Those broken stocks, not GameStop, can outperform hedge funds in their own game, says Jim Cramer
GameStop and AMC stocks took another hike on Wednesday, recording their strongest trading day since an internet-triggered short squeeze that sent their share prices into the stratosphere last month.
AMC stocks closed 18% higher at $ 9.09 and GameStop more than doubled, doubling to $ 91.70 weeks after a “meme stock” frenzy cooled off. Retail investors lined up behind a basket of recommendations on the Wall Street Bets Reddit forum, hoping to uncover unusually high short interest from hedge funds in a number of stocks.
While the rally was short-lived, CNBC’s Jim Cramer advised on Wednesday that young traders using commission-free transactions with brokerage apps like Robinhood should rely less on speculative trades and get back to basics of investing.
“If you really want to beat the big institutions at their own game, you don’t do it with GameStop and AMC. You do it with fractions of stocks and you do it right,” said the Mad Money host. “With the $ 500 club … you make real wealth.”
The comments come after major US averages also compiled their best trading day in weeks. The Dow Jones Industrial Average rose 424 points to hit a new closing high of 31,961.86, up 1.35% from Tuesday. The S&P 500 and Nasdaq Composite both closed about 1% higher.
As individual investors continue to look to Reddit to delve into stocks like GameStop, Cramer warned of the dangers of groupthink in the market.
“Ultimately, this is not a team sport,” said Cramer. “Instead of chasing those risky meme games instead of embarking on a squeeze that goes wrong, why not try investing long-term?”
After the market closed, the Cramer name dropped 12 proven stocks trading above $ 500. This price is usually unattainable for investors who are short of capital. Thanks to broken stocks where part of a stock can be bought, high-dollar stocks like Amazon or Chipotle might not be too far out of reach, he added.
“Some [these stocks] are still at their peak today, “said the host.” I want you to choose three and start buying. “