GameStop Stock: The Clown Show Continues

There are plenty of good values in the financial markets, if you know where to find them. Unfortunately, uninformed investors continue to get lured into bad trades, not knowing that they’re only pumping up the accounts of clownish gurus.

If you’re going to mimic the investments of somebody (which you’re not supposed to do because it’s your money and you really should think for yourself), at least follow a proven legend like Warren Buffett. He invests in solid businesses like Occidental Petroleum, Apple, and Coca-Cola while they’re trading at a depressed valuation.

Take Occidental Petroleum as an example. In its most recently reported quarter, the company posted adjusted earnings of $0.63 per share, beating Wall Street’s forecast that Occidental would earn $0.58 per share. Plus, the company has a strategic partnership with a Berkshire Hathaway subsidiary to extract lithium from the ground, which could produce long-term revenue as lithium is in high demand for electric vehicle batteries.

Now, I’m not telling you to invest in Berkshire Hathaway (Buffett’s company) or Occidental Petroleum. I’m not currently invested in either one of those companies, so I wouldn’t gain anything if you bought shares of Berkshire or Occidental right now.

In contrast, meme lord Keith “Roaring Kitty” Gill has a vested interest in promoting GameStop stock. Gill reportedly has a huge share position in GameStop, worth hundreds of millions of dollars.

Price Chart Courtesy of Yahoo Finance

Unfortunately for “Roaring Kitty,” GameStop stock certainly didn’t roar higher during his highly anticipated YouTube livestream on Friday. Undoubtedly, Gill’s net worth contracted sharply as his livestream performance included odd behavior, strange ramblings, and Gill’s seemingly stoned/high demeanor.

I would call the livestream a “nothing burger,” but the sense of disappointment was much deeper than that. Having been up nearly 40% in after-hours trading the previous night, GameStop stock ended up crashing before and during Gill’s livestream.

He couldn’t make magic happen because there’s no magic to be made here. GameStop is in terrible financial condition, having lost $32.3 million in the first fiscal quarter of 2024. Furthermore, the company’s sales shrank from $1.24 billion in the year-earlier quarter to $881.8 million in Q1 of FY2024.

Besides, just as it’s hard to trust “Roaring Kitty,” it’s difficult for sensible investors to trust GameStop. The company evidently won’t hesitate to inflate the supply and therefore potentially dilute the value of its shares. After already planning the sale of 45 million shares in a deal announced on May 17, GameStop revealed on Friday morning that the company expects to 75 million of its shares.

On top of all that, GameStop opted not to hold a conference call for the company’s investors, which is something that reporting companies normally do. If GameStop had favorable data to disclose or positive announcements, one might expect the company to speak directly to the shareholders via a conference call.

I suppose, in a weird way, that Gill’s livestream was GameStop’s conference call. It wasn’t a very good one, though, as “Roaring Kitty” is a thoroughly unqualified ambassador for GameStop, though he certainly knows how to represent his own interests.

Price Chart Courtesy of Google Finance

Lest we forget, the euphoria of meme-stock mania in early 2021 turned to horror and deep financial losses for countless investors throughout much of 2021, as well as in 2022, 2023, and early 2024. The current short-squeeze rally is very likely to have the same, regrettable ending.

It may be difficult to envision the unhappy ending to the story when the financial press covers the rally but hardly mentions the downfall. That’s how it goes, though, when amateur traders have short attention spans and get-rich-quick fantasies.

I sincerely hope that this message reaches some folks who may be tempted to jump on the “Roaring Kitty” bandwagon at the worst possible time. Over the long term, the best investments are ones that provide enduring value, not hype, mania, or transfers of wealth to fast-talking millionaires.