US$5,000 Invested in GameStop (NYSE:GME) on January 1 Is Worth US$44,000 Today

Retail investors made money from the GameStop stock when David slew Goliath in January 2021. However, BlackBerry stock is the more attractive investment choice today than the meme stock.

| More on:
Money growing in soil , Business success concept.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

January 2021 will be written in the annals of the stock market as the month when “David slew Goliath.” S3 Partners, a financial analytics company, reported that giant hedge funds lost nearly US$13 billion in their short positions on meme stock GameStop (NYSE:GME).

If COVID-19 frightened the world, a new breed of retail investors terrorized the big players at Wall Street. The short-sellers were down by almost $26 billion when the video game retailer’s share price soared to US$347.51 on January 27, 2021, from $17.25 on January 4, 2021.

Many investors made big bucks during the rally, although many latecomers lost too when the price sank to US$40.59 on February 19, 2021. Nonetheless, had you bought $5,000 worth of GameStop shares on the first trading of the year and still holding them, you’d be delighted. As of May 13, 2021, the price is US$151.91, or a 781% year-to-date gain. Thus, your money today would be US$44,031.88.

Short-squeeze play

Reddit retail investors and some business leaders do not like the antics of these short-sellers. They borrow stocks from brokers, then sell them. When the stock price drops, they buy the same stock and return them to the broker. The difference goes to their pockets.

However, Redditors went all out to disrupt the game plan of short-sellers who bet that GameStop would go down. The group’s coordinated efforts to scoop and rally behind the meme stock resulted in a short-squeeze play. Instead of falling, GameStop shares kept rising. The short-sellers had to buy the stock at a higher price, which made it worse, because it drove the price even higher.

Avoid GameStop

In Q2 2021, GameStop has a risky, if not notorious image. Wall Street analysts warn investors to avoid the video game and accessories retailer. The short interest on the stock is not there anymore. Don’t expect the same dynamics in January that sustained the short-squeeze play to be present.

BlackBerry is not a meme stock

BlackBerry (TSX:BB)(NYSE:BB) was also the target of short-sellers, but the army of retail investors came to the rescue. The Wall Street big boys also lost money from the Canadian tech stock. However, I disagree if you were to classify BlackBerry as a meme stock. Unlike the struggling GameStop, BlackBerry is on the right path towards profitability.

The $5.49 billion company provides intelligent security software and services to enterprises and governments worldwide. If the tech firm isn’t trustworthy, why did the federal government choose BlackBerry to provide secure communications software for public servants?

Shared Services Canada (SSC), the agency tasked to manage Canada’s IT systems, inked a multi-year deal with BlackBerry. SSC will use cybersecurity products BlackBerry Spark and BlackBerry secuSUITE.

Besides the partnership with Amazon Web Services (AWS), WM Motors in China picked BlackBerry’s QNX to power its W6 All-Electric SUV. The most recent deal is a five-year, multi-million-dollar partnership agreement with the University of Waterloo.

Runaway choice

Between GameStop and BlackBerry, the TSX tech stock is the runaway choice at $7.94 per share. The American brick-and-mortar company is losing out big time to digital platforms. It needs more digital growth initiatives to keep pace. Meanwhile, BlackBerry is signing deal after deal, which gives it sustainability and drives growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. David Gardner owns shares of GameStop. The Motley Fool recommends BlackBerry and BlackBerry.

More on Tech Stocks

Business success with growing, rising charts and businessman in background
Tech Stocks

3 Growth Stocks Worth Buying Today

With the volatility of the stock market, many investors continue to avoid growth stocks. However, here are three stocks worth…

Read more »

Online shopping
Tech Stocks

Down 80% From Record Highs, Is Shopify Stock Undervalued Right Now?

Shopify is among the worst-performing stocks on the TSX in 2022. The selloff surrounding growth stocks has dragged Shopify lower…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

Could Lightspeed (TSX:LSPD) Stock Hit $50 in 2022?

The significant selloff in Lightspeed stock seems unwarranted, especially as the company has multiple growth catalysts and is delivering robust…

Read more »

analyze data
Tech Stocks

Fantastically Cheap TSX Tech Stocks

Investors should benefit from buying cheap tech stocks that are growing their profits in this market correction.

Read more »

Wireless technology
Tech Stocks

2 Quality Growth Stocks Breathe Life Into the Tech Sector

The battered technology sector has been advancing lately thanks to two quality growth stocks with pricing powers.

Read more »

clock time
Tech Stocks

Now’s the Time to Load Up the TFSA With These 2 Top TSX Stocks

Here are two top TSX stocks that long-term growth investors may not want to give up on, especially at these…

Read more »

shopping online, e-commerce
Tech Stocks

Shopify (TSX:SHOP) Stock Recovers 30% From its 3-Year Lows: Should You Buy?

Shopify stock: Should you buy the dip or wait for more weakness?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Tech Stocks

What Market Correction? 2 High-Growth Tech Stocks That Are on the Rise

I don’t think it will be long before these two Canadian tech stocks are back to delivering market-crushing returns.

Read more »