Happy Friday & welcome to Market Mood. If analyzing stock market chatter was a game of Blackjack, then we’d be Rain Man the way we make it look so easy. 🃏

r/WallStreetBets 💎

A dip into Reddit’s biggest stock-talk cesspool

We love combing thru stock market chatter (it’s kind of our thing). Today we thought it would be interesting to focus in on one of the most notorious chatter sources of all: Reddit. More specifically — r/WallStreetBets (WSB).

It’s kind of like the Wild Wild West of stock market discourse. A place where self-proclaimed degenerates get their kicks hyping up meme stocks, YOLOing, HODLing, and downright Ape-ing into ill-advised investments with diamond hands.1

And while it started off as a niche, underground forum in the depths of Reddit back in 2012, r/WSB has exploded in recent years to more than 13.7M individuals, currently ranked as the #25th largest subreddit on the platform.

It’s so massive now, that it’s built a reputation for driving & manipulating stock market outcomes, time and time again. It started with the GameStop ($GME) short-squeeze of the century back in early 2021, then the focus turned towards keeping other bankrupt-brinking stocks like AMC and Bed Bath & Beyond afloat over the past few years (more on this from us here). Kind of nuts, tbh.

Entire movies & documentaries have been written about it. The biggest hedge funds in the worlds are shaking in their boots. So today, let’s take a look under the hood of what’s *actually* happening inside WallStreetBets, and how we can maybe use it as a lens into the future…

Part 1a: Top r/WSB Topics

To start, there’s sooo much to unpack & analyze here. So today we figured we’d keep it simple, with a quick analysis of what types of things are *actually* talked about on WSB. We’ll follow up with another blog post or two about it later.

To gauge the pulse, we went back over the past 6 months-worth of WallStreetBets chatter, and parsed out the companies, people, and topics that have gotten the most buzz. Here’s a quick look at the top-50 of em:

It’s a great gauge into the interests of retail investors. You see things you might expect — conversation about the major indexes (S&P 500, NASDAQ, The Dow), and major government groups (The Fed, SEC, FDA, etc.).

But there’s also some other things that stand out:

• The top-of-mind general topics in recent times are things like inflation & GDP, AI & Chat-GPT, electric vehicles, oh and natural gas

• Elon Musk & Jerome Powell are r/WSB’s lordes & saviours, both among the top 15 most-mentioned entities

• Top stocks include some major market cap’s (Apple, Amazon, Tesla), but also some obscure meme-stocks (AMC, GameStop, SilverGate, Carvana)

• OnlyFans also made the top 50 list, more-mentioned than Putin or Disney 😅

Part 1b: The WSB Hype Scale

So great, we’ve got some bearings. Now that the table is set, I wanted to dive deeper into the top stocks in particular, to see if there are any trends afoot.

I’m specifically curious if we could quantify ‘hype’ on WallStreetBets. As a proxy, we took a look at the top 30 most-mentioned stocks over the past 6-months, and compared their mention volume to their market cap.

The thinking here is that stocks with bigger market caps should have more coverage, and that stocks with a high ratio of mentions to market cap are then generally ‘overhyped’ (we did a write-up on this here). This is what we saw:

Taking the median ratio of mentions-to-market cap as a line in the sand, we plotted out the top 30 r/WSB stocks and looked at which ones were over-indexing in chatter:

Most Overhyped r/WSB Stocks:

• AMC (bonafide memestock)

• Tesla (bc Elon Musk & EV's of course)

• Carvana (probably bc of today's used car prices)

• Ford (^^)

• Robinhood (highly polarizing retail stock)

• NIO (another EV memestock)

So there you have it, a little taste into the WallStreetBets landscape for your Friday. Again lots more to be said here, & we’re just scratching the service.

Next week we’ll plan on looking into how certain keywords have changed in prevalence on r/WSB over the past year (similar to our analysis of earnings transcripts here). Then from there we’ll see if we can discern any predictive indicators of mention volume spikes vs. stock price performance. LMK what you think, & talk soon! ✌️

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Thoughts on today’s post?

1. Incredible 🔥🔥🔥🔥🔥

2. Considerably decent 😺😺😺

3. Not your best bro 👎

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.

SENTIMENT KEY: 🟢=bullish, 🌑=neutral, 🔴=bearish