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GME, AMC are 'meme stocks, but they're really story stocks,' strategist says

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Michael Antonelli, Baird PWM Market Strategist, joins Yahoo Finance Live to talk about the state of notable meme stocks GameStop and AMC, the Bank of America fund manager survey, the Fed, inflation, and investing in the homebuilding sector.

Video transcript

BRIAN SOZZI: With 2021 almost over, investors are looking for new money-making positions as we head into the new year. Joining us now to discuss some potentially hot sectors is Michael Antonelli, Baird PWM market strategist. Michael, always nice to see you. We're going to get on your picks next year, but I have to start on these meme stocks because GameStop, AMC, they are getting lit up again here in the premarket, under major pressure for the second straight session. My question to you, why aren't these names getting defended?

MICHAEL ANTONELLI: So I popped over to Wall Street Bets before we came on here just to kind of see what the mood was over there, and there's definitely a lot of gallows humor in the memes and in the post.

And then also I looked at the chart. It looks like GameStop will have a death cross today. It's going to have a-- 50 is going to cross over the 200 to the downside before AMC's will.

Two things on the meme stocks. Let's remember that we call them meme stocks, but, in essence, there's another name for them, and that's story stocks. And story stocks are usually, you know, high, fast growers, high flyers that benefit from flows, from cheap money.

And, you know, at their apex, the apex of these names, the story was hot, and there was a lot of money around, right-- stimulus checks, 0% interest rates. And all of that has been waning, which kind of brings me to another point, and that's the Fed, right? The Fed is the entity that takes the punch bowl away.

So when the Fed brings that punch bowl out of the party, it kind of reduces the amount of money and cheap interest rates that are in the market, and these story stocks, meme stocks, have seen their-- have seen the apex of their interest.

And just think about Dogecoin, right? Just it's a crypto that's basically a meme or a story, and same thing, right? The apex of that was Musk on "Saturday Night Live." So they need the story to be active and they need cheap money, and both of those are kind of being challenged.

JULIE HYMAN: So does-- but, you know, what's interesting about that is we're not seeing that everywhere, right, like where it's been sort of-- it's been so choppy and really a day-by-day if not moment-by-moment situation when it comes to large-cap tech, for example, when it comes to crypto, which, yes, has been getting beaten up, but then you see these little pops here and there. So as an investor, like, how do you follow that or do you just kind of sit back and come back in 2022? I don't know.

MICHAEL ANTONELLI: Yeah, I mean, as you push end of the year, there's definitely a certain segment of investors, whether they're high-frequency traders or whether they're institutional, that say, all right, I'm up a lot this year. I'm just going to-- I'm just going to cut bait and just move on for the rest of the year, come back in next year.

And then there's the retail investors who are investing for the long run, the kind of ones I talk to. And I like to remind them that when you're thinking about what you're in, are you either speculating or are you investing? And for most retail people, the GameStops and the AMCs and the other kind of story names, those are speculations. They're doing it with a pocket set of money, but their investments, which are a broad-based set of mutual funds and cash and real estate and all those, those are set for the long run. Those are comprised of the Apples and the Amazons and the Johnsons & Johnsons and kind of the big names.

So speculation, investments, those are two different things. I think a lot of people are bailing on those speculations, and that's how I see the difference between them.

BRIAN SOZZI: Mike, you should only see my Twitter feed right now. I tweeted about GameStop and AMC this morning, and the response has been pretty ugly.

But, you know, listen, you've had people that have been left holding the bag. You look at GameStop down about 63% from its highs earlier in the year. A lot of folks are getting crushed despite their belief in the company. My question is here that, you know, with these declines, are you worried that this pushes the retail investor out of the market for some time? I mean, these investors have really helped power the market this year.

MICHAEL ANTONELLI: Yes, and we certainly will be watching that. You can see that in the data, right? You can see that in the flow data. You can see that in the options-trading data. We'll be able to tell whether that what you're saying is actually happening, not in real time but in fairly-- in a fairly kind of robust way.

And yeah, you know, I talk to retail investors all the time. Remember, that's kind of my main role right now, and I like to remind them that there's all sorts of environments in history in the stock market. You can be interested in one sector, and if that kind of burns you, there's all sorts of other sectors. You want to talk about ideas for next year? I got a sector for you guys. We'll get to that in a second.

But yeah, I do worry a little bit that people will learn the wrong lessons from this, and the wrong lesson would be I'm going to abandon stocks completely because I got hurt in GameStop, right? You know, we all can learn as children what it means to be burned in a book, but when you touch the flame, that's when you actually learn. And I think a lot of retail investors are going to learn that speculation is a dangerous thing or speculation can go bad for you in a hurry. But I will be there, and I know you guys will be there, and lots of people will be there to remind them that investing is something else, and we can't abandon that.

JULIE HYMAN: Either that or they got in in January and they're doing fine still. I don't know. We'll see.

MICHAEL ANTONELLI: Yeah. Still up big.

JULIE HYMAN: Maybe they timed it right. Let's give them a little credit. Maybe they did fine.

MICHAEL ANTONELLI: Yeah.

JULIE HYMAN: Maybe they're--

BRIAN SOZZI: Come on.

JULIE HYMAN: --going to move on and they'll still do fine. Maybe they're not leveraged. I don't know. I don't know what they're doing.

Let's get back to the Fed for a second, Mike, and get back to that fund manager survey that we were just talking about from Bank of America. Everybody getting into cash. They're worried about Fed hikes here. Do you think that that cash positioning is indeed a contrarian signal here?

MICHAEL ANTONELLI: Yeah, I looked at the same kind of survey when I woke up this morning too because it's always one of my favorite things to look at. Yeah, you know, those cash balances growing to me are people leaving those high flyers. You know, we look at the Zooms and the Pelotons and some of those other high flyers. I think those rising cash balances are people leaving those names, and now they just kind of don't know what to do with it as they come into year end. Maybe they're waiting for the start of next year to deploy that cash. So I think that's a good kind of supportive mechanism for the market.

Brian mentioned REITs. Remember, REITs was on that survey. In times of high inflation-- our friend Nick Maggiulli looked at this. In times of high inflation, say inflation running over 4%, the best-performing asset class is actually REITs-- REITs and then it's international stocks and then the S&P 500 are the top three. So when I saw that, I thought, you know, they're positioning themselves for high inflation, but those kind of things you can be a little lagging, right? Inflation might turn over next year, and then they're kind of in the wrong sector as the Fed hikes. But that is the top sector for high inflation.

BRIAN SOZZI: Mike, this might be the last time we see you before the new year. The floor is yours. Give us your top picks for next year.

MICHAEL ANTONELLI: All right, I want everybody to stop talking about tech stocks. I want everybody to stop talking about cyclical stocks. I've been on Yahoo Finance a lot. This is my home. I love this place. Home builders, the home sector. Housing has a decade-plus tailwind behind it, OK? There are so many names between the consumer discretionaries and renovations and home builders.

Stop with the tech. Stop with all the interest-rate stuff. Listen, home. The entire home sector is very attractive. It's got-- there's 80 million millennials, and they're all looking for homes, and interest rates are low. We don't have enough of them. Let's focus on that sector and find some good investments to start the year.

JULIE HYMAN: OK, Mike, I hear you on this. However, I mean, but home builders have been having some trouble, right? Their costs are going up-- have gone up like crazy. They've had trouble finding labor, right? We saw what Zillow had to go through to try and get-- flip all those homes they bought. And if rates are still low and rates are still going to be low even after they start going up, but I just wonder what that capacity and what the cost is going to look like and what the demand is going to look like.

MICHAEL ANTONELLI: So it doesn't have to be just home builders, right? There's renovation names. There's decking names. There's painting names. So there's all sorts of consumer-discretionary names that go into kind of that home trade, if you will.

XHB-- if you look at some of the ETFs for home builders, those have been doing well lately. You don't necessarily need to be in just home builders, like you're saying. Maybe that's a part of the value chain that's a little more challenged than the other ones.

But I am just so bullish on homes. There's just not enough homes in the United States. If you look at research, there's less than 300,000 single-family homes for sale in the United States. That's not enough. I think this is a sector that has a lot of tailwind that's not kind of impacted by some of the other things we talk about like high valuations or story stocks or meme stocks. To me, it's a sector that doesn't get talked about enough given the kind of tailwinds that it has.

BRIAN SOZZI: Well, you are indeed one of our favorites too. Michael Antonelli, Baird PWM market strategist. We'll catch you on Twitter. Have a great rest of the week.

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