Meme stocks have been a big story of 2021. Including GameStop and AMC Entertainment Holdings, there have been plenty of unlikely investments that have generated fantastic returns for investors this year. Shares of those two companies have soared more than 1,100% each year to date (the S&P 500 is up just 23%).

Marijuana producer Sundial Growers (NASDAQ:SNDL) also became a hot meme stock in February, and its shares at one point were up over 450%. But it hasn't been as lucky as GameStop and AMC. Its popularity has waned, and it has given back most of those gains. Today, its shares are up 39% from the start of the year. It's an example of one of the risks of investing in meme stocks: fleeting popularity.

People in an office cheering.

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The roller-coaster ride can be sudden and unpredictable

I owned shares of tech company BlackBerry (NYSE:BB) at the start of this year. The lackluster stock was a chronic underperformer with disappointing sales numbers, and I accepted that I might have to wait years for the company to turn its business around. And so when I saw that in January it suddenly soared in value, reaching not just 52-week highs, but prices it wasn't at in nearly a decade, I didn't hesitate to sell it for more than double what I bought it for, because I knew it was grossly overvalued and the price wouldn't hold. And sure enough, it didn't: The stock is now down to around $11, less than half of the high it reached of $28.77 in late January.

It's a similar story with Sundial Growers, which reached a high of $3.96 on Feb. 11. And now, it struggles to stay above $0.70. The marijuana producer was also an unexpected and underrated buy for retail investors. The company hasn't been generating sales growth, it burns through cash, and it isn't profitable.

Now, thanks to multiple share offerings during the rapid rise in its stock price, Sundial is in a much stronger financial position; its cash and cash equivalents balance of 885 million Canadian dollars ($716 million) at the end of June was more than 40 times the CA$22 million it reported a year earlier.

Becoming a hot meme stock can do wonders for both investors and the business itself. But the danger is that if you buy at the wrong time -- such as those who bought shares of Sundial in February when it was at its peak -- it can lead to catastrophic losses as well.

Investors shouldn't count on the popularity lasting for long

Digital World Acquisition is the newest meme stock investors have been buying up. Upon hearing that former U.S. President Donald Trump would be launching a social media platform (Truth Social) and merging with the special purpose acquisition company, Digital World's stock didn't just double or triple in value, it soared to nearly 10 times its value in a span of just a few days.

While it may be exciting to invest in the stock now, there's no telling how long its popularity could last. It's likely to suffer a similar fate as others before it have. Since the end of January, when meme stocks started to cool off, there has been a significant drop in trading activity among some of the more popular buys at the time. And only one of those stocks, AMC, has risen in value since then.

SNDL 30-Day Average Daily Volume Chart

SNDL 30-Day Average Daily Volume data by YCharts

Investors should focus on substance, not memes

Trying to jump on the latest trending stock can be an incredibly dangerous strategy. It's a much safer approach to buy shares of a company before or after a euphoric run-up in price. There's less noise and it's easier to not rush into a decision you may later regret.

In Sundial's case, the cannabis stock has been relatively stable of late. And if you're bullish on the retail cannabis sector, it could be a worthy investment; the company has acquired two retail businesses since its surge in popularity earlier this year: The first was Inner Spirit (which it completed in July), and in October it announced the acquisition of Alcanna, which operates liquor stores and has a subsidiary that owns pot shops.

It's too early to tell if the moves will pan out for the business and make Sundial a better buy. But there's at least a viable reason to see why its shares might increase in the future (stronger sales) rather than just a sudden and unexpected surge in popularity. While it's possible that Sundial could again attract the interest of retail investors and become a popular meme stock, that alone shouldn't form the basis of an investment decision.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.