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Beware of the latest surge in meme stocks, strategist warns

The meme stock resurgence is not likely to last, warns one strategist, as the companies underlying the move are still on shaky fundamental ground.

"It's August, liquidity is light, and people are focused on a lot of things," Monica DiCenso, managing director and head of the Global Investment Opportunities Group at JP Morgan Private Bank, said on Yahoo Finance Live (video above) about the latest meme stock move. “I think following the volatility we've seen, it would behoove people to look at fundamentals. Fundamentally, I struggle with some of these names to say why they should be up that much.”

The meme stock trade has come back in force this month — though some in the community told Yahoo Finance on Twitter it never went away in the first place.

The top 10 most actively traded stocks on Fidelity on Monday included AMC, Bed Bath & Beyond, and GameStop. Shares of AMC were the second most active on the platform behind the always volatile Tesla.

Bed Bath & Beyond stock spiked 10% in premarket trading on Tuesday following a nearly 40% gain on Monday. Shares then tanked 18% as of 2:30 p.m. ET on Tuesday afternoon as Baird cut its rating on the stock to underperform citing the "frenzied move" in the stock price and, to DiCenso's point, weak fundamentals.

So far in August, Bed Bath & Beyond shares had exploded 88% heading into Tuesday's session. The retailer's spokesman Eric Mangan did not return Yahoo Finance's request for comment on the stock price movement.

The move in Bed Bath & Beyond — against a backdrop of speculation that the struggling retailer is nearing a badly needed cash raise — has seemed to come out of nowhere.

A similar no-news push higher affected GameStop stock as well. After an 8.5% gain on Monday, GameStop shares were off by nearly 7% as of Tuesday afternoon.

As for cinema chain AMC Entertainment, the stock dropped 6% by afternoon trading following an 8% increase on Monday

SKOKIE, ILLINOIS - JUNE 01: A sign hangs outside of an AMC theater on June 01, 2021 in Skokie, Illinois. Mudrick Capital has agreed to purchase 8.5 million share of the theater chain for $230.5 million. (Photo by Scott Olson/Getty Images)
A sign hangs outside of an AMC theater on June 01, 2021, in Skokie, Illinois. (Photo by Scott Olson/Getty Images) (Scott Olson via Getty Images)

Unlike its peers in meme land, however, AMC shares had a positive catalyst to kick off the week.

AMC CEO Adam Aron — affectionately known in the Reddit community as "chief ape" — told Yahoo Finance Live in an exclusive interview that the company would begin debt reduction "soon."

"We are going to get on a path relatively soon to deleverage some more," Aron said. "I think you can say relatively soon, meaning starting this year and certainly in significant numbers in 2023."

Whatever the reason for the meme stock trading revival, new data underscore investor appetite for the names that were popular among retail traders at the height of the COVID-19 pandemic.

The Roundhill Solactive Meme Stock Index, which tracks popular meme stocks such as AMC, Roku, Peloton, and Robinhood, is up a cool 15% in August heading into Tuesday.

As Ihor Dusaniwsky, managing director at S3 Partners, put it: "Wall Street has gone to the Hamptons, but meme stocks are back with a vengeance."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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