In today’s big story, we’re breaking down how to identify a meme stock.

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Three years after GameStop upended things, meme stocks are back in fashion.

There’s also been a new entrant to the meme-stock game. Reddit, which played a key role in the original meme-stock mania via r/WallStreetBets, has become a new fan favorite.

But how does one find a meme stock? Interactive Brokers’ Steve Sosnick identified three main criteria, as compiled by Business Insider’s Matthew Fox.

One thing you certainly don’t have to worry about is the fundamentals. If you believe a balance sheet should validate your investment decisions, meme stocks aren’t for you.

That type of “YOLO” investing is evident in another market that’s ripping: bitcoin.

The biggest bulls in the market have given up explaining use cases for the cryptocurrency. Bitcoin holders hodlers now just believe demand will continue to outstrip supply… despite not knowing what the demand for bitcoin is actually for.

Former President Donald Trump’s social media company, Trump Media and Technology Group, recently went public via a SPAC. With losses of $49 million compared to revenue of just $3.4 million, the company’s balance sheet isn’t the type investors traditionally get excited about.

But in meme-stock land, balance sheets are for the birds. Add in the fact Trump has some of the most rabid supporters in the world, and you can see where this is going.

Shares of Trump Media skyrocketed during its first few days of trading. Its market cap is now just shy of $8.4 billion. Even investing legend Bill Gross is getting in on the action.

(Trump Media doesn’t technically qualify as a meme stock under Sosnick’s criteria due to the amount of low short interest. But as BI’s Peter Kafka explains, there’s a technical reason for that.)

Maintaining long-term support for a meme stock remains a tough nut to crack. The share price of AMC Entertainment, a retail trader favorite, has fallen below pre-meme stock levels. Bed Bath & Beyond, another meme stock, was liquidated last year.

But it’s never really been about the long game for meme-stock traders. And with the S&P 500 ripping this year up more than 10%, traders will continue to feel emboldened to make big bets.

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Your Monday headline catchup

A quick recap of the top news from over the weekend:

• River Danube cruise ship crashed after it was ‘suddenly no longer able to maneuver,’ 17 passengers injured.
• Trump keeps pushing the limits of the gag order in his hush-money case. It could land him in jail, legal experts say.
• Robo-lawyer startup DoNotPay did something almost unheard of in Silicon Valley: It paid a dividend.

🔔 Before the opening bell: US stock futures rise early Monday after the Fed’s preferred inflation gauge was in line with expectations. 

2. Hedge your bets. Speaking of playing the long game, it could be worth hedging your portfolio in case of a market downturn. Here are four strategies to protect yourself, from selling off some holdings to getting exposure to a volatility index.   

3. As the stock market hits record highs, some investors are concerned about a bubble. Valuations are stretched, crypto is booming, and to some, it feels like the S&P’s recent gains are too far too fast. From AI to chicken wings, BI has listed the 10 most richly valued stocks in the market right now.

2. AI won’t destroy Hollywood, according to the guy running an AI business. OpenAI’s Sam Altman met with Hollywood executives to ease concerns about Sora, his company’s video-generating tool.

3. Meta started paying creators for engagement on Facebook — but a wave of spam and illicit account sales followed. Facebook’s Performance Bonus program rewards creators whose posts are widely seen or engaged with, but it’s become a prime target for manipulation.

2. The man behind Amazon’s sports strategy. Meet Jay Marine, Amazon’s VP of Prime Video and global head of sports. He helped launch the Kindle and once served as Jeff Bezos’ advisor. His next big move at the company could be for the NBA.

3. Who are the HENRYs? To break down the demographics of America’s HENRYs — high earners, not rich yet — BI analyzed Americans who earn $200,000 or more a year, but have net worths under $1 million.

• Secretary of State Antony Blinken meets with French President Emmanuel Macron in Paris to discuss the conflicts in Ukraine and Gaza.
• iHeartRadio Music Awards will be broadcast live on FOX.

Dan DeFrancesco, deputy editor and anchor, in New York. Hallam Bullock, senior editor, in London. Grace Lett, associate editor, in Chicago. Lisa Ryan, executive editor, in New York.

Get in touch. Email us at insidertoday@insider.com

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