3 Meme Stocks to Buy on the Dip: February 2024

Stocks to buy

In the beginning, meme stocks to buy pitted the bulls against the bears. The market was without form and void of the knowledge of social media. That is until the hedge funds fooled around and found out.

However, those days seem to be long gone. Sure, you will always find people willing to speculate on popular, social-media-driven enterprises. But the zenith of the wild movement appears to be firmly in the rearview mirror. Still, that’s not going to stop folks from trying to get something going.

If I’ve learned from my interactions with ardent proponents of meme stocks, it’s this: appealing to reason isn’t usually the most productive endeavor. It comes down to the reality that people want what they want. So, if you want meme stocks, let’s have at it with the true classics.

AMC Entertainment (AMC)

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While it may be sexy to go contrarian with meme stocks, when analysts tell you to run from an enterprise, you probably should. That’s the case with cineplex operator AMC Entertainment (NYSE:AMC). While I benefited in the past from AMC stock, I no longer own any shares. Frankly, I’m glad that I got out of it given the severe deterioration of market value. Still, that hasn’t stopped the speculation.

So, could AMC make another magical run higher? First, I believe we must acknowledge the ardent support that the cineplex specialist attracts. I don’t think I’ve ever seen anything like it so you can’t count it out. Second, the bears appear to be betting against the enterprise, which theoretically could spark a short squeeze. For example, AMC’s short interest comes in at 9.62% of its float, which is elevated.

However, the bigger catalyst may come from the derivatives market. Fintel’s options flow shows heavy volume of sold calls. At face value, these are bets that the underlying security won’t rise above the listed strike price.

Further, some of these short calls – such as the Feb. 6 transaction for the Feb 23 ’24 4.50 Call – show huge discrepancies between high volume and relatively low open interest. That could mean an aggressively bearish (perhaps naked?) short call. If so, it’s off to the races but this is also an extremely risky bet.

Virgin Galactic (SPCE)

Source: Brian Friedman / Shutterstock.com

Within the past six months, spaceflight specialist Virgin Galactic (NYSE:SPCE) has been all over the map. From August through late October, SPCE tumbled badly. However, from October to late December, SPCE managed to close near the $3 level. That signaled that the bulls have taken control of the market. Alas, it was a trap. Since the beginning of the new year, SPCE cratered, down about 26%.

Fundamentally, though, Virgin Galactic – all other things being equal – enjoys a burgeoning total addressable market. For instance, Spherical Insights reports that the global space exploration market size reached a valuation of $486 billion in 2022. By 2032, the sector could hit nearly $1.88 trillion. If so, that would translate to a compound annual growth rate (CAGR) of 16.21%.

And that adds some “credibility” if you will to SPCE’s short-squeeze prospects. Right now, its short interest as a percentage of float stands at 22.18%. Also, its short interest ratio lands at 11.72 days to cover. On the options flow side, bears have placed both short and long-expiry sold calls and bought puts.

To be blunt, I’m not a big fan of SPCE’s wildness. Still, if you have the nerve, it could be one of the meme stocks to buy.

GameStop (GME)

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This is the one that started it all and coincidentally one of the few meme stocks to buy that I have in my portfolio. At first, GameStop (NYSE:GME) was like any other brick-and-mortar retailer fading away in the swamp of American open-air shopping centers. However, with competition moving in via e-commerce outlets combined with gaming console manufacturers facilitating direct-buy opportunities, GameStop days appeared to be numbered.

Still, that was before short squeezes became part of the mainstream lexicon. I suppose that’s the enduring legacy of GME. We as a financial publication industry routinely cover short squeezes. Heck, I even use short squeezes in my personal options trading. And the phenomenon is so powerful – that is forcing the bears to cover their positions – that even when you make an administrative mistake, the squeeze can potentially bail you out.

Can the same happen again for GME? I wouldn’t count it out. Fintel shows that its short interest as a percentage of float clocks in at 22.49%. Also, its short interest ratio stand at 22.17 days to cover. Recently, bearish traders have sold GME calls that expire on Feb. 16.

Given that there’s shorting activities going on in both the open and derivatives markets, all it takes is a push in the “right” direction. Is it one of the meme stocks to buy? Ya know, it very well could be.

On the date of publication, Josh Enomoto held a LONG position in GME. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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