There is a method for the madness on WallStreetBets. For every stock that rises, such as GameStop Corp. and AMC Entertainment Holdings Inc., many more names touted on the Reddit site are not being launched.
A Wall Street Journal analysis of millions of posts on WallStreetBets, the performance of the most cited companies each month and interviews with traders reveal what makes a stock soar.
Stocks with the highest probability of success typically have low stock prices, typically below $ 25 a share, and are lightly traded. Low stock prices allow smaller traders to bet more easily and can sometimes indicate cheap valuations. Stock prices of lightly traded stocks can be more easily pushed higher or lower than stocks of stocks that are more frequently traded.
According to Hudson Cashdan, co-founder of TopStonks.com, large companies with high stock prices and high volumes, such as the third most mentioned company last year, Apple Inc. website that tracks the stocks mentioned on Reddit.
The success stories often share characteristics with stocks selected by professionals. The companies appear to be undervalued by some measures and have short-term catalysts to improve their business or at the very least generate excitement.