How to Find Meme Stocks: Spotting the Next Big Thing

Meme stocks have taken the investment world by storm in recent years. Driven largely by online communities and viral trends, these stocks have captivated retail investors looking for quick and significant profits. But how can you find the next big meme stock before it blows up? Let’s explore what makes a stock a “meme,” how to identify them, and the risks and rewards that come with investing in them.

What Defines a Meme Stock?

A meme stock isn’t your typical investment. These are company shares that gain viral popularity due to social media buzz, often skyrocketing in price in a short period.

Unlike traditional stocks, meme stocks are less influenced by company fundamentals like earnings or valuations. Instead, their value comes from the collective enthusiasm of online communities. This can create wild price swings and offer an opportunity for quick gains—or steep losses.

Social media platforms play a central role in the rise of meme stocks. Online forums like Reddit’s r/WallStreetBets, Twitter, and even TikTok are breeding grounds for stock gossip and trends.

On these platforms, users share their theories, pump stocks they believe have potential, and often build a narrative around why a stock is “the next big thing.” Conversations on Reddit once drove GameStop’s stock to incredible highs, showcasing the immense influence these communities hold.

Photo by Mikhail Nilov

Examples of Popular Meme Stocks

Some of the biggest household-name meme stocks, thanks to their extraordinary price movements, include:

GameStop (GME): Arguably the stock that started it all. Heavy short interest and a dedicated Reddit following pushed GameStop’s stock from a few dollars to over $400 in early 2021.
AMC Entertainment (AMC): Enthusiasm from retail investors turned this struggling movie theater company into a highly volatile stock.
BlackBerry (BB): Once a mobile phone leader, BlackBerry found new life as a meme stock, catching the attention of online traders.

The common theme? They all had cult-like followings and attracted a wave of retail traders.

How to Find Meme Stocks Before They Go Viral

Spotting a meme stock before it takes off requires a bit of research and attention to trends. Let’s break it down step by step.

Monitoring Online Communities

Online forums like Reddit, Discord, and even stock-focused subreddits are goldmines for early chatter about potential meme stocks. Look for threads with increasing activity. Stocks that start gaining mentions repeatedly are ones to watch.

Platforms such as Trading212 highlight the importance of understanding these discussions. By following trending topics and monitoring sentiment, you can get ahead of the curve.

Analyzing Stock Volume and Trends

Keep an eye on stock trading volumes. A sudden spike in volume, paired with increasing social media chatter, can be an early indicator that a stock is gaining traction.

Charting tools can also give valuable insights. Look for unusual activity in terms of price swings or abnormally high interest relative to the stock’s historical averages. Combining social signals with trend analysis gives you a broader picture of which stocks are heating up.

Risks and Rewards of Investing in Meme Stocks

Before diving in, it’s crucial to understand both the potential and the perils that come with investing in meme stocks. While they can be lucrative, they are equally risky.

Volatility and Hype

Meme stocks are inherently volatile. Social media hype can drive meteoric rises, but it can also lead to devastating falls once the excitement fades.

Sites like Nerdwallet emphasize the importance of understanding this volatility. A sudden drop in online activity or shifting sentiment can lead to steep losses if you’re not careful.

Potential for Fraud

The meme stock arena isn’t free from bad actors. Pump-and-dump schemes are prevalent, where people artificially inflate stock prices to sell their holdings for a profit, leaving others with losses.

Public.com notes that these risks make caution and research essential. As tempting as it can be to jump in on a stock because “everyone else is doing it,” make sure your decisions are based on more than just hype.

Conclusion

Meme stocks can deliver outsized profits but come with significant risks. By understanding their unique characteristics, following online trends, and staying aware of the challenges they present, you can position yourself to identify the next big stock before it goes viral.

Success in the world of meme stocks lies in research, timing, and a healthy amount of skepticism. If you approach them with a well-informed strategy, you just might come out ahead—while avoiding the pitfalls that catch many others off guard.