Rod Alzmann, founder of GMEdd.com, was a big supporter of GameStop Corp (NYSE:GME) when seemingly no one else was interested. Now that the stock is running wild, he's looking to put money to work elsewhere.
What To Know: Thursday on Benzinga's YouTube show "Benzinga Live," Alzmann detailed some of his earliest investments in GameStop, long before it ever became a meme name.
Alzmann first bought GameStop shares in the early 2000s. It was actually the first stock he ever invested in, he said, adding that he ended up selling it for a profit while he was in high school.
Towards the end of 2017, he decided to buy into the stock again. As GameStop shares traded lower in 2018 and 2019, he kept increasing his stake until his GameStop position represented a majority of his investment portfolio. At that time he was down over 50%, he said.
"It was a very painful multi-year experience," Alzmann said.
"I loved GameStop when everyone hated it. I don't like it so much nowadays, but again, that's just the way the world works."
Alzmann told Benzinga that following the recent surge in volatility in GameStop Corp (NYSE:GME) and AMC Entertainment Holdings Inc (NYSE:AMC), investors should be looking for other ways to make money in these meme stocks besides buying shares.
If you are buying stock in GameStop or AMC right now, it's difficult to say there is a margin of safety, and just as challenging to reason that future cash flows justify the risk you are taking on, he said: "It's that simple."
"The nice thing is you don't have to participate in stupid games. Because if you play stupid games, you are going to win stupid prizes," Alzmann said.
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What Alzmann Is Watching: Instead of playing "stupid games" with GameStop stock, Alzmann is keeping a close eye on a part of the market that has battled headwinds in recent years: the automotive sector.
The arrival of electric vehicles on the scene caused people to write off a lot of the internal combustion engine (ICE) players, especially companies that provide valuable parts for ICE vehicles, he said.
He's targeting some of the component providers like Allison Transmission Holdings Inc (NYSE:ALSN) and Garrett Motion Inc (NASDAQ:GTX) who make transmissions and turbochargers, respectively, for ICE companies. Both Allison Transmission and Garrett Motion are trading at single-digit earnings multiples and are aggressively buying back stock, he said.
"Get out of the stocks everyone else is talking about if you're trying to be a more active participant," Alzmann said.
GME, AMC Price Action: GameStop shares closed 30% lower at $27.67 and AMC shares were down 15.3% at $4.64 on Thursday, per Benzinga Pro.
Image created with artificial intelligence via Midjourney and LinkedIn photo.