This week, the "legendary retail investor" Keith Gill, returned to the spotlight after three years and rallied retail investors on foreign media forums. As a result, the first two trading days of this week witnessed a resurgence of the Meme stock frenzy, with $GameStop Corp. Class A GME$ and $AMC Entertainment Holdings, Inc. Class A AMC$ doubling in value, showcasing another highlight moment of retail investors squeezing Wall Street.

Why do Meme stocks frequently experience surges? How can one identify potential investment opportunities in Meme stocks? This article will help you understand:

How Do Meme Stock Squeezes Occur?

Looking back, Meme stocks represented by $GameStop Corp. Class A GME$ and $AMC Entertainment Holdings, Inc. Class A AMC$ recorded over tenfold increases during the epic short squeeze of 2021. GameStop's stock price once reached $120, while AMC surged past $500. However, the hype eventually subsided, and stock prices returned to levels based on fundamental valuations.

Several factors contribute to the formation of the retail investor phenomenon in concept stocks:

• Social Media Influence: Platforms like $Reddit RDDT$ and "X"enable retail investors to easily access and share stock information, creating a strong herd effect. Influencers and celebrities can significantly impact the stock market.

• Targeted Companies: Meme stocks favored by U.S. retail investors, such as $GameStop Corp. Class A GME$, $AMC Entertainment Holdings, Inc. Class A AMC$, and $Koss Corporation KOSS$, are often companies on the brink of bankruptcy due to poor performance. Some retail investors are dissatisfied with Wall Street institutions and their market manipulation tactics, such as short selling, which they believe harm retail investors. By collectively buying heavily shorted stocks, retail investors aim to cause losses for short sellers and achieve a sense of social justice.

The Current Round of Meme Stock Frenzy and Key Representatives

However, current capital inflows differ from the levels seen in 2021. According to VandaTrack, GameStop saw a net inflow of $15.8 million on Monday, while AMC attracted $37.5 million. These figures are significantly lower than the peak inflows in January 2021, when GameStop and AMC each saw daily inflows of $87.5 million and $170 million, respectively.

How to Identify Potential Meme Stocks?

It is noteworthy that the underlying logic behind retail investors speculating on Meme stocks is primarily through short squeezes. These near-bankrupt companies attract substantial short interest before their stock prices surge, leading to short squeezes and significant price spikes.

Additionally, the rise of Meme stocks can trigger gamma squeezes, where rising prices lead traders to buy call options, forcing market makers to purchase the underlying stocks, and further driving up the stock prices.

Historically, if the short interest ratio exceeds 40%, a short squeeze is likely. Based on the latest data from S3 Partners, the following stocks have high short-interest ratios and could be potential Meme stocks. Investors can participate through stocks and options.

Potential Meme Stock List

Source: S3 Partners; Data as of 05/15; Daily Trading Volume ≥ $10 million; Market Cap ≥ $100 million

Risk Warning

It is essential to note that the rapid surge in Meme stocks like $GameStop Corp. Class A GME$ can end abruptly as these stocks generally continue to face significant fundamental challenges, and the current rise also lacks fundamental catalysts.

Moreover, retail investors' enthusiasm may not last long. While they may quickly embrace a stock, they may just as quickly abandon it. Participating in Meme stock trends involves considerable price volatility, and investors need to be vigilant about risk management.