Unless they were on another planet earlier this year, most investors were well aware of the invasion of the retail stock traders. Buoyed by zero commissions, stimulus cash and plenty of time at home due to the pandemic, many started following Reddit’s WallStreetBets stock forum.

The trade that initially got everyone’s attention was videogame retailer GameStop, which soared into the stratosphere in an incredible parabolic move caused by the massive short position that had been built on the company’s stock. The entire float, and then some, was sold short, and when the retail buyers piled in, the stock exploded higher. That move was exacerbated by the short sellers being forced to buy shares to cover.

The huge move certainly wetted the trading appetite for the legions of WallStreetBets traders looking for other hedge fund positions with huge short interest. GameStop was just the beginning, as soon the retail army focused on companies like AMC Entertainment, Bed Bath & Beyond and many others.

While Wall Street at first smirked at the little guys, all of a sudden they were a big factor in daily volume and stock movement. The BofA Securities predictive analytics team was intrigued and in a new research report started to examine if the Reddit data could indeed predict what they call “up-crashes.” The report said this:

With all eyes on Reddit after January’s short-squeeze, we turned to alternative data to understand whether what’s trending on Reddit can help predict future up-crashes. We analyzed data from an alternative data company (Thinknum) that tracks the number of stock mentions in the top 100 posts on Reddit’s WallStreetBets forum, where we focused on the SMID cap (Russell 2500) universe. Overall, we found no clear “tell” from the number, change in or share of mentions on Reddit’s WallStreetBets forum for stocks including GME, AMC or BBBY, which were the subject of “up-crashes” in shares in January. But given the potential impacts to performance from these tail-risk events, we think the data may be most useful to track on a cross-sectional basis (e.g. identifying the top 20 most-mentioned Small and Midcaps in the top 100 posts on Reddit’s WallStreetBets forum, referred to subsequently as “top-mentioned Reddit SMIDs” where all three of the above were among the top 20 the week prior to the Jan up-crashes. But with only a very short data history (since Aug’20) from which to draw observations, we believe the data warrants continued monitoring.

What we found intriguing in the report is that four stocks mentioned within the top 100 posts on WallStreetBets forum over the past week, as of Wednesday, May 12, are rated Buy at BofA Securities. If the data is indeed helpful in predicting big upside moves, it may be smart for aggressive investors and traders to take a look. It is important though to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Shares of this retailer already have had a solid move higher, and the company recently completed a successful secondary offer that was well received. Academy Sports & Outdoors, Inc. (NYSE: ASO) is a value-oriented sporting goods and outdoor recreation retailer with a concentration in the southern United States. It has 259 stores across 16 states, with 41% of the stores in Texas. The company offers a broad-based assortment across national and 17 private label brands in outdoor (32% of 2019 sales), apparel (29%), footwear (21%) and sports and recreation (18%).

The company recently posted solid results and BofA Securities noted this:

We are raising our price target and earnings-per-share estimates to reflect significant first quarter same-store sales upside versus our expectations. We believe solitary leisure momentum continues with consumer spending accelerating despite increase in entertainment spend. We see long-term tailwinds from significant new customer acquisition during 2020 and the Nike wholesale consolidation strategy.

Like many of the Reddit stocks, Academy Sports & Outdoors has a large 25% of the float sold short. The BofA Securities price target for the shares is $42, while the Wall Street consensus target is just $37.83. The final trade for Thursday was reported at $34.81 a share, which was up almost 3% on the day.

Enphase Energy

While somewhat off the radar, this is very solid green energy play. Enphase Energy Inc. (NASDAQ: ENPH) designs, develops, manufactures and sells home energy solutions for the solar photovoltaic industry in the United States and internationally.

The company offers semiconductor-based microinverter, which converts energy at the individual solar module level and combines with its proprietary networking and software technologies to provide energy monitoring and control services. It also offers AC battery storage systems, Envoy communications gateway and Enlighten cloud-based monitoring service, as well as other accessories.

Enphase Energy sells its solutions to solar distributors and directly to large installers, original equipment manufacturers, strategic partners and homeowners, as well as directly to the do-it-yourself market through its legacy product upgrade program or online store.

The company only has 4% of the float sold short. BofA Securities continues to love the secular growth story on battery storage and the European exposure, and it has set a huge $214 price target. The consensus target is down at $195.12, and Enphase Energy stock closed at $114.61 on Thursday.

This stock is about as off the radar as you can get, but it may be poised to move much higher. O-I Glass Inc. (NYSE: OI), with sales of $6.1 billion in 2020, is one of the world’s leading manufacturers of packaging and is the single largest maker of glass containers worldwide. O-I represents 25% to 30% of the world’s glass container market and, when considering technology licensees, its technology is used for one out of every two glass bottles in the world.

The company’s founder, Michael J. Owens, is credited with inventing the modern-day glass bottle forming machine. It operates 72 plants in 20 countries. BofA Securities is bullish and said this after the latest earnings were released:

OI delivered first quarter earnings-per-share of $0.35 compared to BofA at $0.27 given better volumes and accelerated margin expansion efforts. Second quarter earnings-per-shares guidance of $0.45-0.50 includes +15% volume growth. For 2021, OI expects 3-4% volume growth and $50 million of margin expansion benefit. Achievable guidance, strong volumes, agile operations and Paddock should allow for valuation expansion.

The short position comes in at 4% of the float. The $20 BofA Securities price target for O-I Glass stock compares with the lower $17 consensus target and Thursday’s $18.22 closing print, after a close to 3% gain for the day.

Virgin Galactic

This stock has had rocket ship volatility but also holds massive potential upside. Virgin Galactic Holdings Inc. (NASDAQ: SPCE) is an integrated aerospace company that develops human spaceflight for private individuals and researchers in the United States. It also manufactures air and space vehicles.

The company’s spaceship operations include commercial human spaceflight, flying commercial research and development payloads into space. In addition, it engages in the design and development, manufacturing, ground and flight testing, and post-flight maintenance of spaceflight vehicles.

Virgin Galactic employs 4,400 people and is not yet profitable, and commercial operations have not yet begun. Commercial operations are expected to begin later this year. The stock recently was hit hard on a poor earnings report and may be offering aggressive investors a solid entry point.

With 21% of the shares sold short, any positive news could send this stock to the moon. BofA Securities has set a massive $50 price target. The $32.30 consensus target on Virgin Galactic stock is lower but still well above the most recent close at $15.50, which down almost 4% for the day.

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While leaning on Reddit/WallStreetBets posts exclusively for trading or investment ideas is probably not the best way to analyze stocks, the data, in addition to standard Wall Street research, could prove very helpful in the future. We will be keeping a close eye on how these and other stocks fare going forward.

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