Kevin O’Leary, co-founder of O’Shares ETFs, told CNBC on Wednesday that he has begun day-to-day trading with Reddit’s WallStreetBets forum users, hoping for a better understanding of the online community that has played a role. key in the recent GameStop short press.
In an interview with Squawk Box, O’Leary said he put $ 10,000 into an account at the popular brokerage app, Robinhood, and said he joined Reddit to “ride the herd.”
“There’s a brand new sheriff in town and they’re not stupid,” said O’Leary, also a Shark Tank investor. He added that he was impressed by the sophistication that some Reddit users have shown, saying they are not “as stupid as everyone thinks.”
“They are looking for situations that are over-short-circuited and have thin floats. They get organized the night before and track stocks and, in most cases, pick them up,” he said, adding that he won 5 percent on Tuesday at a pharmaceutical company. crazy I’ve never heard of “
As part of a personal experiment, O’Leary said he compares the performance of his daily trading account to the returns he generates through a robotic advisor, who uses computers to manage money. “I’m looking at my robot advisor to beat me right now. The idea is that it’s a fantastic democratization” and an important lesson about the risks of trading versus long-term investments in a diversified portfolio, he added.
O’Leary’s comments came on Wednesday, a day before the House Financial Services Committee held a hearing focused on the GameStop trading mania that erupted in late January.
The actions of the video game retailer increased greatly, when retailers who gathered on sites like Reddit rushed to buy the strong bet against the shares. Hedge funds, such as Melvin Capital, which shortened the stock, tried to minimize losses by buying shares at higher prices, adding to the upward momentum in GameStop. With both forces in play, GameStop went from less than $ 20 a share in early January to an intraday high of $ 483 on January 28 – a huge increase of over 2,300%. Since then, the stock has fallen below $ 50.
At the height of frantic activity, brokerages such as Robinhood have temporarily placed trading restrictions on GameStop and other short-lived stocks. Lawmakers are sure to ask CEO Vlad Tenev about this at Thursday’s sitting. Gabriel Plotkin, CEO Melvin Capital, Reddit CEO Steve Huffman, and Keith Gill – a Reddit user and YouTuber who helped trigger the GameStop craze – will also attend the hearing.
O’Leary said he believes most people who criticize brokerages like Robinhood and Reddit users have no direct experience with any of the platforms. That’s why he decided to start using both platforms.
In doing so, O’Leary expects to show newcomers to the equity market that it is difficult to make money trading daily and that the best way to build wealth over time is through long-term investment. “I think education is strong and important,” he said.
Disclosure: CNBC holds the exclusive cable rights outside the network “Shark Tank, “Which Kevin O’Leary is co-hosting.