Stocks in GameStop and AMC found another leg on Wednesday, posting their strongest trading day since an internet-fueled short squeeze sent their stock prices into the stratosphere last month.
AMC stock closed 18% higher at $ 9.09 and GameStop more than doubled to $ 91.70 weeks after a so-called “meme stock” frenzy cooled. Retail investors got behind a basket of recommendations on the Reddit forum Wall Street Bets in hopes of uncovering an unusually high short-term interest rate from hedge funds in a number of stocks.
While the rally was short-lived, CNBC’s Jim Cramer on Wednesday advised that young traders taking advantage of commission-free trades on brokerage apps like Robinhood should rely less on speculative trades and go back to the basics of investing.
“If you really want to beat the big institutions in their own game, you don’t do it with GameStop and AMC. You do it with fractional shares and you do well,” said the host of “Mad Money.” “With the $ 500 Club … you make real money.”
The comments come after the major US averages also compiled their best trading day in weeks. The Dow Jones Industrial Average added 424 points and hit a new closing price of 31,961.86, up 1.35% from Tuesday. The S&P 500 and Nasdaq Composite both closed about 1% higher.
As individual investors continue to follow signals from Reddit to pour in stocks like GameStop, Cramer warned of the dangers of groupthink in the marketplace.
“Ultimately, this is not a team sport,” said Cramer. “Rather than chasing these risky meme games, why not try to invest in the long run, instead of being impaled by failure?”
After the market closed, the Cramer name dropped 12 proven stocks trading above $ 500, a price tag typically out of the reach of investors who don’t have a lot of capital to get to work. Thanks to fractional stocks, where a portion of a stock can be bought, high dollar stocks like Amazon or Chipotle may not be too far out of reach, he added.
“Some of them [these stocks] are still at their high level, even after today, ”said the host. I want you to pick three and start buying. ‘