Retail investors who use internet forums like Reddit and StockTwits to outline their market strategy have been investing heavily in companies that are expected to post their earnings results for the second quarter in the coming days. These investors hope to cash in on the post-earnings boom - firms who beat market expectations on earnings per share and revenue usually see share price climb following the release of their earnings report - while also trying to shield their favorites stocks from crashes if the earnings disappoint.
Some of the firms expected to post earnings for the second quarter later this week include Uber Technologies, Inc. (NYSE: UBER), the California-based ride hailing service, ViacomCBS Inc. (NASDAQ: VIAC), the New York-based media and entertainment firm, and General Motors Company (NYSE: GM), the Michigan-based carmaker that has been stepping up investments in electric vehicles in recent years. The number of mentions of these firms on Reddit forums has been increasing as the dates for their earnings reveal approaches.
Jaime Rogozinski, the founder of the WallStreetBets, a Reddit forum with 10.7 million members, recently spoke to crypto news platform Crypto Potato and discussed his investment strategies, the inspiration for setting up WallStreetBets forum that now exerts great influence over the stock market in the US, and the explosion in popularity of cryptocurrencies around the world. For those interested in the mindset that retail investors employ to grow their disposable incomes, Rogozinski offers great insight into how business can blend with technology.
The tech sector has truly transformed how finance works. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Reddit's WallStreetBets is Buying these Stocks for Post-Earnings Gains
With this context in mind, here is our list of the 10 stocks Reddit's WallStreetBets is buying for post-earnings gains. These were ranked keeping in mind the number of mentions on Reddit, analyst ratings, business fundamentals, and hedge fund sentiment around each. All the firms listed below are expected to unveil their earnings results for the second quarter later this week.
Reddit's WallStreetBets is Buying these Stocks for Post-Earnings Gains
Expected Earnings Date: August 4 (After Market Close)
Lumen Technologies, Inc. (NYSE: LUMN) is a telecom company that is headquartered in Louisiana. It is placed tenth on our list of 10 stocks Reddit's WallStreetBets is buying for post-earnings gains. The firm is expected to post earnings for the second quarter after the close of market on August 4. It provides services to more than 4.5 million broadband customers across the United States. The company beat market expectations on earnings per share for the first quarter and reported a revenue of over $5 billion.
On May 27, investment advisory Cowen maintained a Market Perform rating on Lumen Technologies, Inc. (NYSE: LUMN) stock with a price target of $12, noting that the sale of the Latin American subsidiary was a sign of the firm getting rid of non-core assets.
At the end of the first quarter of 2021, 32 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Lumen Technologies, Inc. (NYSE: LUMN), up from 29 in the preceding quarter worth $772 million.
Just like Uber Technologies, Inc. (NYSE: UBER), ViacomCBS Inc. (NASDAQ: VIAC), and General Motors Company (NYSE: GM), Lumen Technologies, Inc. (NYSE: LUMN) is one of the stocks Reddit's WallStreetBets is buying for post-earnings gains.
In its Q1 2021 investor letter, Longleaf Partners Fund, an asset management firm, highlighted a few stocks and Lumen Technologies, Inc. (NYSE: LUMN) was one of them. Here is what the fund said:
“Lumen (40%, 3.33%), the global fiber company, was the top contributor. While COVID fallout still weighed on fourth quarter results, the company benefitted from positive business mix improvements. Early in the quarter, Lumen appreciated 38% in a few short days amidst the “Game Stop / Reddit” short cover phenomenon. After this shortterm bounce, Lumen’s stock price appreciated more steadily over the last six weeks of the quarter with improved results. Many of last year’s worst-case fears have not materialized and the outlook is improving for the core business. We continue to believe that the company has multiple ways within its control to both grow and realize value per share, and we have a 13D filed to allow us to discuss these options with the company. Lumen’s board, which includes Southeastern-nominated Chairman Mike Glenn from FedEx and Director Hal Jones from Graham Holdings, is doing good work to realize Lumen’s hidden value and return the business to FCF/share growth. Despite its appreciation, the stock trades at less than half of our appraisal.”
Expected Earnings Date: August 5 (After Market Close)
Novavax, Inc. (NASDAQ: NVAX) is placed ninth on our list of 10 stocks Reddit's WallStreetBets is buying for post-earnings gains.The company operates as a biotechnology firm working on vaccines for serious infectious diseases. It is based in Maryland. The company is expected to post earnings for the second quarter after the close of market on August 5. On July 27, British news publication The Guardian reported that the COVID-19 vaccine developed by the firm would face delays in being shipped to Australia because of regulatory pressures.
On June 15, investment advisory Cantor Fitzgerald maintained an Overweight rating on Novavax, Inc. (NASDAQ: NVAX) stock and raised the price target to $272 from $217, noting enhanced conviction for the COVID-19 vaccine of the company as a growth catalyst.
At the end of the first quarter of 2021, 38 hedge funds in the database of Insider Monkey held stakes worth 1.2 billion in Novavax, Inc. (NASDAQ: NVAX), up from 37 in the previous quarter worth $1 billion.
In addition to Uber Technologies, Inc. (NYSE: UBER), ViacomCBS Inc. (NASDAQ: VIAC), and General Motors Company (NYSE: GM), Novavax, Inc. (NASDAQ: NVAX) is one of the stocks Reddit's WallStreetBets is buying for post-earnings gains.
Expected Earnings Date: August 5 (After Market Close)
Zynga Inc. (NASDAQ: ZNGA) is ranked eighth on our list of 10 stocks Reddit's WallStreetBets is buying for post-earnings gains. The company provides social game services and is headquartered in California. It is expected to unveil earnings results for the second quarter after the close of market on August 5. In recent weeks, as the mobile gaming market grows, there have been rumors around takeover of mobile gaming firms and Zynga has been touted as one of the potential targets.
On May 6, investment advisory Bank of America upgraded Zynga Inc. (NASDAQ: ZNGA) stock to Buy from Neutral with a price target of $13.5, underlining the strong earnings for the firm in the first quarter and double digits organic growth as the reasons behind the update.
At the end of the first quarter of 2021, 47 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in Zynga Inc. (NASDAQ: ZNGA), down from 52 in the previous quarter worth $1 billion.
Alongside Uber Technologies, Inc. (NYSE: UBER), ViacomCBS Inc. (NASDAQ: VIAC), and General Motors Company (NYSE: GM), Zynga Inc. (NASDAQ: ZNGA) is one of the stocks Reddit's WallStreetBets is buying for post-earnings gains.
In its Q4 2020 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Zynga Inc. (NASDAQ: ZNGA) was one of them. Here is what the fund said:
“We also added to our position in Zynga. Our multiyear investment campaign in Zynga has been based on a new management team’s ability to drive steady growth in the company’s base portfolio of games, expand margins, reinvigorate the new game development pipeline and use its strong balance sheet to acquire complementary games and studios. Shares have been pressured in recent quarters, presumably because of investor concerns about the company’s moderating growth rate and Apple’s pending new privacy policy which will make it more difficult for Zynga to both efficiently acquire new players and sell advertising in its games. We believe the company has multiple growth levers it can pull in the periods ahead, including the rollout of new games, acquisitions, further penetration into international markets and entry into new gaming categories, to name a few. Furthermore, our research suggests the Apple privacy policy change is manageable for larger mobile game developers such as Zynga. Given our strong conviction in the profit cycle, we used recent weakness to add to our position.”
Expected Earnings Date: August 4 (After Market Close)
Etsy, Inc. (NASDAQ: ETSY) is a New York-based online marketplace. It is placed seventh on our list of 10 stocks Reddit's WallStreetBets is buying for post-earnings gains. The platform connects buyers with sellers and offers more than 80 million items for sale. The company is expected to release the earnings report for the second quarter after the close of market on August 4. On June 28, the firm announced that it had signed a definitive agreement for the purchase of Elo7, a Brazilian online marketplace, for $217 million.
On July 12, investment advisory Oppenheimer reiterated an Outperform rating on Etsy, Inc. (NASDAQ: ETSY) stock and raised the price target to $225 from $200, highlighting that it expected the firm to either meet or slightly beat expectations for earnings in the second quarter.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in Etsy, Inc. (NASDAQ: ETSY) with 2.3 million shares worth more than $465 million.
Uber Technologies, Inc. (NYSE: UBER), ViacomCBS Inc. (NASDAQ: VIAC), and General Motors Company (NYSE: GM) are some of the stocks Reddit's WallStreetBets is buying for post-earnings gains, just like Etsy, Inc. (NASDAQ: ETSY).
In its Q1 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Etsy, Inc. (NASDAQ: ETSY) was one of them. Here is what the fund said:
“Etsy continued to be a top contributor in the Portfolio during the first quarter. Etsy experienced record levels of demand in 2020. Throughout the beginning of this year, the business has continued to see accelerated growth trends. The company’s recently announced fourth quarter results provided numerous data points that highlight Etsy’s success in both broadening and deepening the relationship it has with buyers and sellers on its platform. In fact, Etsy now stands as the fourth largest e commerce site in the U.S. Repeat buyers have grown nearly 100% year-over-year, despite mask sales, which grew rapidly at the onset of the pandemic, shrinking to less than 5% of sales. We continue to believe Etsy remains in the early stages of growing out its platform. We remain confident in its ability to compound its value for shareholders at an attractive rate going forward.”
Expected Earnings Date: August 4 (Before Market Open)
CVS Health Corporation (NYSE: CVS) is a health service provider headquartered in Rhode Island. It is ranked sixth on our list of 10 stocks Reddit's WallStreetBets is buying for post-earnings gains. The firm will post earnings for the second quarter before the opening of the market on August 4. On July 7, news publication Business Insider reported that the firm had been approached by Amazon, the ecommerce giant, as the latter ramped up efforts to enter the health business and looked to partner with health insurers in this regard.
On July 23, investment advisory Tigress Financial maintained a Buy rating on CVS Health Corporation (NYSE: CVS) stock with a 12-month price target of $108, citing growth of the digital initiatives of the firm as one of the reasons behind the expected 30% upside in shares.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based firm Harris Associates is a leading shareholder in CVS Health Corporation (NYSE: CVS) with 8.5 million shares worth more than $643 million.
Uber Technologies, Inc. (NYSE: UBER), ViacomCBS Inc. (NASDAQ: VIAC), and General Motors Company (NYSE: GM) are some of the stocks Reddit's WallStreetBets is buying for post-earnings gains, alongside CVS Health Corporation (NYSE: CVS).
In its Q1 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and CVS Health Corporation (NYSE: CVS) was one of them. Here is what the fund said:
“We sold our position in CVS Health Corp. to allocate capital to companies with larger margins of safety. During the five years that we owned CVS Health Corp., the company acquired Aetna. At the time, we also owned Aetna, and we believed the combination of the two companies would create additional value. After the acquisition, its business performance has been disappointing. We reevaluated our assumptions and determined its value has not grown.”
