By Spencer Jakab

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Dorks are hot stuff on Wall Street.

No, not socially awkward quants making big bucks at hedge funds: "DORK," like "FANMAG" before it, is an acronym for the latest U.S. stocks making waves. It stands for the first letter in the ticker symbols of Krispy Kreme $(D)$, OpenDoor $(O)$, Rocket $(R)$ and Kohl's $(K)$.

They are much smaller and less promising than Netflix or Amazon.com, which is what's notable about the wild ride they went on this week. Like GameStop and AMC four-and-a-half years ago, and Bed Bath & Beyond more recently, they're companies shunned by Wall Streeters who can read balance sheets but bought aggressively by individuals who mostly read Reddit posts.

Dork's transformation into so-called meme stocks signals the return of reckless overconfidence, and maybe a last hurrah for this rally.

A refresher on meme stocks: Coordinated buying occurs via social media, enhanced by call-options bets that act as a force multiplier. Those bets mean options dealers have to buy the stocks too for routine hedging.

As the stocks rise, that puts pressure on short-selling hedge funds that borrowed the shares to bet against them. They're forced to quickly repurchase them at a loss -- a formula for brief, self-fulfilling rallies.

Dork's results haven't been as spectacular as GameStop, but the storyline is similar: scrappy individuals running circles around pros. It's a fairy tale. Wall Street loves retail frenzies, except for the odd hedge fund that blows up.

Why should more buttoned-down investors care? It's a sign of the times.

"Meme-ing only happens at extremes in sentiment," says social-confidence consultant Peter Atwater, who teaches economics at the College of William and Mary.

Like the original meme craze, speculators have been primed for fearlessness. The Covid bear market in 2020 broke a record by being the shortest ever. Buying the dip, and doing so with the raciest stocks, paid off handsomely for a while.

Stocks' bounce from the "Liberation Day" wipeout has been similar. Goldman Sachs reported Thursday that its new Speculative Trading Indicator is at its highest since the dot-com bubble and the post-Covid bounce of 2020-2021. An ETF that tracks the 75 stocks with the most social-media mentions, ticker BUZZ, is up by two-thirds since the April low.

Meanwhile, Wall Street's unofficial "fear gauge," the Cboe Volatility Index, or VIX, fell below 15 on Thursday -- its lowest in five months. It topped 60 in early April, the highest since the pandemic.

What comes next? Goldman's research says exuberant times can get more extreme for a while. Over a 35-year horizon, sharp rises in speculative trading have preceded above-average three-, six- and 12-month returns for the S&P 500, after which the market has faltered.

The return of meme stocks might fit that timeline again, but it's a warning to edge closer to the exits before the music stops.

Write to Spencer Jakab at Spencer.Jakab@wsj.com

(END) Dow Jones Newswires

July 25, 2025 12:19 ET (16:19 GMT)

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