A strategist considered GameStop one of the main buying ideas for 2021 earlier this year.
Since then, stocks have risen by almost 600% as Reddit brokers took aim at the name because of their high short interest, starting a confusion in which short sellers had to cover their positions, which further boosted the actions.
Now Andrew Smith, chief investment strategist at Delos Capital Advisors, is taking a second look at stocks after their dizzying high.
“It was a very interesting round-trip exchange. We are very optimistic about what was going on, very excited about the events that are going on,” Smith told CNBC’s “Trading Nation” on Monday.
When he made the call on January 5, Smith said the company’s transition to digital space, new console updates, including the PS5 and another round of stimulus checks, supported the fundamental argument for GameStop’s actions. High short interest was also a factor that made him optimistic.
He said on Monday that the fundamental tailwinds remain in place, but the high interest in the open was the “nitro that really raised this stock up”.
GameStop’s record increase to a record high of more than $ 483 per share last week, six times the previous record in 2007, prompted Smith to close his position. He reduced and then eliminated holdings in the third week of January.
“It was just a name that we wanted to reduce risk and also to know that the current price reflects the market dynamics more than the intrinsic value,” said Smith. “The fundamental thesis remains, but obviously the price has moved out of place and we still expect that intrinsic value of $ 20 to $ 30.”
GameStop’s shares fell more than 60% this week. The stock is still about 4,500% below its April low.
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