What to Do When the Market Is Manic

Why doing a whole lot of nothing might be the ultimate contrarian approach

Ben Johnson 25 February, 2021 | 10:11AM
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Wall Street Bets

On January 1 this year, GameStop (GME) was a struggling bricks-and-mortar retailer, trying to adapt an antiquated model to a world that’s been living online for much of the past year, and to serve customers who are consuming more internet bandwidth and fewer video game cartridges. The company had lost money each of the past two years and was being pressured by investors - including Michael Burry of “The Big Short” fame - to get its act together.

Over the next few weeks, the company’s stock price spiked 2,484%, and it has subsequently plummeted nearly 90% from its January 28 intraday high of $483 per share. The story of what was briefly the world’s favourite “meme stock” has been spun every which way by the media. It was even fodder for a Saturday Night Live skit. And while it made for good theatre, what are investors to make of this drama?

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
GameStop Corp Class A183.28 USD-0.30
Tesla Inc843.03 USD3.02Rating
Tootsie Roll Industries Inc31.46 USD-0.79

About Author

Ben Johnson

Ben Johnson  is director of passive funds research at Morningstar.