Efficient Market Hypothesis (EMH) is a market thesis is a market hypothesis taught in higher education that suggests that equity markets are efficient, are a zero-sum game, and are “priced to perfection” – leaving no room for excess profits. However, investors do not need to look very far to debunk the faulty hypothesis.
GameStop & Meme Stock Mania: Markets Not Efficient
GameStop (GME) was up more than 50% this morning after Internet personality “Roaring Kitty” tweeted Sunday night that he owns over $100 million worth of the gaming retailer’s shares. The stock is not up based on fundamentals or outlook but rather hype.
The beauty of markets is that those who own the stock don’t have to give back profits simply because they were not linked to fundamentals. That said, following hype trades like the “Meme stock mania” trade is a recipe for “boom and bust” trading. Meanwhile, obvious fundamentally strong companies often have fundamentals that are “priced into shares” (albeit not perfect, as EMH suggests).
So, how can investors gain an edge beyond fundamentals or hype? Look for stocks that can benefit from bullish catalysts and study those potential catalysts to gain an edge. Below are three stocks with upcoming bullish catalysts, including:
Tesla – Shareholder Meeting & Robotaxi Event
Tesla shareholders are voting in the run-up to the June 13 annual meeting as investors wait to see whether CEO Elon Musk’s previously approved $56 billion compensation package gets approved.
Why Tesla’s Upcoming Shareholder Meeting Matters
Tesla shares are up more than 13,000% since inception with visionary CEO Elon Musk at the helm. Meanwhile, Elon Musk’s time has been stretched further than ever before with the acquisition of X (formerly Twitter), SpaceX, and his new start-up, XAI (to name a few). Nevertheless, it’s hard to argue against Musk’s success, and as a result, I believe the shareholders will approve the pay package, and the stock will rally on the news.
Robotaxi Event
When Elon Musk bets, he doesn’t just bet big; he goes all in. Musk has laid off thousands of employees and is focusing the Tesla’s resources on making it the best-in-class Robotaxi company. Tesla will unveil the Tesla Robotaxi at an event on August 8.
Coinbase Catalysts: Ethereum ETF & Bitcoin Breakout
Ethereum ETF
Ethereum, the world’s second-largest cryptocurrency, soared ~25% two weeks ago on hopes that the Securities and Exchange Commission (SEC) will approve an Ethereum ETF. Eric Balchunas, the top ETF analyst at Bloomberg, puts the chances of Ethereum ETF approval at 90%. If approved, COIN will rack up hefty fees from being the custodian exchange (like it is with most of the Bitcoin ETFs). In a recent statement management said, “Coinbase Prime is proud to be a trusted partner for a majority of the ETF issuers by providing key services, including trading financing, and custody.”
Bitcoin Breakout
Bitcoin is benefitting from a perfect supply and demand storm, as the recent “halving” cuts the amount of new Bitcoin minted in half (supply). Meanwhile, the spot Bitcoin ETF approvals have opened the door to institutional adoption (demand). Because Coinbase is highly correlated to Bitcoin, a breakout could send shares much higher.
Image Source: TradingView
Russell 2000 Index ETF: Rate Cuts, Smart Money Positions
Rate Cuts Ahead
Small-cap stocks are notoriously sensitive to interest rates because higher rates increase borrowing costs and reduce disposable income. As a result, IWM has underperformed its peers as Jerome Powell and the Fed have hiked rates. However, the CME FedWatch tool is pricing in three potential interest rate cuts by year-end.
Druckenmiller 13F Reveals Small Cap Position
It is always lovely for investors to see smart money accumulating a position. Legendary investor Stanley Druckenmiller, who is coming off his best quarter yet, is accumulating IWM calls hand over fist. His concentrated position is his biggest new bet and largest overall (~15% of his portfolio).
Bottom Line
To gain an edge, investors should focus on stocks with upcoming bullish catalysts. The three stocks mentioned should benefit from such catalysts.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>GameStop Corp. (GME) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
iShares Russell 2000 ETF (IWM): ETF Research Reports
Coinbase Global, Inc. (COIN) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
