Welcome to another issue of Ramp Recap, a weekly newsletter covering stocks, crypto, memes, a crowdsourced portfolio, and more. If you’re reading this but haven’t yet signed up, you can join 9,000 others and get Ramp Recap delivered to your inbox each Sunday by subscribing here:
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What Happened:
Like the Undertaker rising from the casket, meme stocks are back from the dead (again).
On the week, AMC and GameStop were up 116% and 25% respectively, bringing their 2021 gains to more than 1000% each. There didn’t seem to be any significant news to fuel the rally again this time around, even though #AMCStrong, #AMC100k, and #AMCSqueeze were trending all week on Twitter. Nevertheless, it was a beautiful tribute on the 5-year anniversary of Harambe’s death. Apes strong together.
As Jim Cramer noted during the week, “I’ve never seen anything like this: a group of buyers with no sensitivity to price. These people don’t have unlimited firepower, but they’ve got enough firepower to engineer a short-squeeze any time a bunch of professionals decide to bet against this thing.” Although both GameStop and AMC both have more than 20% of their float sold short, we most likely won’t see the takedown of another hedge fund this time around.
I can’t help but think about a recurring theme that somehow keeps manifesting itself. It goes like this:
Bubble starts inflating in a security.
Traders go apeshit (R.I.P.I.P. Harambe).
The media catches on.
Your parents, grandparents, and the dumbest person from high school text you about it—asking if you’re long.
Bubble finally pops.
Life goes on.
[3 months later] It’s happening again, isn’t it? Everybody back in the pool!
The difference here, compared to your garden variety bubble, is that investors typically wisen up to the fact that the fundamentals do not align with the price and the bubble eventually pops—capping highs that will never be seen again. However, as we’ve seen time and again if you can meme something into existence with diamond hands, it doesn’t matter if the underlying fundamentals support the move. The only thing that matters is if someone is willing to buy it at a higher price.
The only surprising thing this time around is that GameStop was the poster child of the January meme rally—but now it’s AMC’s turn. While AMC hit 4-year highs this week, GameStop is still 36% off its January high.
Regardless of the 2021 returns so far, both businesses still face strong headwinds from the rise of digital streaming and a shifting consumer. As previously noted by Katie Greifeld, AMC could use this moment to clean up its capital structure.
Chief Executive Officer Adam Aron said in March that AMC “will carefully examine the raising of additional capital in whatever form we think is most attractive” and is focused on de-leveraging its more than $10 billion debt load. Investors have suggested that the company should strike while the iron’s hot and sell more shares to either pay down or refinance that debt.
Bloomberg Intelligence media analysts Geetha Ranganathan and Amine Bensaid certainly agree. The company recently raised $428 million by selling shares, which should give the movie-theater chain a “cushion through year-end to weather a $120 million monthly cash burn,” the pair wrote in a report this week. However, AMC should capitalize on this moment and go even further, they wrote.
As we’ve written about many times over, if you want to chase these bubbles, by all means, scratch that itch. But, do it wisely. Only put up what you can afford to lose, and don’t fall victim to the diamond hands psyop (unless you’re purchasing a Vanguard Target Retirement Fund).
Social media has forever changed the investing landscape. The rules of investing are being rewritten in real-time and we get a front-row seat to all of the action.
Performance Update:
Now let’s see how the People’s Portfolio did this week…
We finally made some money this week and ended the 5 straight weeks of declines. We desperately needed it.
On Friday, we voted Twitter out of the portfolio and replaced it with Shopify (SHOP). We ended up realizing a 12.81% gain which outperformed the S&P 500 by 227 bps over the same timeframe. Unfortunately, on March 1st, we had a 50% unrealized gain on Twitter, but gave up most of it after a disappointing earnings report.
Square (SQ) is on the chopping block next week for the 1st time. We’re currently holding onto a 4.44% gain over the past 9 weeks. Square was another stock that peaked at +28% for us in the first few weeks after we purchased it but has been in a slow drawdown ever since, clinging on to small gains.
We’re currently -7.73% on the year and finally made some headway this week on closing the underperformance gap—still a long way to go. Let’s just try to get back to even first.
Keep an eye out for the new Twitter poll every Friday. It’s your democratic duty to vote each week. Follow along in real-time with nearly 300,000 others on Public.
Portfolio News Highlights:
The biggest stories affecting our portfolio this week:
Twitter Launches Verification Process for the Blue Checkmark (Yahoo)
Square and Google Team Up to Help Square Sellers Get Discovered Online (BusinessWire)
My Take: 3 Reasons Why NVIDIA Had Amazing Earnings (MotleyFool)
Coinbase CFO maintains bullish Q2 guidance: 'Momentum that we are seeing is continuing' (Yahoo)
Penn National Gaming Receives Final Regulatory Approval to Acquire Operations of Hollywood Casino Perryville (BusinessWire)
Charts:
The following charts cover WeRamp Twitter polls Weeks 11 through 20 from the time period they entered the portfolio. Our stock is highlighted in thick green in each poll. Data courtesy of Ycharts.
As shown on Week 11, if we would have flipped Twitter for any other stock on the 2nd go around, we would have made an additional 100-200 bps on the portfolio’s overall performance. Luckily the first 10-week hold outperformed enough to beat the S&P 500 benchmark over the past 20 weeks.
Nvidia (NVDA) reported a quarterly profit of $3.66 per share, compared to a consensus estimate of $3.28 a share. Revenue exceeded forecasts, with the chipmaker also issuing an upbeat revenue outlook. Nvidia said it could not determine how much of its revenue increase was generated by sales to crypto miners. NVDA is currently our portfolio’s biggest gainer, sitting on an 18.41% gain.
What Else We’re Reading:
Blogs/Articles:
Jack Dorsey Says Bitcoin Can Make the World Greener. Could He Be Right? - Jen Wieczner (Intelligencer)
Bitcoin Mining and the Case for More Energy - Hodl’n Caulfield and Selene Lindstrom (Bitcoin & Energy)
My Adventures in CryptoLand (Plus: dLocal, Tencent, Lemonade) - Marc Rubinstein (Net Interest)
Everything Wrong with the “Money Printer Go Brrrr” Meme - Cullen Roche (Pragmatic Capitalism)
What’s the Point of the Office Again? - Sarah Green Carmichael (Bloomberg)
If You Thought Working From Home Was Messy, Here Comes Hybrid Work - Chip Cutter (WSJ)
Books:
Deep Work: Rules for Focused Success in a Distracted World - Cal Newport
Need new reading material? Visit my Amazon page for my most purchased book recommendations.