When discussing meme stocks to buy, the perceptions vary wildly. Most people conger up companies with bad fundamentals that are not deserving of investment considerations. In reality, there are oversold meme stocks to buy even now. First, we must acknowledge the overall risk that lies in the economy. The leaders of this world made a fine mess of it during the last two years. The financial situation is teetering and equities could easily crash another 15%.
The indices technicals suggest that there is enough support for now. So, betting on upside from meme stocks is still a realistic venture. Wall Street is struggling with the idea of the Federal Reserve (Fed) beating down on growth. I don’t blame investors for worrying. In the end, logic should prevail and we will go back to trading dollars and sense. For now, caution is a smart attribute to have, but not all-out panic.
Some of the meme stocks we discuss today will have better fundamental outlooks. Other opportunities are purely in play for technical reasons. Either way, there is real money on the table for those brave enough to participate. I prefer using the options markets where I can deploy risk for much less out of pocket expense than equities. But traditional investors can also have fun along with these exciting oversold meme stocks to buy.
As for the economy, so far it is still strong. That is why the central banks, mainly the U.S. Fed, are tightening monetary policies. Inflation is a problem, but the real enemy is foolish central bank behaviors. Last year, they created inflation on purpose under the “transitory” banner. This year, they are trying to stifle their creation by destroying demand. Their goal now is to go against their mandate and create unemployment. If we have fewer people working, we will have much less spending. It is working, judging by all the companies announcing hiring cutbacks. Good job Fed, you are indeed killing prosperity.
With that background out of the way, here are our three oversold meme stocks to buy:
|ARKK||ARK Innovation ETF||$43.07|
|PLTR||Palantir Technologies Inc.||$8.98|
Oversold Meme Stocks: ARK Innovation ETF (ARKK)
The ARK Innovation ETF (NYSEARCA:ARKK) could arguably serve as an emblem for meme stocks. ARK Invest rose to stardom during the pandemic. The masses wanted to know what its leader Cathie Wood was buying. So, it is only fitting that we make it our first meme stock to buy now.
Year-to-date, ARKK stock is down more than 50%. From the highs, it is down a whopping 70%. Clearly there is not much love for it now. But in reality, there is substance to this ETF. I am not one to chase memes, but the top 10 holdings of this ETF includes solid companies. Among them are Tesla (NASDAQ:TSLA), Roku (NASDAQ:ROKU) and Block (NYSE:SQ). These are wildly successful companies with excellent futures ahead of them. And the lot makes up 50% of the entire ARKK value.
Clearly there are fundamental reasons to add ARKK stock to the meme stocks to buy. Assuming that markets won’t crash, ARKK also has bullish chart upside potential brewing. If they trigger, the upside move would be substantial. I will be holding longs soon to try and capture this swing. But just like with the rest of the stocks on this list, ARKK will need help from the indices.
Perhaps the chief meme stock in charge is GameStop (NYSE:GME). With the advent of Reddit trading, GME stock has become a battle ground. Its spikes have been legendary, so it is always welcome on a list of meme stocks to buy. Currently, there are reasons to think that there could be new upside catalysts.
My specific opportunity is technical, so I would not want to worry much about the fundamentals. The bulls have an opportunity to invite more buyers in two waves. The first is if GME stock can rise convincingly above $154. Then momentum buyers would want to get in because the upside from there is 25%. But then that could lead to a second wave that would start from $199 per share. Neither are certain to happen, but the first one is realistic enough for now.
I would consider this a tactical opportunity worth pursuing. As for the fundamentals, they are still too iffy for my taste. Recently management announced a stock split. Frankly, this worries me a bit because it seems they are busy making sure GME stock is tradable. In reality, they should be making business headlines, not trading ones. I don’t want to rag on their fundamental success, but their financials are not inspiring.
Revenues shrunk 30% in the last few years, so there isn’t an optimistic story to tell there. And they lost almost half a billion in cash to deliver those results. Clearly there is much improvement necessary there before they earn investor confidence. The price-to-sales ratio is now 8 to 10 times more expensive than it was in prior years.
Oversold Meme Stocks: Palantir (PLTR)
With Palantir (NYSE:PLTR), I have my chance to introduce an exciting long-term bet. I am currently long this meme stock from the recent lows. The trade is profitable, but I bet it is still a great entry point. This is my fundamental meme stock to buy with a short term potential kicker.
PLTR stock is trying to snap out of a nasty descending trend. This started last year with barely any letup since. The first sign of a change would be if the bulls can overcome $11 per share. I entered my position at $8 per share, so I am patient now. But even if I were not already in it, PLTR still makes business sense in the long term.
Unlike the GME stock example, the financial metrics are impressive. Management is growing revenues at 30%, so the critics are wrong about it. Some of the complaints were about exorbitant compensation packages. I don’t care what they pay themselves as long as they continue to operate this well. The goal is to assess companies who are growing healthily, not judge their fairness.
On the date of publication, Nicolas Chahine held PLTR longs. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.