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Should You Invest in
Gamestop?
By
www.ProfitableInvestingTips.com
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
The video game retailer, Gamestop, was once ubiquitous in
malls across America. Recently it has been struggling
and its share price has fallen. That was until the end of
December of 2020 at which time its share price was $17.
It peaked to $347 on January 25 and has fallen to $217
as of January 28. Should you invest in Gamestop? For
that matter, what happened with Gamestop (GME). The
New York Times offers a bit of insight into Gamestop’s
rise and what it tells us about today’s stock market. Keep
in mind that Gamestop sold for $3.84 a share a year
ago.
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
Dumb Money Beats Hedge Funds
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
As Gamestop stock started to go up over the
course of 2020, money managers and hedge
funds started to short the stock. Then mom-and-
pop retail investors piled in and started to buy.
The resulting rise in price resulted in a short
squeeze that drove the price even higher. Why
did all of those “dumb money” investors buy
Gamestop and increase its market value from $2
billion to $24 billion in just a couple of days? The
answer lies in the power of social media in
today’s stock market.
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
We wrote about Robinhood investing and
the risks involved. Since the Covid-19
pandemic began, many have started to
trade stocks and options with apps like
Robinhood due to being off work and with
time on their hands. Stocks that have
benefitted include BlackBerry which is up
280% and AMC which is up 840%.
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
According to the Times, the credit (or blame) for
Gamestop’s rise and the losses incurred by
hedge funds and others goes to Wall Street Bets
which is a page on the Reddit social media site.
The page put out the call to buy Reddit when it
became apparent that it was being heavily
shorted. And, when lots of small (dumb money)
investors purchased the stock the price went up
and those with shorts had to buy at a loss,
further driving up the price.
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
What Happens Next with Gamestop?
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
The stock has already fallen from its peak
price and, if left alone, should drift toward
its intrinsic value price. But, if the shorts
start up again, don’t be surprised if the
same pattern repeats itself. Now we see
that folks like Elon Musk are posting on
Twitter about Reddit. It may well be that
accurate market sentiment data will have
to include everything said on Reddit about
stocks!
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
Does Tribal Investment Activity Endanger
the Market?
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
When investors have to bail out of their short
positions they often have to sell their winners to
find the cash. When there are enough short
squeezes it could be that over-priced but
otherwise solid stocks could be affected. The
S&P 500 shuddered a bit after the Fed said that
the economy is not doing so well. The sort of
perfect storm that starts a market crash could be
triggered by a “side show” like Reddit readers
ganging up on the Wall Street hedge funds.
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
Where Does Intrinsic Stock Value Fit into
this Picture?
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
If you are a long term value investor and believe
that a stock like Gamestop is worth more than its
current price based on its forward-looking
earning potential, you will buy it. If you think it is
over-priced right now you will sell. If you are a
short term trader, the Gamestop situation
afforded you with a golden opportunity to make
money, provided that you could predict that all of
the “dumb money” would go “all in on the stock.”
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
For many who thrive on social media this all
makes perfect sense. So, should you
invest in Gamestop today? For those who
are not glued to their smart phones all day
long, this could be dangerous.
https://profitableinvestingtips.com/profitable-
investing-tips/should-you-invest-in-gamestop
For more insights and useful information
about investments and investing, visit
www.ProfitableInvestingTips.com.

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Should You Invest in Gamestop?