We recently compiled a list of the 10 New Stocks Reddit’s WallStreetBets Is Buying. In this article, we are going to take a look at where Corsair Gaming, Inc. (NASDAQ:CRSR) stands against the other WallStreetBets-approved stocks.
The surge of the Internet and the easy access to financial information, courtesy of the personal computing revolution, means that investing is no longer limited to the professionals. While Wall Street of the 1950s and onward was made of traders relying on hand made graphs of daily stock price movements to decipher long term trends, now, anyone with a computer and an internet connection has access to similar and more sophisticated tools.
This has also led to the rise of retail investing, which first made its mark during the coronavirus pandemic. Between 2020 and 2021, more than thirty million brokerage accounts were opened in the US, and the low interest rates coupled with coronavirus stimulus checks led to these traders accounting for 15% of the market's trading volume in September 2020. Data from investment bank Morgan Stanley shows that retail traders tend to prefer well known consumer facing stocks, and crucially, the bank's proprietary methodologies also show that in the five years between 2016 and 2021, stocks that garnered interest from retail investors ended up outperforming those without it.
Building on this, the pandemic and the surge of information in today's age have also shifted the dynamics of how America views wealth preservation. A fresh survey from Gallup shows that while real estate continues to dominate as Americans' favorite investment regardless of their income bracket, stocks come in second place for middle and high income families. This preference for equities dropped after the Great Recession of 2008 which wiped out some of the biggest companies in the world after risky bets on mortgage securities shattered Wall Street's public image. According to Gallup's data, the percentage of Americans who own stocks is the highest in 2024 since 2007 - or before the global economic crisis. Stock ownership stood at 52% of those polled - an all time low - in 2013 and 2016.
It slowly picked up and sat at 55% in 2020, and has risen every year since then to a post 2007 high of 62% in 2024. In fact, the last time stock ownership was higher than it is right now was in 2004 when 63% of Americans owned stocks during an era when interest rates were relatively low and the housing market was booming - economic conditions that are on a completely different spectrum than what we're experiencing right now.
Building on this, the divergence between retail investors and hedge funds came to the forefront of the investing world during the meme stock mania that saw the former pump up video game retailing and entertainment chain stocks as they rallied on social media and particularly Reddit's WallStreetBets, this trend continued in 2023. Data from S&P shows that in October when market sentiment about interest rates and the economy was at its lowest, retail investors sold off $15.64 billion in stocks for their largest monthly outflow since 2021. However, at the same time, the hedge funds appeared to smell blood. In a classic illustration of Warren Buffett's mantra of being greedy when others are fearful, the hedge funds bought $5.56 billion in stocks. Their three favorite sectors were real estate, utilities, and materials, with real estate and utilities witnessing the inflows after smart money flew out in the prior month. For some great Warren Buffett quotes, you can check out Warren Buffett’s 35 Best Quotes About Business, Investing, and Life.
Judging by this, it appears that retail investors are driven by their economic perceptions instead of setting up their portfolios during a downturn. This is also evident in Charles Schwab's Trader Sentiment Survey released in February 2024. The bank's data reveals that 52% of retail traders planned to move more money into stocks during Q1 2024, which marks a 7 percentage point sequential gain. This also coincides with their view of the economy, as 48% think that the US will avoid a recession in 2024 and 53% are bullish for the stock market.
With this context and as retail traders start to become bullish once again, we decided to take a look at how their previous bets have performed. The GameStop short squeeze of 2021 brought the Reddit subreddit WallStreetBets into the limelight and made Roaring Kitty a global celebrity. We covered some WallStreetBets stocks in 2021 and 2023, and in this piece, we'll analyze how the top 2021 stocks have performed since then. If you're interested in similar content, we also evaluated Cathie Wood's stock performance as part of our coverage of 10 Best Stocks to Buy and Hold For 5 Years According to Cathie Wood.
For these stocks, we also mentioned hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician in a laboratory adjusting the components of a gaming power supply unit.
Share Price Performance Since July 2021 Start: -68.5%
Number of Hedge Fund Investors In Q1 2024: 12
Corsair Gaming, Inc. (NASDAQ:CRSR) is one of the oldest companies on our list as it was set up in 1994. It sells video gaming accessories such as keyboards and mice. Therefore, the firm is on a much more stable footing fundamentally when compared to most of the stocks that WallStreetBets bought in 2021. Corsair Gaming, Inc. (NASDAQ:CRSR)'s shares also soared in 2021 on the back of equally strong fundamentals that were driven by a greater demand for personal computing products due to the pandemic lock downs. Naturally, the stock also generated hype on social media. The 162% share price gain between its listing in September 2020 and February 2021 proved that Corsair Gaming, Inc. (NASDAQ:CRSR)'s decision to expand into the live streaming gear market through a 2018 acquisition was well timed. Its revenue and earnings of $556 million and $0.53 respectively during the fourth quarter of 2021 smashed analyst estimates of $528 million and $0.46. Its shares soared by 30% in June 2021 after trading volume exceeded 20x the daily average. Retail investors had discovered that Corsair Gaming, Inc. (NASDAQ:CRSR)'s short interest back then was 18%, and they worked together to inflict massive blows on hedge funds. However, as the pandemic trends have died down, and the personal computing market has struggled amidst aggressive interest rate hikes, the shares have now returned to reasonable valuation levels.
Since it had some fundamentals to fuel its valuation, Corsair Gaming, Inc. (NASDAQ:CRSR) had a good first quarter. During the earnings call, management shared:
2024 is starting out as expected with new products driving a rebound in peripherals growth. Our Gaming and Creator Peripherals segment has continued its impressive performance, achieving 20% year-over-year revenue growth in the first quarter of 2024 after 16% year-over-year revenue growth in the fourth quarter of 2023. We are very pleased that growth is coming from all product lines. This was across Elgato with its popular Stream Deck products, SCUF Gaming with the successful recent launch of PC controllers, and Corsair peripherals with several new keyboards, headsets and mice. We were particularly pleased to see the gross margin lift to 40% with these new product launches.
Overall CRSR ranks 3rd on our list of the WallStreetBets-approved stocks to buy. You can visit Forget AMC and Gamestop: 10 New Stocks Reddit’s WallStreetBets Is Buying to see the other WallStreetBets-approved stocks that are on hedge funds’ radar. While we acknowledge the potential of CRSR as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CRSR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
