Early this year, Wall Street analysts lay witness to one of the boldest forms of contrarian investment tactics ever: deliberately betting on heavily shorted securities which sport poor fundamentals. As we recognize today, this wildly speculative move gave birth to the meme-trade phenomenon. But with risk-on assets appearing to be losing much of their flavor, it may be time to consider anti-meme stocks.
At the moment, though, the sentiment going into the December-end celebrations seems to be reversing. Much of the about-face centers on research coming out of South Africa, which suggests that the omicron variant of the coronavirus catalyzed fewer hospitalizations. If this data is accurate, it would imply that anti-meme stocks may not be the way to go.
Now, one of the frustrations throughout the new normal has been conflicting reports spreading across the internet, causing mass confusion. It’s important to note that while this data is encouraging, it’s not yet peer reviewed. Further, we must understand that South Africa may feature demographic realities — such as vaccination rates or prior infections from other variants — that differ from the U.S. population. Thus, we shouldn’t throw out anti-meme stocks just on one report.
Even if omicron was a nothing-burger, we must also acknowledge basic dynamics regarding market valuations. At some point, people cannot afford to keep piling into speculative trades. Further, with margin trading at extremely elevated levels, the contrarian play isn’t to dive further into speculation. Rather, it’s to consider under-the-radar investments, such as moves into anti-meme stocks.
We should also note that the original meme trades are not doing so well. Even when the market was buoyant for the Dec. 22 session, popular risk-on wagers stumbled. This adds even more incentive to start considering anti-meme stocks to buy.
- Goldman Sachs (NYSE:GS)
- Lennox International (NYSE:LII)
- PepsiCo (NASDAQ:PEP)
- Raytheon Technologies (NYSE:RTX)
- AutoZone (NYSE:AZO)
- Freeport-McMoRan (NYSE:FCX)
- AMC Networks (NASDAQ:AMCX)
While the idea of going contrarian is a popular topic on the blogosphere, it doesn’t always produce great results. Therefore, it’s very possible that going contrarian against contrarianism may contain serious risks. Put simply, you must still conduct your due diligence before pulling the trigger on anti-meme stocks.
Anti-Meme Stocks to Buy: Goldman Sachs (GS)
If you had to pick anti-meme stocks to buy that represented the ire of the social media crowd, Goldman Sachs would be right up there. As you know, memes operate on an underlying morality, of the little guy going against the establishment.
Politicians jumped on the appealing bandwagon, but The Washington Post’s Catherine Rampell had some tough words to share:
Yet populist demagogues on the left and right alike can’t resist the narrative appeal of a righteous confrontation between banksters and the persecuted hordes. Especially one subplotted with conspiracy theories about shady forces scheming to block those hordes from striking it rich. Comments from some political leaders who claim to champion the proletariat have been especially confused.
You won’t have to look too far to find some of those conspiracy theories focus on Goldman Sachs. Still, that’s what fundamentally makes it a solid idea among anti-meme stocks. Eventually, big government and big money crushes all.
However, there is a more logical reason to buy GS stock. With the Federal Reserve shifting toward a hawkish monetary policy in 2022, investors will want to know how to protect their portfolio. Goldman provides much more credibility than say some random dude with a YouTube channel.
Lennox International (LII)
Part of the reason why Lennox International makes it on this list of anti-meme stocks is that the underlying business is incredibly boring. That’s not a knock on Lennox, to be clear. It’s just that very few people get up in the morning pumped to peruse HVAC (heating, ventilation, air conditioning) industry news.
However, Lennox’s products are deceptively boring. When analyzing broader realities, LII stock could become one of the most relevant traders over the next several years. According to a BBC.com report, Arctic warming has been linked to colder winters. That may have been the case with the Texas cold snap of 2021 and sure enough, experts project this winter season to be unusually chilly as well.
Now, I don’t want to dive into a debate about whether climate change is real or not. But the point is that if the climate changes on a consistent and permanent basis — as government data indicates — then LII should be on your radar of anti-meme stocks.
Of course, it’s a cynical play but when you’re dealing with memes, cynicism is just part of the thesis.
Anti-Meme Stocks to Buy: PepsiCo (PEP)
As forward-thinking investors expected, when the coronavirus first upturned our society, PepsiCo emerged as one of the winners. With government agencies restricting non-essential activities, such moves hampered the restaurant and entertainment industries. As a result, when people wanted their food and beverage fix, they turned to their local grocery store.
While PepsiCo doesn’t specialize in salacious drinks, its products nevertheless resonated with consumers who wanted a cheap pick-me-up in lieu of their drive-thru lattes. Better yet, the results show. In 2020, the company generated nearly $70.4 billion in revenue, up almost 5% from the year-ago level. Indeed, it was the pandemic that helped PEP get out of its longstanding revenue funk.
Even with the global health crisis fading in intensity (at least that’s what we hope), the company is still delivering the goods. Assuming that it has another solid result in the fourth quarter, it has a good chance of exceeding 2020’s sales haul.
True to its nature as one of the anti-meme stocks, nobody’s shorting PEP stock. Presumably, the institutional players have the same idea: PepsiCo is a boring investment — complete with a 2.49% dividend yield — that will just steadily chug along even in the face of uncertainty.
Raytheon Technologies (RTX)
At face value, Raytheon Technologies would be an ideal candidate among anti-meme stocks based on meme traders’ moral virtues. After all, so many of these folks remember how the big banks devastated the economy, watching their parents lose their jobs and toil in hardship. Meme-ing was a way of settling the score.
Moreover, many millennials remember being dragged into multiple conflicts in the Middle East under questionable directives. Indeed, quite a few young men and women served in these conflicts. While they may be proud of their service, the idea of supporting corporate interests during war is a complex issue.
Then again, meme traders loved bidding up private prisons so maybe meme-ing is just pure unadulterated capitalism?
Either way, one of the hallmarks of typical meme stocks is high short interest. For RTX stock, that’s just not there and for good reason: geopolitical conflicts are only heating up.
If I’m being terribly cynical, Raytheon’s anti-tank guided munitions system Javelin could play a huge role in the Ukraine-Russia conflict. Although the U.S. aims to stay out of a military conflict with Russia, backing down from the Russians sends a message to the Chinese that Taiwan is free for takeover.
And if Taiwan goes down, communist China will dictate global economic terms. The U.S. must draw the line, for credibility and for the future.
Anti-Meme Stocks to Buy: AutoZone (AZO)
Just by virtue of its share price tag, AutoZone takes itself out of the running for meme trades and into the running for anti-meme stocks. Although high-priced meme examples exist, it’s nevertheless a tall order for your average contrarian trader to buy a stock trading slightly over $2,000.
Yes, I understand that many brokerages these days offer fractional share ownership. It’s just that psychologically, fractional ownership isn’t as appealing as whole-unit ownership. And psychology has been a key driver for meme stocks.
Over the next several days, I’ll go into why I believe automobile prices are headed even higher in 2022. But long story short, the unique headwinds that the pandemic imposed on the supply chain creates a long-term drag on manufacturers and dealerships feeding demand. As well, consumers cannot just put off auto purchases. Electric vehicles, for all their reliability marks, are still not 100% reliable.
Of course, not everybody will be thrilled with higher car prices. Therefore, the auto parts and services sector will likely boom as consumers look to extend the life of their vehicles, giving AZO stock an inexplicably profitable ride.
On surface level, Freeport-McMoRan easily qualifies as one of the anti-meme stocks thanks to its underlying business. As you know, young investors have clamored onto cryptocurrencies, which are digital assets. On the other hand, FCX represents a wager on physical commodities, including gold. Analog versus digital, it doesn’t get more dichotomous than that.
However, Freeport-McMoRan is admittedly a tricky subject now that the Federal Reserve will raise interest rates in 2022. According to Reuters, such an ecosystem, combined with higher supplies and softer demand, will cool prices for copper, the company’s go-to commodity. Thus, FCX stock seems quite risky, something that I’m not going to deny. For full disclosure, I own shares of FCX.
At the same time, copper is critical for the electrification movement in transportation, along with the clean energy transition. That’s also according to the same Reuters report, which means that the supply glut could be a mitigated headwind.
Also, if you’re looking much further out, FCX might be worth a gamble. Economically and politically, I’m seeing very little sign of a substantive push back against electrification.
Anti-Meme Stocks to Buy: AMC Networks (AMCX)
No, it’s not what you think. I’m talking about AMC Networks, which is different from the meme that shares an almost identical name. And for complete disclosure, even though I’m not directly mentioning that company, I do own shares of the cineplex operator which often gets confused with AMCX, an operator of niche cable networks like IFC and SundanceTV.
Ironically, AMC Networks was a meme trade, with the stock enjoying a blistering run throughout most of the first quarter of 2021. Following a crash and a rebound in early June, AMCX has been stuck in a bearish trend channel. Since the middle of November, the negativity has only accelerated.
So, while sentiment as a meme trade may have died down, it could become one of the longshot anti-meme stocks to buy. Granted, the final season of The Walking Dead series — which has jumped the shark multiple times — has hurt AMCX. At the same time, it’s possible that this headwind has been priced in.
I’m not going to shy away from the severe risks that AMCX faces, especially in terms of competition. However, the network has a history of delivering groundbreaking material so it might be worth a bet. Who said anti-meme stocks had to be exclusively boring?
On the date of publication, Josh Enomoto held a LONG position in FCX and AMC. 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.