We're more than a year removed from the height of the uncertainty associated with the coronavirus disease 2019 (COVID-19) pandemic, but volatility hasn't left Wall Street. Everything from inflation worries to the ever-changing interests of retail investors have occasionally whipsawed equities since the year began.
Despite this volatility, the broad-based S&P 500 has gained 10% on a year-to-date basis, through April 22.
Yet for a trio of companies, a 10% year-to-date gain would be laughably low. If you had the wherewithal to invest $250,000 into the following three stocks on Dec. 31, 2020, you'd currently be sitting on $1 million, or more, as of April 22.
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AMC Entertainment: $1.18 million
For the past three months, movie theater chain AMC Entertainment (AMC -1.24%) has been an absolute favorite of the retail investing community. AMC was part of the mid-to-late January push by the Reddit community that sought to buy common stock and options in companies with very high levels of short interest. In a matter of days, AMC rocketed from $2 to $20 a share. Even after pulling back, a $250,000 investment in AMC to begin the year would be worth $1.18 million, as of April 22.
Scour the message boards and you'll still find no shortage of retail traders who are counting on another short squeeze. In recent weeks, the number of shares held short has risen, as has the company's short interest relative to float. That's good news for the short squeeze thesis. Unfortunately, AMC has been trading so many shares on a daily basis for months that its short ratio (also known as "days to cover") is under 1. In simple terms, short-sellers could cover their positions in a matter of hours, which makes it very unlikely that we see a sustained squeeze like we saw earlier this year.
The bigger news for AMC is the upcoming proxy vote on May 4 that'll approve or deny the company the right to issue up to 500 million additional outstanding shares at some point in the future. I view this vote as a no-win scenario for AMC. If shareholders deny it, they'll avoid a mammoth amount of dilution but may be dooming AMC to an eventual bankruptcy two or more years down the line. If they approve it, AMC can raise the capital it so desperately needs, but the "hodlers" will get diluted into oblivion.
Lost in this mess is the reality that movie theater exclusivity is on shaky ground, and aggregate ticket sales have declined by 22% between 2002 and 2019. AMC is lugging around a mountain of debt in an industry that's simply not growing like it used to. This makes it a high-flying company to avoid.
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Ocugen: $1.27 million
Another company that's been a shining star in the early going of 2021 is clinical-stage biotech stock Ocugen (OCGN 3.86%). A $250,000 investment in Ocugen at the beginning of the year would have more than quintupled to $1.27 million.
Ocugen's claim to fame looks to be its development of COVID-19 vaccine Covaxin in cooperation with Bharat Biotech. In early March, the duo announced an interim vaccine efficacy of 81% for Covaxin in a 25,800-participant study in India. Last week, Bharat Biotech unveiled a primary efficacy of 78% during the second interim analysis. Although this represents a slight reduction in efficacy from their first interim analysis, the more important data point was the 100% protection against severe disease, including hospitalization, for study participants.
Furthermore, Ocugen has previously touted that Covaxin may be effective at tackling original strains of the coronavirus as well as its many variants. A 100% success rate against severe forms of the disease would appear to suggest that Covaxin is doing an excellent job of fighting back against the many pervasive variants of this illness.
The big question mark is whether or not the U.S. Food and Drug Administration will accept this trial data from India as enough evidence to grant an emergency-use authorization (EUA). Although Ocugen and Bharat Biotech can generate revenue worldwide, the U.S. is where drugmakers typically find their greatest financial success. As a clinical-stage company, an EUA approval would go a long way to putting Ocugen on the map.
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GameStop: $2.01 million
However, the biggest gainer of all since the year began is video game and accessories retailer GameStop (GME -2.40%). Investors with the foresight (and luck) to put $250,000 into GameStop at the beginning of the year are now sitting on just over $2 million. That's a gain of more than 700%!
Before AMC became the talk of the Reddit-verse, GameStop was all the rage on the WallStreetBets chatroom. In mid-January, no publicly traded company had a higher short interest than GameStop. With a short ratio higher than 6, it made the company a perfect target for one of the most epic short squeezes ever executed.
From a fundamental perspective, enthusiasts have to be pleased with what they've seen from GameStop's digital gaming push. E-commerce sales during the holiday season more than quadrupled, while digital sales for the full fiscal year soared 191%. Between the company's cash-rich balance sheet and digital focus, there's reason to believe GameStop will survive its ongoing operating model shift.
On the other hand, GameStop's outlook isn't going to improve overnight, or anytime soon. The company is being forced to rethink its brick-and-mortar operating model, which has meant closing down hundreds of its locations. Last year, GameStop shuttered 12% of its stores to conserve capital and reduce its operating expenses. Even excluding these closures, comparable-store sales still fell 9.5%.
Though it remains a favorite of the Reddit community, GameStop no longer possesses the right mix of catalysts that would make it a sustainable short squeeze candidate. Based on fundamentals alone, it offers much more downside than upside at this point.
