Australian investors that own the iShares S&P Small-Cap ETF (IJR) are among the country’s biggest winners from the Reddit-driven short squeeze.
Thanks to WallStreetBets, GameStop – a struggling video games shop targeted by short sellers – has surged more than 1700% in the past three months. The unprecedented rally has caused GameStop to become the largest holding in IJR, taking 2% of the portfolio – up from less than 0.2% in December.
The stunning run has helped propel IJR, which invests in small American companies, to become one of the top performing ETFs in Australia this year. IJR has also benefited from the unveiling of the Biden stimulus plan, which provides relief to small businesses.
IJR is not the only ETF with stocks popular on WallStreetBets.
IJR has outperformed VISM over the past 12 months, thanks to a recent climb.
Vanguard’s VISM – which buys global small companies and competes with IJR – holds both GameStop and AMC Entertainment. However VISM’s broad diversification (it owns more than 4,000 companies’ shares) means that the Reddit rally has had less impact on its portfolio.
As the Reddit short squeeze extends to global companies, other Australian ETFs are starting to benefit too.
VanEck’s video games ETF (ESPO) holds a stake of CD Projekt (CDPR), the Polish video games company. CD Projekt’s flesh was feasted on by short sellers in late-2020 after its new video game Cyberpunk, turned out to be a flop.
While CDPR’s shares trade in Warsaw, beyond the reach of most Reddit punters, a depositary receipt trades in the US under the ticker OTGLY.