“I wouldn’t finance a fad if I were a banker.” – Ken Hakuta, aka “Dr. Fad“
Chart of the Day
Good morning!
Meme stocks are back with a new generation of picks.
The poster child for the new craze is Beyond Meat (BYND 7.91% ), whose shares rose as high as 112% yesterday before ultimately ending down 1.1%.
The recent exuberance marks a stark reversal of fortunes for the plant-based burger company which had fallen so far out of favor that it’s been trading like a penny stock since 2024. Even with the recent rally, shares are down 98% from their all-time highs hit in July 2019.
Wednesday’s catalyst could be a myriad of reasons, starting from even more retail traders jumping on the bandwagon to perhaps even short covering.
But the big reason behind all the Beyond Meat chatter is because Roundhill on Monday added it to its meme stock ETF, which is similar to an ETF that the company offered until 2023.
Since the news of the inclusion, Beyond Meat shares are up 450%. It’s the biggest weighting inside the ETF. Other than United States Antimony Corp, however, all of the ETFs top 10 holdings are down this week. The ETF itself is down 7.5% this week.
That perhaps goes back to why investing in memes, especially via an ETF, isn’t the best strategy if you’re a longer-term investor. And you don’t have to listen to me for that. Take what Dave Mazza, chief executive of Roundhill, indicated to the Wall Street Journal last summer about shutting down the ETF: “the action was so concentrated in a few stocks that a broader fund didn’t make sense,” the story said.
Shares of Krispy Kreme, for example, are up about 25% this week. It’s not a top 10 holding in the ETF.
Another reason for the old ETF’s closure, Mazza said at the time, was that “Recently, investors have favored themes that are more tangible. The low interest rate environment encouraged speculation, and that’s ended.”
Since then, speculation has made a big comeback. It’s fueling moves in other unloved corners of the market this year, too. Tech companies with no revenue or profits are performing better than the Magnificent Seven, according to Schroders data. If these phases end, ETFs like Roundhill’s tend to get hit first.
Here’s what I’ll say though, while highflying meme stocks are disappointing to see, as are 5x leveraged ETF applications, they also show that investors remain eager to get in this year’s market, so much so that ETFs are being launched to capitalize on that demand.
It also further proves the point that Main Street is a force to reckon with in this year’s markets. Otherwise Wall Street would have continued their tradition of ignoring them. Retail investors have been instrumental in buying the dip this year, which has helped push the market to fresh all-time highs.
For now, let’s hope that the retail investor on the Reddit group wallstreetbets who bought 10,000 shares of Beyond Meat at $7.50 fares well. Shares finished down at $3.58, so that trader is going to have to hold on for profit.
Share your thoughts
What do you make of dabbling in meme stocks? Click here to send us your response.
📧✍️Here’s what a reader commented📧✍️
Q: Do you think the SEC should approve 5x leveraged ETF products?
A: Why wasnt the headline “A 5X ETF… What the heck?”
Catch up with FS Insight
Today was a widespread derisking day, and momentum stocks have fallen -15% in 6D, the worst performance since early 2022. But to us, this is an excessive reaction to credit concerns, as we believe markets still have PTSD from earlier this year. So we would be dip buyers.
Technical
While this doesn’t portend a rally continuing in any of these, the structure of this “risk-on” trade has begun to noticeably change in the short run. I expect this might bring about volatility next month, but for now, trends remain intact.
Crypto
Galaxy Digital reported a standout quarter with adjusted EPS of $1.12 vs. $0.30 expected, driven by record trading volumes, strong M&A activity, and treasury mandates from Digital Asset Treasury companies. GLXY continues to build a “two-headed monster” with both its scaling crypto business and expanding AI data center operation.
News We’re Following
Breaking News
- Elon Musk said Tesla’s robot will be ‘incredible surgeon,’ left Wall Street with no guidance on EVs CNBC
- Trump Administration in Talks to Take Equity Stakes in Quantum-Computing Firms WSJ
Markets and economy
- Popular Leveraged Funds Shock Investors With Huge Losses WSJ
- Andreessen Horowitz lines up $10bn for next wave of tech bets FT
- Trump administration on track to narrow deficit, Treasury analysis finds FT
- Single-family rent growth just hit the lowest level in 15 years, new report finds CNBC
- Junk Bond Investors Are Ignoring Stress in Credit Markets. Here’s Why. BR
Business
- Reddit sues AI search engine Perplexity for scraping its data FT
- Alibaba prices AI glasses at $660 to rival Meta and launches ChatGPT challenger CNBC
- IBM’s stock falls after growth slows in this key segment MW
Politics
- Mamdani and Cuomo Trade Barbs in Tense New York City Mayoral Debate WSJ
- Fear and Anger Fill New York’s Canal Street After Immigration Raid NYT
Overseas
- Trump’s Oil Sanctions Strike at Russia’s Economic Lifeline WSJ
- U.S. Lifts Key Restriction on Ukraine’s Use of European Long-Range Missiles WSJ
- Milei’s make-or-break moment FT
Of Interest
- Harvard Records an Increase in Asian Students and a Drop in Black Students NYT
- AI Workers Are Putting In 100-Hour Workweeks to Win the New Tech Arms Race WSJ
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| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 10/23 | 10:00 AM | Sep Existing Home Sales | 4.06 | 4 |
| 10/23 | 10:00 AM | Sep Existing Home Sales m/m | 1.5 | -0.25 |
| 10/24 | 8:30 AM | Sep CPI m/m | 0.4 | 0.4 |
| 10/24 | 8:30 AM | Sep Core CPI m/m | 0.3 | 0.3 |
| 10/24 | 8:30 AM | Sep CPI y/y | 3.1 | 2.9 |
| 10/24 | 8:30 AM | Sep Core CPI y/y | 3.1 | 3.1 |
| 10/24 | 9:45 AM | Oct P Sep F S&P Srvcs PMI | 53.5 | 54.2 |
| 10/24 | 9:45 AM | Oct P Oct S&P Manu PMI | 51.9 | 52 |
| 10/24 | 10:00 AM | Oct F Oct P UMich 1yr Inf Exp | 4.6 | 4.6 |
| 10/24 | 10:00 AM | Oct F Oct P UMich Sentiment | 54.6 | 55 |
| 10/24 | 10:00 AM | Sep New Home Sales | 708 | 800 |
| 10/24 | 10:00 AM | Sep New Home Sales m/m | -11.5 | 20.5 |
| 10/27 | 8:30 AM | Sep P Durable Gds Orders | -0.1 | 2.9 |
| 10/28 | 9:00 AM | Aug Case Shiller 20-City m/m | n/a | -0.07 |
| 10/28 | 10:00 AM | Oct Conf Board Sentiment | 93.75 | 94.2 |
| 10/29 | 2:00 PM | Oct 29 FOMC Decision | 4 | 4.25 |
