pretty much seen all year. Investors remain super-bullish on these two companies as well, in particular with GameStop. A staggering 93% of all GameStop trades on CommSec last week were on the buy side, despite the fact that this original 'meme stock' has slid around 15% over the past month or so.

Tesla also remains popular, albeit less so than GameStop. Tesla shares are up roughly 10% since the start of the month, which may be influencing trading activity here.

But turning to other news, and it was interesting to see e-commerce giant Amazon climb into the top 5 shares this week. Amazon is a regular feature on this list, but usually occupies a spot at the bottom of the table when it does turn up. Perhaps a rare share price pullback in Amazon shares (the company is down more than 10% over the month just passed) is to thank for this.

We also see a strong appetite for US share market newcomer Robinhood. Robinhood had an explosive IPO late last month, rising from around US$35 a share to US$85 by last Wednesday. The company is back down to the mid-US$50 range as it stands today.

And finally, it's also worth noting the presence of Afterpay Ltd's (ASX: APT) potential new overlord Square. Like Amazon, Square is a company that has turned up at the bottom of this table before, but its new presence in the ASX investor's mind looks to have boosted its profile. Square's commitment to list on the ASX if its acquisition of Afterpay goes through may also be at play here.

The post ASX investors were buying Robinhood, Square shares last week appeared first on The Motley Fool Australia.

CommSec is one of the most widely used brokers in Australia. Because of this, this data can give us a valuable window into the US shares that ASX investors are finding enticing. So here are the top 10 US shares that CommSec-ers were buying and selling last week. This week's data covers 12-16 July.

Nothing can keep GameStop down

1. GameStop Corp. (NYSE: GME) – representing 3.3% of total trades with an 89%/11% buy-to-sell ratio.
2. Apple Inc (NASDAQ: AAPL) – representing 3.2% of total trades with a 72%/28% buy-to-sell ratio.
3. Tesla Inc (NASDAQ: TSLA) – representing 2.9% of total trades with a 61%/39% buy-to-sell ratio.
4. AMC Entertainment Holdings Inc (NYSE: AMC) – representing 2.5% of total trades with a 65%/35% buy-to-sell ratio.
5. Virgin Galactic Holdings Inc (NYSE: SPCE) – representing 1.6% of total trades with a 49%/51% buy-to-sell ratio.
6. NVIDIA Corporation (NASDAQ: NVDA)
7. Microsoft Corporation (NASDAQ: MSFT)
8. Amazon.com, Inc. (NASDAQ: AMZN)
9. Nio Inc. (NYSE: NIO)
10. Alibaba Group Holding Ltd (NYSE: BABA)

What can we learn from these trades?

That the meme is strong for one. Yes, 'meme stock' king GameStop is back at the top of this pile, displacing the giant Apple as well as perennial ASX favourite Tesla. Even more interestingly, 89% of GameStop trades last week were in the 'buy' column.

This coincides with GameStop shares hitting their lowest level since May recently. Clearly, there are more than a few investors hoping for another one of those lucrative 'pops'.

We see a less-enthusiastic commitment to other meme stocks like AMC, Nio and Virgin Galactic. Although, in saying that, Virgin Galactic investors appear to be more inclined to bail out than buy more, with 51% of trades in the 'sell' column.

Ever since Sir Richard's successful space flight earlier this month, investors have been stampeding to the exits. Since 8 July (3 days before the flight), Virgin Galactic shares have lost more than 38% of their value. Imagine what would have happened if it wasn't a successful flight!

We still see bubbling affection for the US big tech blue chips like Apple, Amazon and Microsoft. Apple in particular maintains a dominant position in this week's numbers, even pipping Tesla with its 72% 'buy' bias.

This week's report also marks the return of chipmaker NVIDIA after a few weeks' absence. NVIDIA has been on an exceptional run lately, rising roughly 50% between 13 May and 6 July. That's a pretty significant move from what is now a company with a market capitalisation of US$468 billion.

The post ASX investors were buying GameStop (NYSE:GME) shares last week appeared first on The Motley Fool Australia.

Since CommSec is one of the most widely used brokers in Australia, this information can give us an interesting window into what ASX investors are finding exciting over in the USA right now. My Fool colleague James has already taken a look at CommSec's most popular ASX shares today. But here are the top 10 US shares that CommSec users were trading last week. This week's data covers 5-9 July.

Tesla in the driving seat, but Apple looking sweet

1. Tesla Inc (NASDAQ: TSLA) – representing 3.5% of total trades with a 67%/33% buy-to-sell ratio.
2. Apple Inc (NASDAQ: AAPL) – representing 2.8% of total trades with a 55%/45% buy-to-sell ratio.
3. GameStop Corp. (NYSE: GME) – representing 2.6% of total trades with a 93%/7% buy-to-sell ratio.
4. Alibaba Group Holding Ltd (NYSE: BABA) – representing 2% of total trades with a 79%/21% buy-to-sell ratio.
5. AMC Entertainment Holdings Inc (NYSE: AMC) – representing 2% of total trades with a 66%/44% buy-to-sell ratio.
6. Microsoft Corporation (NASDAQ: MSFT)
7. Amazon.com, Inc. (NASDAQ: AMZN)
8. Nio Inc. (NYSE: NIO)
9. Virgin Galactic Holdings Inc (NYSE: SPCE)
10. Alphabet Inc Class C (NASDAQ: GOOG)

What can we learn from these trades?

That old habits die hard. Last week, we saw Nasdaq newcomer DiDi Global Inc (NYSE: DIDI) make an appearance here after its recent IPO.

Well, this week, we saw the old favourites of ASX investors reclaim their dominance. Electric vehicle and battery manufacturer Tesla is back on top, with investors going from a pretty even buy/sell split last week to decidedly biased towards the buy side this week. That coincides neatly with an 11% increase in the Tesla share price over the past month.

Apple also climbs from 5th spot last week to number 2 this week. Unlike Tesla though, investors are still pretty split down the middle when it comes to buying and selling.

In other news, we see many of the same faces returning. 'Meme stocks' like Nio, AMC and GameStop remain popular, as do the US tech blue chips like Apple, Microsoft and Alibaba (which is actually a Chinese company, but US listed). In that vein, we also see the return of Amazon and Google-parent Alphabet after a few weeks' absence.

It's interesting to note that Virgin Galactic retains its presence after several weeks of obscurity prior to last week. Perhaps Sir Richard Branson's well-publicised space flight the other day has inspired some investors.

The post ASX investors were buying Tesla and Apple shares last week appeared first on The Motley Fool Australia.

The spot in question comes from the list of favourite international shares held by Australian retail investors. A list put together from global user data by the global multi-asset investing platform eToro.

Apple, in fact, dropped from first place in the previous quarter to fourth spot in Q2 2021.

Coming in at number 2 for the quarter just gone by is Tesla's fellow electric vehicle (EV) maker and Chinese rival Nio Inc. (NYSE: NIO). Nio moved up from ninth most favourite international share in the previous quarter.

Why Aussie investors are increasingly interested in Tesla

Australian investments in Tesla increased 4% compared to the prior quarter, while Aussie investments in Nio fell 8%.

According to Josh Gilbert, eToro's Australian market analyst:

Tesla and Nio have both been the 2 most prominent stocks for Australian investors over the last six months. We can see that Australian investors are adapting to a long-term buy-and-hold strategy with both these assets, anticipating that the EV space will dominate the automotive industry for many years to come.

Tesla has slightly more skin in the game than Nio, and that's why Australian investors are opting for Tesla shares right now.

What other international shares are attracting Australian investors?

Atop Tesla, Nio and Apple, the 7 other shares making the top-10 list in Q2 2021 are:

• GameStop Corp. (NYSE: GME) – moving to number 3 spot, from 259 the previous quarter
• Palantir Technologies Inc (NYSE: PLTR) – making the list for the first time at number 5
• Amazon.com, Inc. (NASDAQ: AMZN) – up to number 6 from number 4 in Q1
• BioNano Genomics Inc (NASDAQ: BNGO) – also not on the list in Q1, now at number 7
• Microsoft Corporation (NASDAQ: MSFT)
• AMC Entertainment Holdings Inc (NYSE: AMC), and
• Alibaba Group Holding Ltd (NYSE: BABA)

Investors shrugging off inflation fears

There's been a lot of ink spilled in the financial media about the looming rise of inflation. This would see central banks raise interest rates and, with the end to easy money, could put a crimp in share market performance.

Commenting on investor's inflation concerns, eToro's Global Markets Strategist, Ben Laidler said:

Tesla's and Nio's enduring popularity suggests investor confidence in the electrical vehicle sector as a long-term investment opportunity, despite fears over a prolonged inflationary period. The fact that Apple, Microsoft and Palantir also remain in the top 10 most held stocks on eToro also suggests that investors believe the recent bout of inflation may be temporary.

Laidler added:

Investors are currently facing a lot of uncertainty but our data shows that they seem to be sticking to their long-term strategies. We may start to see more investors diversify their holdings if central banks such as the Federal Reserve, Bank of England and European Central Bank change their tune on inflation.

How has the Tesla share price moved this year?

Tesla tops the list of favourite international shares for Aussie investors in Q2 despite shares in the EV pioneer falling 7% this calendar year.

Still, Tesla's shares have gained 147% over the past 12 months. And the past month's price moves suggest a possible turnaround, with shares up 12% since 7 June.

The post Australia's favourite international shares? Tesla (NASDAQ:TSLA) tops the list appeared first on The Motley Fool Australia.

CommSec is one of the most popular ASX brokers in the country. As such, its data can give us a valuable window into the minds of ASX investors. My Fool colleague James has already taken a look at CommSec's most popular ASX shares today. So here are the top 10 international shares that CommSec-ers were trading last week. This week's data covers June 28 – July 2.

Tesla still the one, but DiDi IPO excites

1. Tesla Inc (NASDAQ: TSLA) – representing 3.6% of total trades with a 51%/49% buy-to-sell ratio.
2. GameStop Corp. (NYSE: GME) – representing 2.6% of total trades with an 87%/13% buy-to-sell ratio.
3. Nio Inc. (NYSE: NIO) – representing 2.1% of total trades with a 57%/43% buy-to-sell ratio.
4. AMC Entertainment Holdings Inc (NYSE: AMC) – representing 2.1% of total trades with a 70%/30% buy-to-sell ratio.
5. Apple Inc (NASDAQ: AAPL) – representing 1.9% of total trades with a 51%/49% buy-to-sell ratio.
6. DiDi Global Inc (NYSE: DIDI)
7. Microsoft Corporation (NASDAQ: MSFT)
8. Virgin Galactic Holdings Inc (NYSE: SPCE)
9. Alibaba Group Holding Ltd (NYSE: BABA)
10. Palantir Technologies Inc (NYSE: PLTR)

What can we learn from these trades?

Mostly that Aussie investors can't get enough of the high flying US shares at the moment. Of these 10 companies, only three (Apple, Alibaba and Microsoft) don't fall into the category of 'high-octane growth shares'. And even Alibaba toes that line somewhat. Yes, the top three companies, as well as the remaining four, can arguably still be in the growth/speculative pigeonhole. But we have two companies here that haven't seen this list for a while. The first is Virgin Galactic. Investors have been very excited in the past over this company's plans to commercialise space travel. However, this company had recently fallen out of favour, and was down roughly 70% between February and May this year. That was until Virgin Galactic rocketed 245% between 14 May and 25 June. A new planned space flight, this one involving Virgin founder Sir Richard Branson, appears to be the catalyst here.

In the case of Chinese ridesharing company DiDi, well, it IPOed last week, joining the US markets for the first time. Clearly, ASX investors are keen to put their money where their rear ends might be at the end of a big night out with this one. That's despite the fact that DiDi's IPO hasn't exactly resulted in a lot of financial success so far.

The post ASX investors were buying DiDi and Virgin Galactic shares last week appeared first on The Motley Fool Australia.

Well, today we're looking at the shares ASX investors were holding across the 3-month period that's just passed, the quarter ending 30 June. The data comes from the global broker and investing platform eToro.

Here are the top 10 most popular shares from around the world that Aussies were holding last quarter:

Tesla and Nio shares win the ASX race

First off, it's worth noting eToro also gave us the most popular shares its global investor base were holding over the quarter as well. But interestingly, the list was almost identical to what Aussie investors were holding. The only exception was a preference for cryptocurrency brokerage company Coinbase Global Inc (NASDAQ: COIN) in the place of AMC.

But what is immediately obvious is the dominance of electric vehicle and battery manufacturers in Tesla and Nio.

Tesla is of course the US company helmed by Elon Musk. After a breathtakingly successful share price run over 2019 and 2020, Tesla shares have stalled somewhat in 2021, and are currently down 7.1% year to date. That hasn't stopped Aussie investors from showing their commitment to the company though, it seems.

Nio's fortunes have been remarkably similar to those of Tesla's. Although it is listed in the US, Nio is a Chinese company that is sometimes called the 'Tesla of China'.  Like Tesla, Nio had a 2020 to remember, but is also slightly down in 2021 so far (albeit up 52% since 14 May).

Here's what eToro market analyst Josh Gilbert had to say on the dominance of Tesla and Nio:

Tesla and Nio have been the two most prominent stocks for Australian investors over the last six months. We can see that Australian investors are adapting to a long-term buy-and-hold strategy with both these assets, anticipating that the EV space will dominate the automotive industry for many years to come. Tesla has slightly more skin in the game than Nio, and that's why Australian Investors are opting for Tesla shares right now.

Blue chips and meme stocks also popular

In terms of the other popular shares we see above, there seems to be a healthy mix of US blue-chip tech companies such as Apple, Amazon and Microsoft (and the Chinese tech giant Alibaba), as well as some high-growth and (dare we say) 'meme stock' plays in companies such as GameStop, Palantir and AMC.

It's likely not too many investors would have even heard of AMC or GameStop before 2021. We can see this in GameStop's startling rise from placing 259 this time last year and placing 3 last quarter.

AMC wasn't even on last year's list. But the share price insanity we have seen across these companies in various phases through 2021 has certainly put these two names on the map.

Fuelled by social media-driven short squeezes and momentum trades, AMC and GameStop both saw incredible share price appreciation in just a matter of days at various points this year. Aussies have evidently been very excited to try their hands at this type of trading.

In contrast, the dominance of Apple, Microsoft, and Amazon is clear. They were at the top of this list last year, and nothing much has changed.

The post Wondering which US shares Aussies bought last quarter? Here's the answer appeared first on The Motley Fool Australia.

Since CommSec is one of the most used ASX brokerage platforms in the country, its data can give us an interesting insight into the minds of Aussie investors. So here are the top 10 US shares that CommSec users were trading last week. This week's data covers June 21-25.

Tesla back on top

1. Tesla Inc (NASDAQ: TSLA) – representing 4% of total trades with a 59%/41% buy-to-sell ratio.
2. GameStop Corp. (NYSE: GME) – representing 3.7% of total trades with a 93%/7% buy-to-sell ratio.
3. Apple Inc (NASDAQ: AAPL) – representing 2.3% of total trades with a 56%/44% buy-to-sell ratio.
4. AMC Entertainment Holdings Inc (NYSE: AMC) – representing 2.3% of total trades with a 65%/35% buy-to-sell ratio.
5. Nio Inc. (NYSE: NIO) – representing 1.3% of total trades with a 73%/27% buy-to-sell ratio.
6. Microsoft Corporation (NASDAQ: MSFT)
7. ContextLogic Inc (NASDAQ: WISH)
8. Alphabet Inc Class C (NASDAQ: GOOG)
9. Alibaba Group Holding Ltd (NYSE: BABA)
10. Amazon.com, Inc. (NASDAQ: AMZN)

What can we learn from these trades?

That electric vehicle and battery manufacturer Tesla has regained its most popular US share crown, for starters. For many, many months, it seemed nothing could knock Tesla shares off of their perch on top of the most traded US shares list.

But over the past month or so, we've seen 'meme stocks' like AMC and GameStop usurp Tesla at the top of the pile. No longer it seems. Tesla is back on top with 4% of total trades last week.

This might be a by-product of the Tesla share price's recent performance. Tesla shares are up more than 10% over the past month and nearly 15% since 15 June.

Turning to other shares, it seems that meme stocks remain popular, even if they're not at the top of the pile. We continue to see interest in GameStop, AMC, Nio and ContextLogic. That's despite GameStop losing around 30% of its value since 9 June.

But AMC continues to rocket. It's still up 35% since 10 June and 81% over the past month. Other than these 'hot stocks', we continue to see solid interest in the US blue-chip tech companies like Apple, Alphabet, Microsoft and Amazon.

The US-listed Chinese giant Alibaba also saw an uptick in popularity for Aussie investors last week.

The post Tesla back on top as the most popular US share for ASX investors appeared first on The Motley Fool Australia.

CommSec is one of the most popular ASX trading platforms in the country. As such, its data can give us some useful insights into the foreign shares ASX investors are interested in right now.

My Fool colleague James Mickleboro has already covered some of the popular ASX shares from CommSec today. So here are the top 10 US shares that CommSeccers were buying and selling last week. This week's data covers June 14-18.

Meme stocks steal show

1. AMC Entertainment Holdings Inc (NYSE: AMC) – representing 4.4% of total trades with a 67%/33% buy-to-sell ratio.
2. GameStop Corp. (NYSE: GME) – representing 3.5% of total trades with a 94%/6% buy-to-sell ratio.
3. Tesla Inc (NASDAQ: TSLA) – representing 2.7% of total trades with a 59%/41% buy-to-sell ratio.
4. Apple Inc (NASDAQ: AAPL) – representing 2% of total trades with a 51%/49% buy-to-sell ratio.
5. Nio Inc. (NYSE: NIO) – representing 1.6% of total trades with a 57%/43% buy-to-sell ratio.
6. Microsoft Corporation (NASDAQ: MSFT)
7. Amazon.com, Inc. (NASDAQ: AMZN)
8. Alphabet Inc Class C (NASDAQ: GOOG)
9. Upstart Holdings Inc (NASDAQ: UPST)
10. Advanced Micro Devices Inc (NASDAQ: AMD)

What can we learn from these trades?

Meme stocks are evidently continuing to dominate the US shares that ASX investors are interested in.

As with last week's list, ASX investors just can't seem to get enough of the shares that may offer the possibility of a quick and lucrative gain. That's what companies like AMC, GameStop and Nio have certainly become known for.

AMC continues to be the king of the hill in this respect.  Even though AMC is still more than 10% away from the all-time high we saw back on 2 June, it has also rallied more than 30% since 10 June.

Some 67% of the ASX investors trading AMC shares last week were buying, so clearly most of these investors think there might be at least another pop left in this stock.

Another, even more surprising, trend to note was GameStop. An uber-bullish 94% of ASX GameStop trades last week were buys. This meme stock rose more than 100% between 12 May and 9 June, before falling more than 33% between 9 June and today. Clearly, most ASX investors looking at GameStop think there might be more gains to squeeze out.

Turning to a newcomer in this list, we have Upstart. Upstart only debuted on the US Nasdaq Exchange back in December last year. Today, it is up 175% since its IPO. However, Upstart shares are also down 26% since 4 June, so perhaps ASX investors are doing some bargain hunting here.

Finally, it's worth noting that in addition to meme stocks, ASX investors are still evidently being drawn in by many of the US's big blue chip tech companies. Apple remained popular last week, as did Microsoft. We also see some renewed interest in Google parent Alphabet, as well as e-commerce giant Amazon.

The post Meme stocks most popular US shares for ASX investors appeared first on The Motley Fool Australia.

My Fool colleague James Mickleboro has already covered some of the popular ASX shares from CommSec today. So here are the top 10 international shares that CommSec users were buying and selling last week. This week's data covers June 7-10.

Meme stocks galore for ASX investors

1. GameStop Corp. (NYSE: GME) – representing 5.9% of total trades with a 78%/22% buy-to-sell ratio.
2. AMC Entertainment Holdings Inc (NYSE: AMC) – representing 4.6% of total trades with a 66%/34% buy-to-sell ratio.
3. Tesla Inc (NASDAQ: TSLA) – representing 3% of total trades with a 72%/28% buy-to-sell ratio.
4. Clover Heath Investments Corp (NASDAQ: CLOV) – representing 2.4% of total trades with a 72%/28% buy-to-sell ratio.
5. Apple Inc (NASDAQ: AAPL) – representing 2.3% of total trades with a 76%/24% buy-to-sell ratio.
6. BlackBerry Ltd (NYSE: BB)
7. Amazon.com, Inc. (NASDAQ: AMZN)
8. ContextLogic Inc (NASDAQ: WISH)
9. Nio Inc. (NYSE: NIO)
10. Alibaba Group Holding Ltd (NYSE: BABA)

What can we learn from these trades?

So what can we learn? Well, that ASX investors are not immune from the 'meme stock' train, mainly. This week's list is dominated by so-called 'meme stocks' – the catchy name given to companies whose share prices are the subject of social media-driven speculation. We can comfortably put GameStop (the original meme stock) in this bucket, as well as AMC, Clover Health, BlackBerry and ContextLogic. Tesla is also viewed as a meme stock by many investors. As is (to a lesser extent) the Chinese electric vehicle and battery manufacturer Nio.

True to form, AMC, Clover, BlackBerry and ContextLogic have all enjoyed Reddit-fuelled spikes in value during the past month or so. AMC is up more than 300% in the past month. Clover shot up almost 150% between 4 June and 8 June. BlackBerry is up 65% in the past month. And ContextLogic enjoyed nearly a 50% bump just last Tuesday. It seems ASX investors are keen to get a slice of the meme stock pie.

In other news, we still see the US blue-chip tech stocks in Amazon and Apple maintaining a dominant positioning on this list. Chinese e-commerce giant Alibaba is also a regular inclusion here and just makes the top ten this week.

The post ASX investors couldn't get enough of meme stocks last week appeared first on The Motley Fool Australia.

Mr Burry is a US hedge fund manager who shot to fame in the global financial crisis of a decade-and-a-half ago. Burry was one of the only fund managers in the US who saw the canaries in the coal mine of the ill-fated US housing market back in 2006 and 2007.

He lost millions of dollars (and many of his investors) betting against the housing market, only to make billions when the housing sector collapsed and sparked the global financial crisis.

As such, he's now one of the most respected money managers on Wall Street. That's despite taking an investing hiatus for a few years after making his 'big short'.

But now, Burry is back (baby), heading the hedge fund Scion Capital. He's also back on Twitter. Here's a tweet Burry made early this morning:

Wow, the "greatest speculative bubble of all time in all things"? Twice over? That's quite a bold statement, to say the least.

Burry bubble, toil and trouble?

Burry has come out before and decried the rise of a number of different trends and assets. These include Bitcoin (CRYPTO: BTC), Tesla Inc (NASDAQ: TSLA), electric batteries and vehicles, software-as-a-service (SaaS), and so-called 'meme stocks'.

Meme stocks is a term that's emerged to describe companies with share prices that have been caught up in social media-fuelled buying frenzies. It typically encompasses shares like GameStop Corp. (NYSE: GME), AMC Entertainment Holdings Inc (NYSE: AMC) and BlackBerry Ltd (NYSE: BB).

But that's not to say Burry hasn't benefitted from this 'bubble'. According to Markets Insider, Burry was actually a significant holder of GameStop shares before the Reddit-fuelled rampage the company's shares went on a few months ago. He used the opportunity to cash out, no doubt banking a large profit.

Still, this warning will no doubt cause some concern for any investor who follows Burry or accepts his investing prowess.

On a final note, you might notice Burry's Twitter display name is 'Cassandra'. After some quick research, this writer found that Cassandra was a figure in Greek mythology – a Trojan princess who was cursed with the ability to see the truth, but never to be believed.

Another big statement from Mr Burry!

The post 'Big Shorter' Michael Burry calls biggest share market bubble of all time appeared first on The Motley Fool Australia.

Defining a meme stock

A meme stock is typically regarded as a stock that lacks fundamental backing and is, more so, driven in popularity by hype. Usually, it is retail investors that drum up support for these stocks using social media channels such as TikTok and Reddit.

Once this type of stock 'goes viral', the resulting extreme share price jumps can attract even more investors as the fear of missing out (FOMO) kicks in. This momentum can then lead to a stock price that is divergent from all fundamental measures of analysis. As a result, many commentators see the valuations as humorous – thus, a meme stock is born.

Be warned – meme stocks are not for the faint of heart. The irrational speculation surrounding them is usually paired with violent volatility. Take GameStop Corp (NYSE: GME) for example. The gaming retailer's stock price increased nearly 25% between 4 June to 9 June. Then it proceeded to fall 27% the very next day.

What's all the hype about?

Meme stocks really came to prominence with GameStop. What originally began as a WallStreetBets led short-selling squeeze turned into a full retail investor onslaught. Since then, the attention has spread to several stocks that are heavily shorted – including BlackBerry Ltd (NYSE: BB), AMC Entertainment Holdings Inc (NYSE: AMC), and Bed Bath & Beyond Inc (NASDAQ: BBBY).

The reason many are now talking about these types of shares is because of the potential returns. While the risk is extreme, some speculators cannot dismiss the possible gains on offer. For instance, the US-based movie theatre chain AMC Entertainment has returned 2,837% so far this year. While the valuation may look like a joke, for those who managed to achieve them, the returns are certainly no laughing matter.

However, the catch is, to really capture the upside, you must be among the early speculators. Once a stock reaches the late or FOMO phase, it's often too late. Because of this, many speculators are constantly on the hunt for the next GameStop or AMC…

Foolish takeaway

When it all boils down, meme stocks are extremely high-risk 'investments'. While they may seem like a joke to some, for those left holding the baby when the momentum swings the other way, it can all end in tears.

The stock market is often full of distractions. The potential 'get-rich-quick' investments are often seductive – but unless a company's fundamentals catch up with its share price, it can very easily all come tumbling down.

Lastly, many experts argue that building wealth via the stock market is best done by utilising the power of compounding. It may not be the most exciting way, but it's the easiest way to ensure the stock market doesn't make a meme of your finances.

The post What is a meme stock, and why is everyone talking about them? appeared first on The Motley Fool Australia.

CommSec is one of the largest share trading platforms on the ASX. Because of this, its data can give us a window into what is interesting to Aussie investors on the US markets right now.

My Fool colleague James Mickleboro has already covered some CommSec's ASX's most popular shares today. So here are the top 10 international shares that CommSec users were buying and selling last week. This week's data covers 31 May to 4 June.

AMC and 'meme stocks' still dominate ASX investors attention

1. AMC Entertainment Holdings Inc (NYSE: AMC) – representing 10.2% of total trades with a 66%/34% buy-to-sell ratio.
2. GameStop Corp. (NYSE: GME) – representing 4.7% of total trades with a 78%/22% buy-to-sell ratio.
3. Tesla Inc (NASDAQ: TSLA) – representing 4.6% of total trades with a 72%/28% buy-to-sell ratio.
4. BlackBerry Ltd (NYSE: BB) – representing 1.3% of total trades with a 72%/28% buy-to-sell ratio.
5. Apple Inc (NASDAQ: AAPL) – representing 2.6% of total trades with a 76%/24% buy-to-sell ratio.
6. Nio Inc. (NYSE: NIO)
7. Palantir Technologies Inc (NYSE: PLTR)
8. Sundial Growers Inc (NASDAQ: SNDL)
9. Microsoft Corporation (NASDAQ: MSFT)
10. Alibaba Group Holding Ltd (NYSE: BABA)

What can we learn from these trades?

Last week, we discussed how cinema chain AMC had finally displaced the long-running king of this pile – Tesla. Well, ASX investors seemed to have doubled down on that change. AMC shares dominated ASX investors' attention last week, representing a whopping 10.2% of all US share trades. For comparison, last week, AC made up 6.2% of all trades.

AMC is the latest so-called 'meme stocks', delivering a massive 544% gain between 3 May and 2 June. Since 66% of trades last week were buys, we can possibly assume that many investors think that this run isn't over yet.

In other news, another meme stock in BlackBerry (yes, the BlackBerry phone maker) also burst onto ASX investors' minds last week. BlackBerry spiked in value back in February amid the first GameStop saga. But it's also been resurging lately with an 83.6% gain since 25 May. We saw an even stronger buying bias with this one, so again, we can probably assume there are still some ASX investors attempting to jump on this rain

Other than that, we see many familiar faces this week. GameStop and Tesla both remain popular, as does Apple and Chinese Tesla-rival Nio. A newcomer though is Canadian cannabis stock, Sundial Growers. According to our US Fool colleagues, Sundial is yet another candidate for the latest meme stock. Its shares rose almost 80% between 24 May and 3 June. It seems ASX investors have followed their International counterparts in chasing this cannabis company higher.

The post Here are the US shares ASX investors were buying last week appeared first on The Motley Fool Australia.

What happened

Shares of AMC Entertainment (NYSE: AMC) skyrocketed 160.4% in May, according to data from S&P Global Market Intelligence. The largest movie theater company in the world became the latest poster child of meme stock mania, as Reddit message board WallStreetBets fueled a massive spike in this beaten-down, highly shorted stock as the economy inched closer to a full reopening.

The massive move came in spite of a first quarter earnings report showing a huge cash burn of $325 million, more dilutive equity sales to keep itself afloat, and the company's largest shareholder for the past nine years selling its entire stake.

With all of that going on, you might have expected the stock to go down. But of course, this is 2021, the year of the meme stock! So what the heck is going on?

So what

While AMC did report substantial first quarter cash burn at the beginning of the month, its U.S. theaters were only operating at 15% to 60% capacity in the March quarter, and only 27% of international theaters were open, also at limited capacity. With vaccinations accelerating faster than thought since March, reopening optimism apparently reignited the WallStreetBets message board on Reddit, because AMC's stock began appreciating shortly after earnings.

On May 13, a few days after earnings, AMC sold another 43 million shares for $428 million, at nearly $10 per share. Given that the company had sold shares in the low-single digits last fall and winter, selling shares at $10 may have seemed like a great deal... if only management knew what was coming!

In the wake of the equity raise, sell-side analysts at B. Riley upgraded the stock, saying the raise likely lessened the need for more capital ahead of an industry recovery. While that bullish call bolstered the stock further, B. Riley only raised its price target from $13 to $16 -- less than half of where shares trade now.

Then, as the stock climbed toward $12, Dalian Wanda, the Chinese group that had originally purchased AMC in 2012, sold all of its remaining shares on May 21. While most would take that as a hugely bearish sign, the stock inexplicably went on an enormous tear immediately thereafter, more than doubling to $26 per share by the end of the month.

Why did that happen? It's hard to say. On May 26, sell-side firm CFRA upgraded AMC, but only from "Sell" to "Neutral" and giving an $18 price target. That coincided with the hashtag "#AMCSTRONG" trending on Twitter. The stock rallied about 20% that day and continued to rise through the end of the month. A short squeeze likely played into things, as nearly 20% of shares outstanding were sold short heading into May.

Now what

The stock's rise has continued into June, along with more capital raises. On June 1, the company raised $230.5 million at $27.12 per share from hedge fund Murdick Capital. The stock surged 20% on the news, and Murdick sold all of its stake that same day, telling clients shares were "massively overvalued," according to Bloomberg.

Murdick had also owned AMC's debt, likely at distressed prices, so the equity raise may have been a ploy to increase the value of its debt by increasing AMC's creditworthiness. Although a savvy trade by Murdick, it apparently sold too early as well, as AMC's shares skyrocketed over 100% the next day, reaching a high of $72.62, and prompting trading halts. Incredibly, AMC was allowed to sell another 11.5 million more shares to the public the following day at $50.85 per share, raising a whopping $587.4 million while only minimally diluting shareholders. Shares ended last week at $47.91.

All in all, AMC has raised $1.246 billion this quarter, adding to the $813.1 million in cash it had at the end of the first quarter. The company is still likely burning through cash, so it likely has a little less than $2 billion in cash against a still-high $5.46 billion in debt -- and some of that at very high interest rates. The company's share count has also nearly quintupled from pre-pandemic levels to 502 million shares outstanding.

Ironically, with investors bidding up the stock and the company selling shares, likely well above intrinsic value, AMC has likely fended off bankruptcy for the foreseeable future and actually increased the intrinsic value of the company. For instance, if a company is really worth $1, but is able to sell shares at $10, let's say, doubling its share count, it increases the company's intrinsic value from $1 to $6 ($1 plus $5 per share in cash).

The problem? It's still worth $6 -- less than the $10 price at which investors bought shares. Ironically, the more shares the company sells above intrinsic value, the closer intrinsic value will move toward the sale price, but it will never exceed that value.

The big exception to that rule is if the company can use that cash to make high-return investments that will increase intrinsic value going forward. That is also possible, as CEO Adam Aron said on the Murdick capital announcement that "it was time for AMC to go on offense again," saying AMC is pursuing the high-end deluxe theater chain Arclight Cinemas in California, which went bankrupt this year as a result of the pandemic, as well as other "highly attractive theater opportunities."

So if AMC sold shares at high prices, and can then buy high-quality theaters at bargain prices, and if movie-going bounces back in a big way, it could in fact create value above where the company sold shares.

However, that still seems like a long shot. In 2019, before the pandemic, AMC reported "adjusted" free cash flow of $358 million -- and that figure incorporated some generous adjustments. Still, assuming AMC can get back to its prior free cash flow on the new quintupled share count, that's only about $0.71 per share. So, at the current stock price, shares are valued at 67.5 times 2019 adjusted free cash flow per share.

Of course, movie theaters weren't exactly a growth industry prior to COVID, and could very well struggle to fully bounce back. Studios are shortening the window for theater exclusivity, and some may even begin releasing titles directly to streaming services in conjunction with theater releases.

While accretive theater acquisitions could add value, I doubt any acquisitions would materially increase AMC's free cash flow, since AMC already has massive scale as the largest theater chain in the world.

Basically, shares seem massively overvalued from a fundamental point of view, and the stock is extremely risky at these levels. That doesn't mean investors can't make money on technical buying bursts like we've seen over the past month, but that's not really investing; it's subscribing to the greater fool theory.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why AMC Entertainment skyrocketed 160.4% in May appeared first on The Motley Fool Australia.

But what's the story behind this theatre chain's rise from the ashes? And what are commentators anticipating next?

AMC stock caught in the middle

When it all boils down, the main thrust of AMC's meteoric rally is the war between Wall Street and Main Street. In other words, retail investors decided to act against the big hedge funds.

GameStop Corp. (NYSE: GME) was the frontrunner of a campaign against hedge funds, which were shorting companies into oblivion. Earlier in the year retail investors applied a buy and hold approach, which pushed the share price of GameStop higher. The rise in share price led to a few hedge funds making substantial losses on their short positions.

At the time, AMC was another US company that was receiving the same boost from retail investors. Unlike GameStop, AMC has gone on to surpass its January/February share price highs.

It appears the retail love has shifted more towards AMC than GameStop. Sentiment data for WallStreetBets over the last 24 hours corroborates this hypothesis. Reportedly, AMC was mentioned 9,130 times with 83% of the comments being positive towards the stock. Whereas, GameStop has received 2,280 mentions with 85% positive sentiment – according to Swaggy Stocks.

Where to from here?

Host of Mad Money, Jim Cramer believes the AMC share price is well into overvalued territory. Furthermore, Cramer thinks the theatre chain will face intensifying competition from the home streaming market as well as from the impact of COVID restrictions.

Commenting on the skyrocketing price of AMC shares, Cramer said:

AMC is fascinating, but now, at $22 billion, with 300 million shares traded out of a float of 500 million, it's obvious that this is a stock where the sellers have just had to go away. The meme people have two stocks, they have GameStop and they have AMC, and they have nothing else frankly.

Like a cup of water on a raging fire, Cramer's comments have failed to extinguish the meme stock's momentum. In after-hours trade, the AMC stock is up a further 8.7% to US$68 a share. The company's market capitalisation is now US$28.16 billion.

The post AMC Entertainment (NYSE:AMC) takes meme stock crown, up 95% appeared first on The Motley Fool Australia.