While some of the names discussed on the subreddit WallStreetBets continue to grab Wall Street’s attention owing to their solid growth attributes, fundamentally weak stocks that hit record price highs because of the actions of amateur traders should experience a downtrend. As such, we think AMC Entertainment (NYSE:AMC) and Clover Health (CLOV) should be avoided now due to their poor growth prospects. Conversely, we think Apple (AAPL) and Microsoft (MSFT) should continue to generate gains and, hence, could be ideal picks now. Let’s discuss.With approximately 10.7 million users, subreddit r/wallstreetbets entered the mainstream following an epic GameStop (NYSE:GME) short squeeze earlier this year. The forum has triggered red-hot price rallies in several stocks this year, including Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), AMC Entertainment Holdings, Inc. (AMC), and Clover Health Investments Corp. (CLOV). These names are still among the top ten most discussed stocks on the forum. However, while the AMC and CLOV rallies were essentially a consequence of a short squeeze, that isn’t the case with the other two stocks.
Tech stocks have gained significant momentum amid the COVID-19 pandemic. Furthermore, with robust digitization occurring in almost every industry, and with 5G being deployed widely, tech companies are seeing a surging demand for their products and services. So, considering the tech sector’s solid growth attributes, we think AAPL and MSFT could be great picks now.
In contrast, the social-media-triggered interest of retail investors, and the excessively stretched valuations of AMC and CLOV, could potentially lead to these shares retreating in price in the near term. Given their shaky fundamentals amid heightened market volatility, we think AMC and CLOV are best avoided now.