Twenty-eight highly paid Wall Street analysts, many of them top dollar types, follow the stock of Wendy's (WEN) . Most of them like the stock very much and pound the table aggressively after every good quarter.
And those pushes collectively have meant very little, lost in the miasma of recommendations, a boat tossed on the waves of the overall market.
Or at least very little versus u/chillznday, a poster on WallStreetBets, the red-hot Reddit site who explained that the company's new summer salad and its incredibly savvy tweeting, particularly the "roast me thing that Wendy's is doing." Even better, wunderstock, GameStop (GME) and Wendy's, and I quote, "have been sharing in the social media beef or "metapragmatic roasting. They both follow each other u/chillznday noted, and it also "literally the perfect stock for this sub," because of Wendy's Chicken Tendies" a merger between a food and financial gain.
U/chillznday likes the short position, which is about 4% although he says it might be as high as 10% and his coda: 'It's a good investment because of the salad."
And with this and some other favorable anonymous posts, the stock of Wendy's moves up 18. Just as important, the entire restaurant cohort, from Wingstop (WING) , to Domino's (DPZ) , Brinker (EAT) , and Shake Shack (SHAK) exploded in a sort of "who's next for WallStreetBets" affinity move.
What the heck is going on? Welcome to the new world of WallStreetBets, the democratic-small d - tout sheet that's been able to move stocks because its followers number in the millions and because it's power had moved the stock of AMC, the near-bankrupt theatre chain, 2521% and the stock of the retail-hobbled GameStop up 1513%. These gains are so great that they are irresistible to those who think they can ignite a few more stocks. Why not? They've managed to move BlackBerry's (BB) stock 141% and jumpstart Bed Bath & Beyond (BBBY) 109% aided by a 33% short position and an actual turn by a terrific new management team. And they've glommed on to a heavily shorted SPAC, Clover Health (CLOV) , ripping it up 70%.
But Wendy's is different. This one is an established company, one of my favorites, a frequent guest of Mad Money where both its chairman, Nelson Peltz, a huge investor in some very big companies, and its CEO, Todd Penegor, have done a remarkable job turning the company around.
Todd was on Mad recently after the company reported as close to a perfect quarter. We have often joked about how terrific their social media is - they have highlighted my wife eating a Baconator, her favorite sandwich. I've had the classic Chicken Sandwich and the Jalapeno Popper Sandwich but, candidly, the new summer salad? Just haven' had a chance to get it.
Despite the fact that Wendy's raised its dividend, announced that its breakfast initiative is ahead of plan and raised its guidance for 2021, it's stock went down. Talk about pounding the table, I was pounding the Wendy's counter top to buy the stock and I clearly had no impact. But no one listened, not one bit, not at all. Or at least no one listened as much as they did to u/chillznday, whoever the heck that is.
And you know what?
I love it.
First, if I own the stock, do I really care that the recommendation is from u/chillznday whom I don't even know? I just want the stock to go higher. If it's because some analyst raises numbers big, or a gigantic dividend boost or a takeover rumor, do I really care? Further, do I care about any of the Wall Street recommenders knowing that the popular perception is that they are shills anyway - even if that's not true?
Second, so often stocks go higher after people push them, even on tv and then they sell the stock, a classic pump and dump. But the experience I have seen with the WallStreetBets throng is that not only do they not pump and dump, they buy and then buy and then buy some more. One of the major secrets of their success is that their moves are so vociferous that you are pretty foolish if you succumb to selling to them and you are downright moronic if you short stock to them.
They cut their teeth with GameStop and AMC, two heavily shorted stocks, but now they are spreading their wings with these new stocks, especially an institutional favorite, Wendy's, with a very low short position. As per u/chillznday they don't care about the traditional metrics. They do not care about earnings per share projections, they just like the darned thing for a variety of funny ways. Where does it say that stocks have to move to earnings projection changes or else?
I keep hearing from complainers, who typically have a imperious tone, that these so-called meme stocks are wildly overvalued. How the heck do we know? How do we know that Adam Aron, the CEO of AMC, doesn't take advantage of the fact that real estate stocks are the strongest in the entire market and the companies have a lot of empty space. Which REITs wouldn't want a spanking new rent-paying cinema in the mall.
Tomorrow GameStop reports. What if Ryan Cohen, the chairman, announces that he is going to buy a series of video game companies for GameStop stock and offer them free to the 55 million PowerUp rewards members with plans to have games played globally with winners getting cryptocurrencies? Why not become the preeminent seller of Ethereum chip board made by Nvidia (NVDA) which, right now, are the hottest thing being sold in retail? Why not be the first physical bank to transact in cryptos of all kind? Does that sound like a company that's worth only $22 billion? I could argue that the 55 million PowerUp members alone could be worth billions of dollars if harnessed correctly. Activision Blizzard (ATVI) , which is on tonight, is worth $75 billion. What if GameStop does some sort of deal with them where the 55 million PowerUp members get free games and just pay for whatever add-ons that need to be bought?
Sure, the wags say, who would take AMC's or GameStop's currencies. The answer? If the meme people keep buying the answer might be anybody.
There's a perception that this all has to end. That there's going to come a day, blah blah blah. I think these people might just be getting started.
Take Bed Bath. I think the turn is real. I have been behind it like I have been behind Wendy's, proclaiming that the turn merits far more scrutiny because Mark Tritton, the CEO, late of Target (TGT) , is engineering a remarkable rebranding and re-merchandising even as 33% of the stock is sold short. That's just ridiculous. If u/chillznday drops by a Bed Bath and likes it, woe be one of the moronic shorts who, right now, are taking their lives in their hands.
What it all comes down to is I have seen, in 40 years, many a stock go higher by people with a totally vested interest, offering specious theses and dissembled logic. At least with the WallStreetBets people they have no airs. I mean if Mad Tendies - yes I am not kidding, with our own logo - falls in love with Wingstop, it's to the moon, and all I ask is a ticker aboard.
(Nvidia is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells NVDA? Learn more now.)