As Hedge Funds Endure Rocky Year, | Stock Market News Today


Investments in private companies are saving the year for stock-picking hedge funds.

Prominent managers that invest in both public and private companies in the same funds have seen their portfolio of public investments flail, weighed down by losses from January’s meme-stock rally and a retreat by fast-growing technology stocks. But soaring valuations of private companies and a hot U.S. IPO market have boosted their private wagers. That has helped mask their poor performance in public markets and driven up their overall returns.

Dan Sundheim’s $25 billion D1 Capital Partners, for example, is down 4% in its public bets for the year through September—but up 71% before fees in its private investments, said people familiar with the firm. The S&P 500 had a total return of 15.9% for the period.

D1 clients opt into share classes that offer varying levels of exposure to private investments. Clients in the share class that can invest up to 15% in private companies have seen gains of about 4.5%, after fees, for the period. The gains stand at 14% and 21% for clients in share classes that can invest up to 35% and 50% in private companies.

Meanwhile, Boston-based Whale Rock Capital Management was down 11.2% for its public investments in a hedge fund that can invest up to a quarter of its clients’ money in private companies, said people familiar with the fund. The performance of the fund’s private wagers shrank the fund’s losses to 3.3% for the year through September.

Hedge funds without private companies in their portfolios have had a rougher time. Palo Alto, Calif.-based Light Street Capital Management, which manages late-stage growth and other funds along with a hedge fund that only invests in public companies, is down 18.6% for the year through September in its hedge fund, said people familiar with the firm. That has brought the fund’s size down to about $1.7 billion. Its growth funds have fared much better, the people said, with Light Street’s first such fund, whose investments include the restaurant-software provider

Toast Inc.

and the software-development company

GitLab Inc.,

expected to have an internal rate of return of more than 100%.

The rush into private investing by public-market investors has helped fuel surging valuations for private companies. And as hedge funds, along with mutual funds and sovereign-wealth funds, deploy billions of dollars, they often crowd out venture and growth funds.

Hedge funds made up 27% of the money raised in private rounds this year through June, despite participating in just 4% of the deals, according to a recent report by Goldman Sachs Group Inc.

“These tech companies are growing exponentially, and managers want to capture that huge exponential growth for their clients,” said Susan Webb, founder and investment chief at the New York-based outsourced-investment firm Appomattox Advisory.

The higher-return potential is stark. Private-equity and venture strategies gained an average 14.2% a year in the decade ended in 2020, Goldman said, while hedge funds overall averaged half those annual returns over the period—and were subject to the stresses of regular redemption cycles.

Toast, a restaurant-software provider that went public last month, is an investment of a Light Street Capital Management growth fund.



Photo:

Richard Drew/Associated Press

Hybrid funds can offer distinct benefits, said Udi Grofman, global co-head of the private-funds group at Paul, Weiss, Rifkind, Wharton & Garrison LLP. “The beauty of the structure is that it allows the capital of the investors, in between being invested in private investments, to be exposed to public markets,” Mr. Grofman said. Clients typically sit on cash to fund capital calls by venture and private-equity funds.

Stock-picking hedge funds had a banner year in 2020, buoyed by markets that set new highs after bottoming that March.

Their fortunes in public markets have changed this year. The meme-stock rally in January, which sent the price of companies including GameStop Corp. and

AMC Entertainment Holdings Inc.

to extraordinary heights, dealt losses to myriad hedge funds. Whale Rock gained 71% last year, while the D1 share class investing up to 15% of clients’ money in private companies climbed 60%; in January they lost about 11% and 30%, respectively, in just their public investments.

While D1 has almost recouped those losses, Whale Rock and other growth-oriented stock pickers have struggled. Fund managers say sector rotations that have alternately favored growth or value have made it difficult to navigate markets. Long out-of-favor sectors such as energy and financials have been on a tear.

Meanwhile, private markets have continued to be supportive. The U.S. IPO market is flourishing, and companies are continuing to raise more money in private markets than in the past. Hedge funds are contributing to the brisk pace of fundraising. D1 and Tiger Global Management, which manages a series of private-equity funds in addition to a hybrid hedge fund, have participated in private funding rounds this year through September at a pace of more than a deal a week for D1 and more than two deals every three days for Tiger, according to PitchBook Data Inc.

The 44-year-old Mr. Sundheim, who started D1 after several years as chief investment officer at Viking Global Investors, said at a recent capital-introduction conference that he hadn’t expected to get as big in private companies as he has. D1 is invested in 90 private companies, he said.

He said judgment was the only competitive advantage in public markets as private markets offered the additional benefit of firms’ reputations playing a role in gaining access to deals. He said D1 in its earliest investments acted as a resource to management teams so they would be strong references for D1. Mr. Sundheim also said he was confident in his portfolio of public investments over the next three to five years.

Write to Juliet Chung at [email protected]

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Virgin Galactic, PepsiCo, JPMorgan Chase, Goldman Sachs: What to | Sidnaz Blog


Here’s what we’re watching ahead of the opening bell on Tuesday.

  • U.S. stock futures wavered, suggesting indexes would hover close to their record levels as investors awaited inflation data and earnings from the nation’s biggest banks.
  • Futures tied to the S&P 500 were relatively flat after the broad index climbed to its 39th record closing levels of the year. Dow Jones Industrial Average futures weakened 0.1%, while Nasdaq-100 futures were up 0.3%.
What’s Coming Up
Market Moves to Watch

JPMorgan Chase kicked off earnings season for big banks on Tuesday.



Photo:

Mark Kauzlarich/Bloomberg News

  • Conagra Brands


    CAG -0.53%

    declined 3.2% after reporting a fall in sales and cutting its expectations for profit next year, saying that it expects increased inflation to hit its bottom line.

  • PepsiCo


    PEP 0.02%

    shares added some fizz, rising 1.5% premarket after the food-and-beverage giant reported earnings and lifted its full-year guidance.

  • Tesla


    TSLA 4.38%

    edged up 1% in premarket trading, rising for the fourth consecutive day. CEO Elon Musk was in court on Monday to defend the purchase of SolarCity. He also said he doesn’t enjoy leading the automaker.

  • Boeing retreated 2.3%. The planemaker is facing production issues for the 787 Dreamliner, likely further delaying deliveries of the popular wide-body jets.
  • Some U.S.-listed Chinese companies are recouping recent losses, with search engine

    Baidu


    BIDU -0.53%

    adding 2.2%, e-commerce company

    JD.com


    JD -0.53%

    rising 1.5% and video-sharing firm

    Bilibili


    BILI 0.22%

    up 3.2%. Beijing said last week that it is probing tech companies’ data practices, prompting a tumble. But some of those worries may have eased after China’s top market watchdog approved

    Tencent’s


    TCEHY -3.36%

    plan to privatize search-engine affiliate

    Sogou.

  • Swedish telecom

    Ericsson

    ‘s U.S.-listed shares are up 3.5% ahead of the bell. Rating agency Moody’s issued a review of the company’s rating.

  • Meme stock

    AMC Entertainment

    slid 3.8% premarket. It has lost nearly 25% of its value this month so far.

Market Facts
  • The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all hit record closes on Monday—and in the S&P 500’s case, it was the 39th record close this year, beating the Dow’s 27 records and the Nasdaq’s 24. The broad index is ahead of the others in terms of gains this year too, with a nearly 17% rise.
  • European stocks have also been on the rise, with both the Stoxx Europe 600 and Germany’s DAX index notching record highs on Monday.
  • On this day in 1852, Wells, Fargo opened for business in San Francisco and Sacramento. It was founded by Henry Wells and William G. Fargo to convert gold dust into cash for miners, transport and safeguard letters, gold nuggets and other valuable byproducts of the California Gold Rush.
Chart of the Day
  • Global coffee prices are climbing and threatening to drive up costs at the breakfast table as the world’s biggest coffee producer, Brazil, faces one of its worst droughts in almost a century.
Must Reads Since You Went to Bed

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Vertex Pharmaceuticals, AMC, Uber, Dave & Buster’s: What to Watch | Sidnaz Blog


Stock futures are inching up, a day after the S&P 500 notched its 27th record close of the year amid the push-pull of rising inflation versus a healing job market. Here’s what we’re watching ahead of Friday’s trading start.

What’s Coming Up
  • The University of Michigan’s consumer sentiment index, due at 10 a.m. ET, is expected to rise to 84.4 during the opening weeks of June from 82.9 at the end of May.
  • The Group of Seven summit is under way in England. Leaders from the world’s seven largest advanced economies will discuss the recovery from the Covid-19 pandemic, climate change and other issues.
Market Movers to Watch
  • Shares of drug maker

    Vertex Pharmaceuticals


    VRTX 1.50%

    are looking sickly premarket, with a 15% drop. It said it will stop developing an experimental drug after it was shown in a midstage study to be unlikely to provide a clinical benefit to people with a rare genetic disease.

Vertex Pharmaceuticals’ building in Boston, Oct. 19, 2016.



Photo:

Scott Eisen/Bloomberg News

  • AMC Entertainment


    AMC -13.23%

    jumped 6.6% premarket. Late in Thursday’s session, AMC’s credit rating was upgraded by two notches, to CCC+ from CCC- , by S&P Global Ratings, as it pointed to the movie theater operator’s recent equity capital raises.

  • Skee ball anyone?

    Dave & Buster’s


    PLAY -3.78%

    shares climbed 5.2% premarket after the entertainment-venue chain reported a profit for its latest quarter as revenue picked up with consumers heading back into its locations.

  • Cruise lines caught the Covid blues. Two guests sharing a room on Royal Caribbean Group’s Celebrity Millennium tested positive for Covid-19 toward the end of the cruise, the company said. The ship was sailing out of the Caribbean island of St. Maarten, one of the company’s first voyages to restart out of the region.

    Royal Caribbean


    RCL -2.33%

    shares slipped 2% premarket, and

    Carnival


    CCL -2.04%

    was also down, by 1.4%.

  • Uber


    UBER 0.83%

    is up 0.6% premarket. A Chinese competitor, Didi Chuxing Technology, made its IPO papers public on Thursday, and could fetch a valuation upward of $70 billion. Didi is known for successfully pushing Uber out of China, winning a bruising price war that ended in 2016. But Uber also stands to benefit from Didi’s success, as it now owns a 12.8% stake in Didi.

  • Chewy


    CHWY 2.03%

    shares slipped 1.3% premarket after the pet-products retailer said it was facing labor shortages and supply problems that led it to run out of some items. Still, investors were tossed a bone when it also surprised Wall Street with a quarterly profit.

Market Facts
  • While the pandemic has hit India hard, its stock market has surged. The MSCI India index hit record highs this week and is now up 14% for the year to date.
  • Uranium this week traded at $32.05 a pound, according to UxC LLC, a nuclear-fuel data and research company. Prices reached an all-time high of $136 a pound in 2007, according to records going back to 1987.
  • On this day in 1930, trying to rebuild public confidence in the market, New York Stock Exchange President Richard Whitney had the press witness him making a bid, with his own money, of $160 a share for a 60,000-share block of U.S. Steel stock. Shortly thereafter the stock sank below $150, on its way to $21 in the market bottom of 1932.
Chart of the Day
  • Money is pouring into stocks that get good grades on issues like building a diverse workforce and reducing carbon emissions. But figuring out how high- and low-rated companies perform is nearly impossible because of inconsistencies in the way they are rated.
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GameStop Doesn’t Have a Blank Check After All | Sidnaz Blog


GameStop’s stock price slid as much as 12% after hours Wednesday following the company’s results.



Photo:

nick zieminski/Reuters

Apparently, even meme-stock investors have their limits.

GameStop’s


GME 0.85%

fiscal first-quarter results reported Wednesday afternoon were encouraging in many respects. Revenue grew for the first time in three years, surging 25% year over year to almost $1.3 billion for the quarter ended May 1. That came thanks mostly to strong sales of the new PlayStation and Xbox consoles that—while still sharply limited in supply due to the global chip production shortage—drove a 37% increase in GameStop’s hardware sales to about $704 million for the quarter. The company has also been able to boost its cash reserves and reduce its debt, due to selling nearly $552 million of its shares during the quarter.

But like fellow meme-stock champion

AMC Entertainment,

GameStop seems to have discovered that individual investor love isn’t a blank check. The company said Wednesday it intends to file papers to sell up to five million shares, after selling 3.5 million shares in April.

GameStop’s stock price slid as much as 12% after hours Wednesday following the company’s results and a truncated conference call that again took no questions. AMC’s stock has fallen 21% since it announced its latest stock sale last week.

But even with such a sharp after-hours drop, GameStop’s shares remain up an absurd 1,300% from the start of the year. Which means the company will need all the help it can get to justify investors’ bets that it can renovate a videogame retail chain for an age when most games are sold digitally. The latest results also laid out starkly what a challenge that will be.

Game software, once GameStop’s largest business, fell 5% year over year during the quarter to about $398 million. This wasn’t an industrywide problem; NPD’s data shows that sales of videogame content across digital and physical channels in the U.S. rose 14% during the comparable three-month period ending in April.

Strong demand for gaming products such as the newest consoles are keeping GameStop in the game for now. But the company’s long-term revival can’t depend on machines that are updated once every seven or eight years. And GameStop is still in the staffing-up phase of whatever its plan is. The company formally installed Chewy co-founder

Ryan Cohen

to the chairman slot following a successful shareholder vote on Wednesday. It also names a new chief executive and chief financial officer—both from executive roles at

Amazon.com.


AMZN 0.52%

Mr. Cohen told shareholders Wednesday that GameStop’s turnaround will take time. He also said the company was trying to do something in retail that no one else has done before. GameStop investors seem inclined to give the company time—but not at any price.

Write to Dan Gallagher at [email protected]

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Stitch Fix, Coupa Software, Clover Health, Tesla: What to Watch | Sidnaz Blog


U.S. stock futures wavered, suggesting major indexes would turn in a mixed performance after the opening bell in an extension of the recent choppy but range-bound trading.

  • S&P 500 futures were flat. Futures on the Dow Jones Industrial Average slipped 0.2%. Contracts for the tech-heavy Nasdaq-100 edged up 0.2%.
  • Yields on 10-year Treasury notes ticked down to 1.553% from 1.570%. The dollar is up and oil prices are down slightly. Read our full market wrap here.
What’s Coming Up
Market Movers to Watch
  • Stitch Fix


    SFIX 4.36%

    : The online apparel company’s losses narrowed in the fiscal third quarter as sales jumped 44%, lifted by an increase in customers who took their shopping online. Shares leaped 14% premarket.

The Nasdaq exchange in New York displays advertising for Stitch Fix’s initial public offering in 2017.



Photo:

Richard B. Levine/Levine Roberts/Newscom /Zuma Press

  • Shares of

    Clover Health Investments

    soared after emerging as the latest target for retail traders on Reddit forums. The health-care company’s share price rose over 32% Monday and is up another 13% on Tuesday in premarket trading.

  • Shares of

    Coupa Software


    COUP 2.82%

    dropped 7.9% before the bell. The company forecast that it would post a loss in its 2022 fiscal year and named Tony Tiscornia as its new chief financial officer.

  • Tesla


    TSLA 1.01%

    shares rose 2.6%. The China Passenger Car Association said the electric-vehicle maker sold 21,936 made-in-Shanghai vehicles in China in May while exporting 11,527 cars overseas.

  • Marvell Technology


    MRVL -0.88%

    gained 4.6% after the chipmaker record quarterly sales.

  • Equity Residential


    EQR 0.74%

    fell 3.6% premarket. Shares of the real-estate investment trust had rallied in recent weeks after analysts at Morgan Stanley and BMO Capital markets had raised their target prices for the stock.

  • Another REIT,

    W. P. Carey,


    WPC -0.40%

    slipped 2.5%. The trust said it was looking to raise about $395 million in a share offering to fund potential investors and repay debt.

  • Etsy


    ETSY 2.52%

    lost 1.7% after the online crafts marketplace proposed a private offering of $1 billion in convertible senior notes late Monday.

Market Facts
  • Traders last week spent $11.6 billion on options contracts tied to AMC Entertainment Holdings, more than on the SPDR S&P 500 ETF Trust, Invesco QQQ Trust and Tesla Inc. combined, according to Cboe Global Markets data. Options on those stocks are typically among the market’s most popular.
  • Biogen shares surged 38% on Monday after U.S. regulators gave the green light to the drug known as aducanumab, the first such approval of any drug to treat Alzheimer’s in nearly two decades.
  • Demand for lithium used in batteries is expected to expand by a factor of 30 by 2030, according to the International Energy Agency. Cobalt and nickel also will be needed for batteries while copper will be used by transmission lines, electric vehicles and wind turbines. 
Chart of the Day
Must Reads Since You Went to Bed

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AMC Boss Adam Aron Basks in Meme-Stock Spotlight | Sidnaz Blog


Adam Aron,

AMC Entertainment Holdings Inc.’s


AMC -17.92%

chief executive, has decided to run with the meme-stock bulls who helped his company avoid bankruptcy during the pandemic.

More than any CEO swept up in the meme-stock trade, Mr. Aron has come to represent the surrealism and opportunities of modern-day trading. He is a Harvard Business School graduate now known for sharing social-media memes of Reddit in-jokes. He has traded a Chinese real-estate firm, the Dalian Wanda Group, for three million individual investors he calls his community. He has promised the new shareholders dividends and free popcorn.

And it has helped the world’s largest movie-theater chain emerge from its pandemic hole. AMC raised $587 million Thursday through another stock sale effort, its seventh in nine months, adding up to more than $2.2 billion total since it began its stock sale efforts in August. The sale comes on the heels of a recent rally that brought

AMC’s

share price to $72 from $10 in early May.

“Fearless leader, we trust your process!” one Twitter user posted Thursday in a reply to Mr. Aron’s tweet about raising capital. “Guide us to the moon!”

AMC raised $587 million Thursday through another stock sale effort, its seventh in nine months.



Photo:

Hans Gutknecht/Orange County Register/Zuma Press

It was the latest twist in what has become one of the most unusual relationships on Wall Street. Mr. Aron said in an April interview that he viewed the individual shareholders as “my bosses. They’re who I work for.” Now, Mr. Aron contends with the new challenge of keeping a fragmented investor base happy amid extreme stock volatility and challenges to the movie-theater industry, including getting people back to cinemas post-pandemic and dealing with the growing threat from at-home streaming.

The latest stock offering sold out within hours of being announced but pushed the price down by 18% Thursday to $51.34. Some individual investors who tout the stock on social media and forums like Reddit’s WallStreetBets hub took to the internet to complain about the company diluting the share count, while others cheered the company and Mr. Aron. 

AMC has embraced the individual investor horde, now the majority of its investor base, to bring its movie theater business from the brink of bankruptcy to a well-capitalized company riding the economic reopening and shopping around for potential acquisitions. “Growth through acquisition is currently a priority,” Mr. Aron told The Wall Street Journal on Thursday.

The CEO, known for raising money and wooing investors, has gotten its theater chain through the pandemic by capitalizing on AMC’s stock price surges to raise cash and nurturing connections with the company’s individual investors. He tweets to them both serious corporate rationales as well as photoshopped memes that rile traders seeking to drive up the stock and make quick profits.

Mr. Aron said he sees the individual investors as his potential customers. “And we are already thinking about ways that we can excite them and lure them back into our theaters again,” he said in the April interview. The company increased its outreach to individual investors on Thursday by opening a web portal to communicate with them and furnishing loyalty perks like free popcorn and exclusive screenings.

Still, AMC acknowledged the volatility of its shares and the unusual nature of being around 80% owned by individual investors. It warned in its filing for Thursday’s offering that investors shouldn’t buy the shares “unless you are prepared to incur the risk of losing all or a substantial portion of your investment.” Mr. Aron and AMC sold the shares after the latest sign that the moviegoing business can make a legitimate comeback. Memorial Day weekend box office sales in North America reached nearly $100 million, a new high since the pandemic.

“Not often do you have a CEO out there representing this particular demographic of people,” said Anton Torres, 33 years old, an AMC shareholder who works as a cable technician in Washington state. “It’s huge,” he said, referring to Mr. Aron’s efforts to reach out to the individual investor community.

Most corporate leaders caught up in meme-stock trading frenzies, such as the chiefs of

GameStop Corp.


GME -8.52%

and

Hertz Global Holdings Inc.,


HTZGQ -2.51%

have largely avoided the spotlight. Mr. Aron has eagerly exploited his newfound status as a celebrity in online investing forums, embracing a shareholder base increasingly dominated by bullish traders.

He has posted memes on Twitter where his face has been put on “The Godfather” movie poster, renamed “The Apefather,” a reference to the AMC investor group that calls itself AMC “apes.” He also has posted an image of himself where his face was subbed for actor Sigourney Weaver’s on the movie poster for “Gorillas in the Mist.”

Even before Reddit leapt onto his company’s stock, Mr. Aron seemed ready-built for the internet meme world. In an exhibition industry populated by movie-theater industry lifers who tend to keep disputes behind closed doors, he got into public fights with Hollywood studio chiefs and floated ideas like having a phones-allowed texting row in AMC auditoriums. On conference calls with analysts, he quoted Winston Churchill and described disappointing quarters as “no picnic.”

Chinese billionaire Wang Jianlin, head of Dalian Wanda Group, which sold nearly its entire stake in AMC earlier this year.



Photo:

wang zhao/Agence France-Presse/Getty Images

For those who have worked with Mr. Aron, the outreach employs a skill set of working with investors honed over many years as the CEO of various companies in far-flung sectors. When Mr. Aron got the AMC job in late 2015 after working as CEO of Starwood Hotels & Resorts, he essentially had one shareholder to keep happy:

Wang Jianlin,

the Chinese billionaire and head of Dalian Wanda Group, then the majority shareholder in AMC.

Mr. Wang was known as an idiosyncratic boss, as likely to take meetings with subordinates in the karaoke lounge as in the boardroom. Mr. Aron won him over, colleagues say, and frequently traveled to China for in-person meetings.

Wanda sold nearly its entire stake in AMC earlier this year, replacing Mr. Aron’s small constituency with the three-million-person one he now has.

SHARE YOUR THOUGHTS

How do you think the meme stock craze will affect markets long term? Join the conversation below.

On social media, AMC believers can be seen bragging that they saved the company from bankruptcy earlier this year, propelling a capital raise in January after the company warned it could file for chapter 11 if it didn’t receive a sufficient cash infusion.

However, the company’s feedback from its backers hasn’t been all positive. Some users have complained on social media about AMC’s decision to exploit the rally in its stock to raise capital, which pressures the share price.

After announcing a stock deal with hedge fund Mudrick Capital Management LP on Tuesday, some online accounts posted messages that AMC should lay off selling equity and just watch its stock price rise, squeezing out short sellers—or those betting that the company’s stock price will fall—and driving the shares even higher. Those messages continued after Thursday’s equity sale.

“We have helped save AMC,” one Twitter user posted in a reply to Mr. Aron Thursday. “You’re making me and most likely millions of other shareholders disgruntled.”

“Seriously we got the company this far let us have our squeeze,” another said.

Meme Shares and the Markets

Related coverage, selected by the editors

Write to Alexander Gladstone at [email protected] and Erich Schwartzel at [email protected]

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AMC, Salesforce, HP, Ulta Beauty: What to Watch When the Stock | Sidnaz Blog


Here’s what we’re watching ahead of Friday’s opening bell.

  • U.S. stock futures edged higher as data showed consumers were opening their wallets in a manner consistent with lockdown measures being eased.
  • Futures tied to the S&P 500 added 0.2%, indicating that the broad market index could end the week with gains. Tech heavy Nasdaq-100 futures edged up 0.2%. Read our full market wrap here.
  • Consumer spending rose 0.5% in April, the Commerce Department said Friday. After months of buying goods, many Americans are now shelling out more for services, dining out and traveling.
What’s Coming Up
  • The University of Michigan consumer sentiment index for May, due at 10 a.m., is expected to tick up to 83 from a preliminary reading of 82.8.
Market Movers to Watch
  • Salesforce


    CRM -1.68%

    reported first-quarter results and a second-quarter outlook that beat analysts’ forecasts. The cloud-software company’s shares added 5% premarket.

  • Meme stocks are on the rise again, with

    AMC Entertainment


    AMC 35.58%

    jumped 10% ahead of the bell.

    GameStop


    GME 4.77%

    was up a more muted 1.4% and

    BlackBerry


    BB 5.61%

    ‘s U.S.-traded shares gained 2.3%.

  • HP


    HPQ -0.22%

    : A pandemic-fueled run on computers helped the company deliver strong financial results for the latest quarter despite a semiconductor shortage that is denting some industries. But investors seemed displeased nonetheless; HP dropped 6% premarket.

HP expects personal computers to remain a hot item into next year.



Photo:

Richard B. Levine/Levine Roberts/Zuma Press

  • Big Lots


    BIG -1.72%

    slipped 4.2% premarket after it reported a quarterly rise in sales and profit, but said it still lacked sufficient visibility to provide full-year guidance.

  • Hibbett Sports


    HIBB 3.18%

    shares jumped 8.2% premarket. The sporting-goods retailer lifted its full-year guidance and expanded its stock-buyback program.

  • Costco


    COST 0.49%

    reported $45.28 billion in revenue for its quarter that ended May 9, up almost 22% from the same period last year—but its shares nudged down 0.9% ahead of the bell.

  • Ulta Beauty


    ULTA 0.27%

    swung to a profit during its latest quarter as sales picked up with the economy in the U.S. rebounding. The beauty retailer’s shares climbed 4.7% premarket.

  • Plant-based meat maker

    Beyond Meat


    BYND 12.52%

    ‘s shares were up 5.2% premarket. Credit Suisse on Thursday lifted its price target on the stock, but to $123—ahead of the bell it was already more than $149.

Market Facts
  • The British pound on Thursday hit a new 52-week high against the U.S. dollar, with one pound trading for $1.4203.
  • This year has seen cryptocurrency ethereum’s value soar nearly fourfold, even after a sharp correction over the past few weeks.
  • On this day in 1946, with the stock market still euphoric over peace, the Dow Jones Industrial Average hit its immediate post-World War II high of 212.50, a level it would not surpass again until April 12, 1950—after nearly four years of chronic doldrums.
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‘God Told Me to Put Money Into Hertz’: Small Investors Are | Sidnaz Blog


Many small investors are beating Wall Street pros at their own game.

A basket of stocks favored by individuals has outperformed the broader market since March of last year, according to Vanda Research. This group, which includes behemoths like

Apple Inc.

and

Tesla Inc.

alongside electric-vehicle maker

NIO Inc.

and digital-payments company

Square Inc.,

has gained 68% since the beginning of March 2020, far outpacing the S&P 500’s roughly 36% climb.

And meme stocks popular with individual investors have been on a tear again. Shares of movie-theater operator

AMC Entertainment Holdings Inc.

jumped 19% Wednesday, putting them on track to almost double this month.

GameStop Corp.

has advanced 40% this month, far outpacing the S&P 500’s gain of 0.4%. Shares of

Hertz Global Holdings Inc.

have nearly tripled in May.

Short sellers who bet against GameStop, Hertz and AMC—a group targeted by many smaller investors who have favored these stocks—have lost more than $8 billion this year, according to data provider S3 Partners.

“It feels great,” said Daniel Shin, a 35-year-old individual investor based in Edison, N.J., who bought shares of AMC in January and has added to his positions since. “It feels like us against them. Like retail against Wall Street.”

This year’s reversal has riveted the financial industry and fueled a surprising revival for some apparently moribund businesses, helping AMC narrowly avert bankruptcy and paving the way for GameStop to raise money by issuing shares. Those episodes were the ultimate victory for small Main Street investors who are often derided in markets as “dumb money.”

Meanwhile, hedge funds—the “smart money” of years past—have continued to make a lackluster showing. From January through April, a weighted index tracking the performance after fees of about 1,300 hedge funds climbed 8.7%, according to data provider HFR. That lagged behind the S&P 500, which rose 11% over the same period.

The market’s upside-down turn, featuring a sustained rally in smaller companies with shaky financials and easy fortunes made by some early buyers of these shares, doesn’t make everyone happy. Analysts and portfolio managers recall that the market meltdowns of 2000 and 2008 were preceded by roaring bull markets in speculative areas such as dot-com startups and mortgage finance. When those manias ended, the broader economy paid the price.

Millions of individual investors stampeded into the market last year, enticed by zero-commission brokerages and easy-to-use investing apps, and their interest helped fuel the post-pandemic rally. That, and the fervor with which many small investors have piled into market winners, have potentially set the stage for severe selloffs if spooked investors flee hot stocks en masse.

That is in part because they are riding one of the most powerful forces in markets over the past year: momentum investing, or buying assets simply because the price is rising. The rising prices of assets from dogecoin, a cryptocurrency created as a joke, to Hertz shares have attracted buyers, whose demand has driven prices even higher. That, in turn, has drawn even more buyers, in part because of a behavior dubbed FOMO—the fear of missing out.

Data from Vanda Research show individual investors tend to pour far more money into stocks with high momentum than low momentum.

SHARE YOUR THOUGHTS

How do you think the meme-stock frenzy will end? Join the conversation below.

Paktra Som, a 35-year-old pilot based in Los Angeles, said he jumped into the market for dogecoin in 2019 and has since kept buying, looking to ride its continued ascent. Dogecoin has skyrocketed more than 6700% this year despite a recent pullback.

“If there is a large increase in volume in something and there is a clear trend of direction that it is going…the result is typically rewarding as long as you know when to sell,” Mr. Som said. “Dogecoin had no solid fundamentals to [base] my investing strategy on. But the volume of buyers was always there.”

Other investors aren’t tracking trading volumes or momentum. Rather, they are relying on their gut.

“God told me to put money into Hertz,” said Damien Roscoe, a 42-year-old electronic technician in Glenwood, Ill. “I know it sounds crazy.”

Mr. Roscoe says he made about $8,000 in profits from buying Hertz shares this spring.

A bankruptcy court recently approved a winning auction bid in which Hertz stockholders would get more than $7 a share. The stock was below $1 in March.



Photo:

Taylor Glascock for The Wall Street Journal

The car-rental company has become one of the most unlikely success stories. Hertz declared bankruptcy last year as coronavirus lockdowns and travel restrictions devastated its business. Financial professionals fretted as individual investors snapped up the shares, warning that stock in insolvent companies usually ends up worthless.

But buyers had the last laugh after a bankruptcy court this month approved a winning auction bid in which Hertz stockholders would get more than $7 a share. The stock was trading at less than $1 in March.

“Everyone was, ‘Y’all are stupid for buying stock in a bankrupt company,’” Mr. Roscoe said. “But driving around…I just believed in it.”

The recent run-up in GameStop and other stocks involves opposing camps: traditional Wall Street firms and small investors who are bucking the system. WSJ asked the same series of questions to one of each about the role of WallStreetBets in the trading frenzy. Photo Illustration: Carlos Waters

In one sign of how powerful the run for meme stocks like Hertz has been, investors who didn’t hold GameStop shares this year would have lagged behind the Russell 2000 value index by almost 1 percentage point even if they held every other stock in the gauge, according to Ted Aronson, a longtime value investor and founding partner of AJOvista, his new investment firm. Value investors seek to buy shares at a discount to their net worth, essentially sifting through out-of-favor assets for bargains.

Mr. Aronson gave $10 billion back to investors at AJO, his old firm, after a stretch of underperformance.

He compared the recent run in meme stocks and other speculative bets to the internet craze in the late 1990s.

“You just have the herd mentality bidding stuff up based on rumor or Reddit or TikTok,” Mr. Aronson said. “This is just payback for a long time when we had it relatively easy, when value investing worked really well and any monkey could do it.”

Write to Gunjan Banerji at [email protected] and Alexander Osipovich at [email protected]

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Ford, Snowflake, GameStop: What to Watch When the Stock Market | Sidnaz Blog


Here’s what we’re watching ahead of Thursday’s market open.

  • U.S. stock futures edged down ahead of a slew of economic data releases that are expected to spur discussion among investors about the Federal Reserve’s response to the strengthening economic recovery.
  • Futures tied to the S&P 500 slipped 0.2%, suggesting a reversal of Wednesday’s tepid gains. Nasdaq-100 futures declined 0.4%, pointing to moderate losses for technology stocks after the opening bell. Read our full market wrap here.
What’s Coming Up
  • U.S. gross domestic product for the first quarter, due at 8:30 a.m., is expected to increase at a 6.6% annual pace from the prior quarter, an upward revision from the previously reported 6.4% gain.
  • U.S. pending home sales for April, due at 10 a.m., are expected to increase 1% from the prior month.
Market Movers to Watch
  • Shares of meme stocks

    GameStop


    GME 15.82%

    and

    AMC Entertainment


    AMC 19.20%

    declined in premarket trading after a fresh retail frenzy pushed both stocks higher Wednesday. GameStop declined 2.3% while AMC fell 2.7%. The two stocks are the most mentioned on Reddit’s WallStreetBets forum over the past day, according to TopStonks.com.

  • Snowflake


    SNOW 2.30%

    ‘s shares fell 3.3% premarket after the cloud-software company again showed revenue growth of more than 100% in its latest quarter, but losses also grew faster than expected.

A banner for Snowflake was displayed celebrating the company’s IPO at the New York Stock Exchange, Sept. 16, 2020.



Photo:

brendan mcdermid/Reuters

  • Okta


    OKTA 0.97%

    shares declined 4.7% after the provider of cloud-based software related to identity management boosted revenue in its latest quarter but reported a slightly larger adjusted loss.

  • Shares in

    Williams-Sonoma


    WSM 2.58%

    rose 3.3% after the home goods company’s profit surged in the latest period while revenue rose 42%, helped by a pandemic boost to home-product sales.

  • Auto maker

    Ford Motor


    F 8.51%

    outlined a tech-centric strategy to electrify much of its vehicle lineup and sharply grow its commercial truck and van business. Shares rose to their highest level in nearly five years on Wednesday and added another 2.9% premarket Thursday.

  • Vertex Energy


    VTNR 2.01%

    shares soared more than 90% after it agreed to acquire a Mobile, Ala., refinery from a subsidiary of Royal Dutch Shell PLC for $75 million, part of the company’s ambitions to become a pure-play producer of renewable and conventional products.

  • Shares of

    Best Buy


    BBY 2.22%

    added 4.2% after the electronics retailer’s first-quarter revenue increased by more than a third as the company saw high demand for its products and services.

Market Facts
  • Investors who bet that shares of GameStop and AMC would fall have seen larger than normal losses this week. Those with short positions in GameStop lost about $721.4 million on Tuesday and Wednesday, S3 Partners data show. Short sellers who bet against AMC, meanwhile, have lost about $543 million during the same period.
  • SPACs have raised over $100 billion this year, according to SPAC Research. There were 329 new SPACs this year, up from 248 in 2020 and 59 in 2019. Share prices have tumbled in recent months, and fewer private firms are jumping at the chance to go public via a SPAC marriage amid the market pullback.
  • The number of life-insurance policies sold jumped 11% in the first quarter from a year earlier, the biggest gain since 1983, according to the industry research firm Limra.
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GameStop, Zscaler, Urban Outfitters, Nordstrom: What to Watch | Sidnaz Blog


Here’s what we’re watching ahead of Wednesday’s opening bell.

What’s Coming Up
Market Movers to Watch
  • Urban Outfitters


    URBN 0.69%

    jumped 12% premarket. The retailer reported a profit for its latest quarter as the shopping landscape continued to normalize.

An Urban Outfitters retail store in New York, Aug. 16, 2020.



Photo:

Richard B. Levine/Zuma Press

  • Zscaler


    ZS -0.95%

    shares also jumped 12% premarket. The cloud-based security platform said revenue grew and its profit, after adjustments, climbed during its latest quarter.

  • Dick’s Sporting Goods


    DKS -1.20%

    advanced 8.8% premarket. The retailer said sales and profits rebounded from the pandemic in its latest quarter as consumers snapped up items used everywhere from golf courses to youth-sport leagues.

  • Abercrombie & Fitch


    ANF 1.09%

    shares climbed 7.7% premarket. The clothing retailer said it had its best first-quarter operating income since 2008.

  • Meme stocks pushed higher in premarket trading, with

    GameStop


    GME 16.34%

    adding more than 11% and

    AMC Entertainment


    AMC 19.96%

    up 9%. A new page advertising GameStop NFTs recently appeared on the videogame retailer’s website, stoking speculation that GameStop may be building digital products that users could own.

  • Nordstrom


    JWN -2.85%

    shares dropped 6.1% premarket. The department-store company narrowed its first quarter loss, with better-than-expected sales in the first quarter.

  • Toll Brothers


    TOL 2.38%

    shares gained 1.1% premarket. The luxury homebuilder’s sales rose in the fiscal second quarter, lifting its bottom line, as low mortgage rates and low housing supply continued to boost home-buying trends.

  • Intuit


    INTU -0.32%

    shares rose 1.4% ahead of the bell. The TurboTax, QuickBooks and Mint parent raised its full-year financial projections, as the company sees strong demand for its products and services.

Market Facts
  • The cost of softwood lumber, which is often used for framing, is now at a record, up over 83% from this time last year, according to CoStar Advisory Services. Overall, lumber and wood prices are also at record levels, up 34% from one year ago, CoStar said.
  • China’s yuan has strengthened to a near-three-year high, boosted by a falling dollar despite attempts by the central bank to keep the currency in check. On Tuesday, the offshore yuan strengthened below 6.4 per dollar.
  • On this day in 1667, mathematician Abraham de Moivre was born in Vitry, France. In 1688, he fled to England to escape King Louis XIV’s persecution of the Huguenots. In London, de Moivre discovered the normal statistical distribution (the “bell curve”) and worked out the formula for standard deviation, or short-term volatility. 
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