MW This is why meme stocks have 'bubbled back to the surface,' fund manager says

By James Rogers

Meme-stock behavior among some retail investors never really went away, says portfolio manager at Leuthold Group

The recent resurgence in meme stocks shows that the underlying drivers of the phenomenon never really went away after the original meme-stock explosion in 2021, according to Leuthold Group, a market-research and money-management firm.

Last week a slew of mostly heavily shorted names were swept up in the latest meme-stock frenzy, with shares of Opendoor Technologies Inc. $(OPEN.UK)$ climbing more than 120% intraday on July 21. Shares of Kohl's Corp. $(KSS)$ and Krispy Kreme Inc. (DNUT) also soared.

Such was the extent of Opendoor's recent surge that the e-commerce platform for residential real estate adjourned a meeting to discuss a planned stock split.

Greg Swenson, senior research analyst and co-portfolio manager at Leuthold Core Investment Fund LCRIX LCORX, Leuthold Global Fund GLBIX GLBLX, Leuthold Grizzly Short Fund GRZZX, Leuthold Global Industries Fund and Leuthold Select Industries ETF LST, says he wasn't shocked by last week's events.

"It really shouldn't be surprising that this has bubbled back to the surface, because the behavior never really left," he said in a report released this week. "Measured from that blow-off month at the onset of 2021 through June this year, there have been five months where the performance gap [of the 50 most shorted stocks] was +10% or greater."

Shares of original meme stocks GameStop Corp. (GME) and AMC Entertainment Holdings Inc. $(AMC.AU)$ were famously sent skyrocketing in 2021, fueled by chatter on the WallStreetBets subreddit and the influence of trader Keith Gill, also known as Roaring Kitty.

See related: How students at Roaring Kitty's high school became top stock pickers

That period marked a milestone for the most shorted stocks, Swenson noted.

"Prior to 2020, there were exactly two months in the entire history to breach that [performance gap of more than 10%]," he wrote. "It's safe to say that, with retail traders having easier access to markets, derivatives, and online chat rooms, the game among these types of stocks has been permanently altered."

Short interest as a percentage of Opendoor's public float of shares is 21.9%, while it's 46.3% for Kohl's stock and 27.5% for Krispy Kreme shares. Short interest in GoPro Inc.'s stock $(GPRO)$, which also saw meme-style activity last week, is 9% of float. Short interest refers to the number of shares that have been used to bet that prices will fall.

Swenson said that Kohl's has probably garnered the most headlines during the latest episode. "However, the behavior has also been widespread among other heavily shorted names," he said.

People shouldn't assume that every day trader using derivatives to short "your favorite retailer from the 1990s" is going to be minting money from here on out, according to the fund manager. "After January 2021, the basket of the 50 most-shorted stocks lagged in 14 of the next 17 months by an average of 6% per month," he wrote. "We're guessing some of those diamond hands turned into Jell-O hands over that subsequent period."

"Diamond hands," a widely used term in the meme-stock community, refers to investors who hold a position in the face of possible risks and headwinds.

Swenson noted that Leuthold Group doesn't short stocks with "obscenely high" short interest. "When already swimming in dangerous waters, why wade into the deep end?" he added, citing a report from 2021.

Opendoor shares are up 7.1% in afternoon trading, while Kohl's stock is up 1% and Krispy Kreme is up 1.9%. GoPro shares are up 8.1%.

-James Rogers

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July 30, 2025 14:10 ET (18:10 GMT)

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