Roaring Kitty is back.

As of May 12, Roaring Kitty made his return to the world. You might remember him as the Reddit user who “liked the stock”. This man was essentially the person behind GameStop’s infamous rise back in 2021. He was also responsible for a few hedge funds getting absolutely wrecked.

That is another story in and of itself. The hedge funds were short GameStop, or borrowing shares to sell in hopes they could buy them back for cheaper. This is a common strategy when looking to capitalize on a dying business. 

When the stock you’re short begins to go up, you have the potential for unlimited loss. If the stock continues higher, eventually the short seller will buy the stock back at a higher price to mitigate their losses, also known as a short squeeze. When leverage is involved, a short squeeze can be catastrophic for short sellers. One hedge fund, Melvin Capital, actually had to close shop after the debacle.

Anyway, Keith has broken the internet as of recently. His return sparked another inevitable parabolic move in GameStop. This lasted for about 3 days. Not very long, but long enough to get Twitter/X absolutely amped, as well as the “cult” following GameStop has.

At the peak of 2021, people speculated that Keith’s GameStop position was worth $50,000,000. Well, if there is one thing that we know, that man has been incredibly busy. He posted a screenshot of his ETrade account to Reddit, which showed an account worth roughly $230,000,000.

Ho-hum. Nothing like taking $50,000 to $50,000,000 and then doubling that position a couple of times to have a solid $230,000,000 to play around with. The screenshot also showed that the majority of his account ~$180,000,000 is currently invested in GameStop and GameStop call options.

Classically, the recent posting of his balances pumped the stock. On paper, he made roughly $78,000,000 as of market close on Monday, June 3rd.

Now, you might think a financial advisor is pretty against someone holding individual positions. Given the risk that is associated with them, many advisors tell people to avoid any singular stocks for their portfolios outright. The risk added to a portfolio by holding individual names is monumental relative to a diversified portfolio of ETFs.

So, what do we think when someone wants to initiate a position in an individual name? Well, we are usually okay with it. Normally, we do our due diligence to give a final opinion on the name before giving an okay. However, we are generally okay with someone choosing a stock they like and building a position in it, so long as they are subscribed to the long-term mindset we’d want to see with any investment.

I hate to say “it depends” but it always does. Usually, depending on someone’s investable net worth, we will recommend a percentage of their investable net worth that we wish for them to keep the position below. We like to refer to this type of portfolio as an opportunity portfolio.

So, for example, if someone had $1,000,000 in investable assets (across 401(k), IRAs, taxable brokerage, etc.) we might suggest that they cap their individual opportunity portfolio at 5%. If they are an incredibly aggressive person who has proved their ability to accept volatility, maybe we will stretch to 7.5% of their total investable net worth. Essentially, we want to ensure that any catastrophic moves in the opportunity portfolio do not pose a concentration risk to the investor’s overall financial standing.

This can give many a sense of independence in their investments. They can have a true opinion about a business, its culture, and its future, backing it with their capital. We always want to encourage this; however, we want to do this in moderation. After a strong foundation is built, the fundamentals have been checked off and someone has gained experience in markets, there is no reason a small slice of their portfolio cannot be allocated to a few individual names.

As far as GameStop goes, that individual stock appears to be pure speculation coupled with a large and dedicated following. Please know that entering the meme-stock market is roughly equivalent to entering the casino. As always, none of this should be construed as financial advice. For specific advice tailored to your situation, reach out to your financial advisor. Don’t have one?! Don’t worry, consultations at Bone Fide Wealth are free. Come on in any time, my fellow young professionals!

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Have a more specific question or want to get your finances in order? Feel free to reach out to [email protected] for a free consultation!