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Jason Menta, of Boisbriand, Quebec, became so enamoured with buying and selling stocks that he quit his day job to trade full-time.Christinne Muschi/The Globe and Mail

Jason Menta didn’t know much about investing when he purchased stocks last year. He worked as a car salesman outside of Montreal, and amid the doldrums of the pandemic, opened a trading account with Wealthsimple.

Mr. Menta, 29, bought a small number of shares in tech and pharmaceutical companies, “volatile stocks,” he says. “I don’t really like blue-chip stocks, to be honest. They’re slow. They’re boring.” In late January, shares in struggling theatre chain AMC Entertainment Holdings Inc. skyrocketed, caught up in the emerging meme-stock frenzy.

Mr. Menta took notice, joined a Reddit board devoted to AMC and bought in. First, he purchased $10,000 worth of shares and followed it up with another $10,000. He held on even as shares ballooned sixfold a few months later and only sold his stake when he decided to switch brokers. Mr. Menta pocketed about $25,000 in profit, but he invested another $60,000 back into AMC. It’s still his largest holding and he’s down about $20,000. He contends it will bounce back. “We’re on the right path now,” he says.

The meme-stock phenomenon (which refers to stocks that have gained online cult followings, where the traditional rules of investing generally don’t apply) exploded early last year when retail investors piled into troubled video-game retailer GameStop Corp. The stock soared more than 1,800 per cent before falling 90 per cent in a few short weeks. Its share price is still more than six times higher today than in early January, 2021.

The mania has subsided, but meme stocks are still a force. That has dismayed seasoned money managers, concerned regulators, and prompted much hand-wringing over what it all means for the future of public markets.

But some of those who participated see it differently. For many, it has been an intense educational experience, a crash course in finance that has made them more knowledgeable investors, they say. Some have branched out into longer-term holdings and paid off debt. Their commitment to their chosen meme stocks, however, is unshaken – and that still carries a lot of risk.

The whole concept sprung from WallStreetBets, a Reddit board for investing, and snared a variety of companies, including BlackBerry, Nokia and Bed Bath & Beyond. A number of factors drove the meme-stock trend: pandemic boredom, stimulus money and the popularity of zero-fee trading apps. Some investors were motivated by the idea of instigating a short squeeze – essentially, driving up stock prices to cripple hedge funds that had bet against favoured companies. The idea of regular folk causing pain for the Wall Street elite is still a motivation for some investors one year later.

This group of investors is more diverse than one might assume, according to a study released last fall by the Rotman School of Management in Toronto and research firm Riwi Corp. Contrary to the stereotype that the trend was driven by Gen-Z and young millennials, the study found 70 per cent of the 1,600 first-time investors who responded were 35 and older, and nearly a third were 55 and older.

Indeed, participation is not limited to the financial hedonists on WallStreetBets. Goldie Ghamari, a Progressive Conservative MPP in Ontario, is also among them. Her financial disclosure form as of September, 2021, indicates the only stock she owns is GameStop. “I’m not going to lie,” she says, “with lockdowns and quarantines, it was just something interesting to do.”

Ms. Ghamari will not disclose when exactly she invested, how much she invested or even whether she is up or down. She insists fear of missing out, or FOMO, did not play a role, and says she deployed her background as a trade lawyer to study GameStop’s filings with the U.S. Securities and Exchange Commission before investing. (She does, however, occasionally check out SuperStonk, a GameStop subreddit.) Ms. Ghamari says she’s behind the company for the long term, pointing to its plans to develop a marketplace for non-fungible tokens. She sums up her attitude thusly: “Diamond hands.” That’s slang for an investor who clings to a holding, no matter how volatile.

“I never learned about investing anywhere, really. The more that I learn about it, the more I learn how much financial literacy is so critical to success,” she says, adding she’s taught herself about setting up a trading account and how to more thoroughly analyze financial statements.

Holding a single stock goes against all sound financial advice, and some meme-stock investors have since branched out. A study from Public, a U.S. investing platform, found 81 per cent of people who purchased a meme stock went on to diversify their portfolios (although the study does not specify how).

That’s what Krystina Duckworth did. A 29-year-old in Virginia, Ms. Duckworth missed out on bitcoin a few years ago and jumped at the opportunity to buy GameStop. “I felt that FOMO,” she says.

She only invested about US$600 and later sold at a loss. Undeterred, she put money into AMC. As the price rose, Ms. Duckworth sold a portion of her AMC holdings to pay off her family’s car and fund some renovation projects around their home in preparation for selling it. When they sold, Ms. Duckworth put some of the proceeds into AMC and GameStop but also into longer-term stocks for diversification.

About half of her portfolio consists of AMC and GameStop today, and she is down on both names. “It’s never fun to see your stock in red, but I’m still bullish on it,” she says.

Ms. Duckworth’s husband is in the military and they have moved around a lot. She doesn’t have many friends or family where she lives, but she found a community of like-minded investors online. She’s active on Twitter and Reddit, and often listens to investing voice chats on Discord around the house while taking care of her two young children. “It’s been really cool being able to talk with all these people online,” she says. “It’s not just dry, boring stock information.”

Not everyone is as concerned about having a well-balanced portfolio, though. “Diversification has its place, but it’s for those who lack conviction,” says Nate Ballarino, a 25-year-old in Massachusetts. He purchased shares in GameStop last year after the company announced Ryan Cohen, an activist investor and entrepreneur who founded online pet store Chewy Inc., would join the board. (Mr. Cohen, referred to as Papa Cohen among GameStop acolytes, is now the company’s chairman.)

He continued buying over the next few days and later used options to increase any potential gains. One day in March, Mr. Ballarino planned to exercise two call options, which would allow him to purchase shares at a price far below where GameStop was trading at. He was at work selling RVs at the time and planned to let GameStop ride even higher through lunch.

By then, each share was close to US$350 but then whipsawed violently and fell under $200. In an instant, Mr. Ballarino’s options lost about $100,000 in value. “That’s more money than I’ve made in the past five years,” he says. He had to take a walk before returning to work.

The excruciating experience did not sour him on GameStop or trading. His position in GameStop is worth around US$60,000 today. Mr. Ballarino is committed for a few reasons, including his faith in Mr. Cohen’s efforts to turn it around. He considers himself a much smarter investor, too: He’s learned about market mechanics, hedge funds and short-selling, and consults SEC filings and researches which funds are long and short on a potential holding before he buys in.

Still, the phenomenon is concerning for some. Andreas Park, a finance professor at the Rotman School of Management who helped conduct the study into the demographics of meme-stock investors, has an admittedly dystopian view. The movement, he says, is one more symptom of the post-truth era, where experts and credible research are distrusted. Should meme-stock investors end up losing a lot of money on their holdings, which is possible, that may just reinforce the notion that the game is rigged and the average person can’t win – and the resulting anger will have to go somewhere.

The Rotman study found meme-stock investors tended to be lower income, relied on Reddit and other social media for investment advice and were motivated by shorter-term goals such as paying down debt or using profits to buy real estate. “This raises the concern that these investors enter the market, ‘bet the house’ to get out of debt, and are not prepared for downside risk,” according to the study.

Moreover, while financial education is beneficial, stock picking is incredibly difficult. “We as finance professors say you should be diversified, stay away from individual stocks because of the high risk you’re taking, and that you can’t predict stock prices in the short term,” Prof. Park says. “Nobody wants to hear it, obviously. … No matter how much evidence people produce, it’s like, ‘You’re still wrong, because you’re a bunch of eggheads.’”

Mr. Menta in Montreal, meanwhile, knows he’s had a wild ride with AMC, but he draws conviction from the wider community of investors. “We win all or we lose all. That’s really the mentality right now. And it’s crazy. It’s completely nuts,” he says. Mr. Menta became so enamoured with buying and selling stocks that he quit his job selling Subarus to day trade full-time. He misses interacting with other people, though, and is now pursuing a mortgage broker’s licence.

He says he believes a squeeze is coming for AMC and closely watches the short interest on the stock. Some fatigue is starting to set in, though. “I can’t wait for it to be over,” he says. The volatility can be exhausting. Mr. Menta says he’s learned to manage stress – he goes to the gym, he runs, he meditates – all while longing for some kind of resolution.

He could, of course, sell now. But that’s not an option: “I’ve held for too long to sell.”

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