Meme stocks were one of the biggest trends on Wall Street in 2021. Plenty of traders made a killing trading stocks like AMC Entertainment Holdings Inc (NYSE:AMC) and GameStop Corp. (NYSE:GME) and meme cryptocurrencies like Dogecoin (CRYPTO: DOGE).
AMC shares are on track to finish 2021 up more than 1,250%, GameStop shares are up 707% year-to-date, and Dogecoin is on track to finish the year up an incredible 3,250%. Missing out on spectacular gains like that is enough to give anyone a severe case of FOMO, but there are several reasons why investors who missed out on the big meme stock gains in 2021 shouldn’t lose any sleep over it.
Battleground Stocks: First of all, these meme stocks and cryptos are all extremely volatile. In general, risk and reward are fairly balanced in the stock market, and volatility swings both ways. Early AMD and GameStop investors certainly hit a home run in 2021, but investors that were late to the game have struggled. In the past six months, GameStop shares are down 27.3%, AMC shares are down 27.7% and the price of Dogecoin is down 47.2%.
In November, Michael Batnick, Director of Research at Ritholtz Wealth Management, wrote a blog post discussing how he missed out on the massive run in Tesla Inc (NASDAQ:TSLA) over the past several years. In the post, Batnick said he believed Tesla was “wildly overvalued” when it had a $50 billion market cap. Today, Tesla’s market cap is $1.07 trillion.
Fortunately for Batnick, he highlighted one rule that helped him avoid losing money on his bearish Tesla thesis that would also have served meme stock skeptics well in 2021: never short a battleground stock. In fact, Batnick said long-term investors should generally steer clear of battleground stocks all together.
“If a company or the founder is in the news three times a week, probably best to just let other people fight it out,” he wrote.
Buffett And Tesla: Batnick is certainly not the only person that missed out on Tesla. Berkshire Hathaway, Inc. (NYSE: BRK-A) (NYSE: BRK-B) COE and Wall Street legend Warren Buffett has never owned a single share of Tesla stock. When asked his opinion of Tesla CEO Elon Musk in 2019, Buffett seemingly chose his words carefully.
“Well, I think you’re trying to bait me a little bit,” Buffett said. “He’s done some remarkable things.”
When it came down to the million-dollar question of whether or not Buffett would invest in Tesla stock, he kept his answer short and sweet.
“No,” Buffett said.
Wall Street Vs. Main Street: Regardless of what you personally feel about the prospects for AMC and GameStop’s struggling businesses or the long-term outlook for Dogecoin as a potential replacement for the U.S. dollar, these meme investments are serving as the front line in a major battle between the Wall Street establishment and a new generation of populist social media stock traders.
In the first half of 2021, traders on Reddit, Twitter and other social media platforms were winning the battle. In the second half of 2021, Wall Street seemingly gained back some territory. But the price action in these stocks seemingly has very little to do with whether or not they are good long-term investments, and is more about the latest media headlines and the latest trending hashtags.
If you missed out on AMC, GameStop and Dogecoin in 2021, there’s no need to beat yourself up. There’s also no need to be angry or envious of all the people that traded these investments and made a killing. Most investors did pretty well in 2021, with or without meme stocks. The SPDR S&P 500 ETF Trust (NYSE:SPY) has generated a year-to-date total return of 27.5%, well above its historical annual average.
Investing is hard enough without getting involved in these volatile, unpredictable battleground investments. Don’t feel like you need to chase the hottest stocks in the market, or invest in certain stocks just because they are popular.
Benzinga’s Take: The great thing about investing is there are 1,000 different ways to participate and make money. In 2022, consider forgetting about FOMO, YOLO or “to the moon” and try to identify the best long-term investing approach that gives you peace of mind and puts you on the right track to meet your financial goals.