A dizzying run for meme stocks including
AMC Entertainment Holdings Inc.
accelerated Wednesday, sending the movie-theater chain’s stock to a new closing high and powering some unexpected stock-market winners.
In a rally reminiscent of the Reddit-fueled craze of late January, AMC shares almost doubled to $62.55 Wednesday, notching their first record close since 2015.
Bed Bath & Beyond Inc.
surged 62%, its biggest one-day advance on record. Headphone maker
rose 32%; and
Individual investors have banded together again on social-media platforms including Twitter and Reddit in a bid to drive the stocks higher, leading to the frenetic session of trading. AMC shares jumped so far so fast that trading was temporarily halted four times.
Options activity skyrocketed, with investors positioning for even greater gains in the shares through bullish call contracts. Bets on AMC and BlackBerry were among the most popular in the entire market, alongside those tied to the S&P 500, according to Trade Alert.
The recent rally has put AMC’s gains for the year to 2,850%, surpassing even GameStop’s nearly 1,400% advance.
Among the more surprising winners of the recent meme stock resurgence were value investors who typically look for bargains in the stock market and bet that their prices will appreciate. That is in contrast to many individual investors in meme stocks, who have bought to profit from the relentless momentum behind the shares.
In an odd twist, GameStop and AMC are still part of the Russell 2000 value index. That means that investors who may not even want to hold shares of AMC and GameStop and have eschewed the social-media-fueled frenzy in the stocks currently have them in their portfolios.
They have benefited nonetheless. The rallies in the two stocks have helped push the value index toward its biggest outperformance against its growth counterpart on record, according to Dow Jones Market Data. The Russell 2000 value index is now up 30% for the year, compared with the Russell 2000 growth index’s 3.8% gain through Wednesday.
GameStop was the $17 billion iShares Russell 2000 Value ETF’s biggest holding as of Tuesday. AMC Entertainment was the second-biggest, according to iShares. To start the year, neither stock ranked in the top 300 holdings, and their weightings were a fraction of what they are currently.
The index provider, FTSE Russell, says the benchmark is populated with companies that exhibit lower price-to-book ratios—which draws on famed investor Benjamin Graham’s traditional approach to discovering undervalued companies—and lower expected growth values.
When GameStop appeared in the
iShares Russell 2000 Value ETF
in June 2018, shares had been falling for several years, knocking its price-to-book ratio down to about 0.6 at the time, according to FactSet. Anything under 1 is considered a solid value stock. This year’s rally has dramatically reshaped the value proposition, though, pushing its book value to the ultra rich level of more than 40.
AMC’s stock is in a different spot: The company’s book value was around 1.9 when it started trading in the iShares index fund in 2014 and had plummeted as low as 0.3 in March of last year. The upheaval the company experienced since the pandemic has made the metric a moot point in recent months, but forward-looking projections put it at 0.8, according to FactSet.
The inclusion of GameStop and AMC in a value fund like the iShares Russell 2000 Value ETF is surprising to some investors who said that they don’t consider GameStop and AMC to be value investments.
“GameStop and AMC are not small-cap value stocks,” said Kevin Silverman, who oversees small-cap value stocks as chief investment officer of Sterling Partners Equity Advisors. “Having these names in the index that aren’t actually what the index is advertising is a disservice.”
Mr. Silverman says he expects the two meme stocks to be kicked off the index at the next annual rebalancing. Russell is expected to inform investors of changes to the gauge this Friday.
Meme stocks’ influence on the stock market overall has grown, and GameStop and AMC can be found in a range of ETFs, from value funds to growth funds and social-media-focused funds. For example, the $25 billion Vanguard Small Cap Value ETF has positions in AMC and GameStop, as does the
SPDR S&P 1500 Momentum Tilt ETF,
FactSet data shows.
Many professional investors have looked to profit from any declines in the shares by shorting them, confident that they are overvalued.
Individual investors, however, have continued to tout AMC on Twitter in recent days, vowing not to sell their shares. AMC recently said individual investors own 80% of its shares.
The latest leg of the rally has coincided with enthusiasm that a big investor, Mudrick Capital, bought a big chunk of the company’s shares, though it sold out shortly after.
Additionally, the company said Wednesday that it would reward the loyalty of individual investors who had bet big on its shares this year, giving them special benefits at theaters.
“We start with a free large popcorn on us, when they attend their first movie at an AMC theatre this summer,” AMC said in a news release.
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com and Michael Wursthorn at Michael.Wursthorn@wsj.com
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