I suggested the idea of going long GameStop (NYSE:GME) before it became the international phenomenon it is today. Sure, you could buy GME stock at a bit over $100 now, which is a relative discount. But I could have gotten you in much, much lower.
You can look it up yourself. The date was June 1, 2020. I provided my reason for a positive catalyst in GME stock, back when you could have bought it for $4 to $5. And the kicker is that I didn’t even own GameStop at the time.
Well, I convinced myself to take a chance and I’m glad I did. (Now GME trades hands at about $110). But that doesn’t make me any more knowledgeable than the next person.
How was I supposed to know that a social media phenomenon would erupt, sending GME stock to the proverbial moon?
As with cryptocurrencies, I was simply in the right place at the right time. As such, I refuse to make it more than what it really was, which was some analysis and a whole lotta luck.
Make Sure You Control the Fun in GME Stock
If I’m being brutally honest, my analysis on GME stock — however well-reasoned I thought it was at the time — ended up being off track. Although it contained some useful insights, what ultimately skyrocketed GameStop shares had absolutely nothing to do with what I was bringing to the table.
And that is empirically why I don’t like to call myself some sort of “meme stock expert.” If the outcome is right but the process was wrong, eventually, the system will be exposed. That’s my concern moving forward with GME stock.
Presently, the social media stream loves to pump up GameStop with myriad conspiratorial news and just outright falsities. Bear in mind that’s not just my anecdotal observation. Recently, the New York Times mentioned the various conspiracies or the Robinhood-type ethos that undergird GME stock and its ilk.
To be fair, as Melanie Schaffer of Benzinga reported, shady practices such as naked short selling existed before authorities cracked down on the practice following the 2008 financial crisis. However, loopholes allow for the creation of synthetic shares, which by deduction provides greater ammunition for short traders to exert negative pressure on the affected securities.
So, it’s possible that this could be occurring with GME stock, sparking what meme traders call the “mother of all short squeezes” (MOASS). The thing is, folks on social media have been saying the same thing up and down this crazy ride. It hasn’t happened and there’s a chance that it might never happen.
Just like I was counterintuitively humbled with GameStop, we have to accept that on Wall Street, you can be right about a thesis and be wrong in your answer. I just lucked out with the mirrored derivative.
Don’t Forget About the ‘Losers’
While the New York Times focused on the winners of the meme-stock phenomenon, the Wall Street Journal — which tends to have a more conservative slant than the Times — went the opposite direction. It urged you to consider who really got rich from GME stock.
Author Spencer Jakab wrote, “When the smoke cleared, though, the popular image of tables being turned on America’s financiers wasn’t entirely accurate. Individual investors who bought GameStop this time a year ago and never sold are sitting on hefty losses.”
Exactly. And you know who these folks are? Regular people who bought into the MOASS story on the way up, on the way down and while GME was going around in circles.
Again, I’m not suggesting that there’s zero truth to the MOASS narrative. But I’ll tell you something. Being wrong in the thought process but being right in the ledger is a lot more palatable than the other way around.
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.
