The top 50 Robinhood stocks in March
Recently, the investment community marked a year since stock market volatility hit the charts. We have seen the fastest decline of at least 30% in S&P 500company history, as well as a brief period when West Texas Intermediate crude oil futures turned negative.
While much of the investment community marveled at these historic moves, this volatility has acted as an insatiable draw to millennial and newbie investors.
Robinhood investors can’t stop buying these 50 stocks
The Robinhood online investing app, known for its commission-free transactions and free share donations to new members, attracted some 3 million new users last year. What’s remarkable about this number is that the average age of Robinhood members is only 31. This means that millennial and / or novice investors have flocked to the platform at a time when volatility has exploded.
On the one hand, it’s a good thing to see young investors putting their money at the service of the greatest creator of wealth on the planet. Over the past 40 years, the total return of the S&P 500 (i.e. including dividends) has been just over 10%. In other words, investors have doubled their money about once every 7 years since the start of 1981, including the reinvestment of dividends.
On the other hand, Millennial / newbie investors in Robinhood don’t seem to understand the importance of long-term investing or the benefits of compounding. We know this because Robinhood’s ranking (a published list of the most owned stocks on the platform) is filled with penny stocks, swing sets, and a number of other horrific companies.
If you don’t believe me, here’s a look at the 50 most held Robinhood shares as of the entry into March.
|1. Apple||26. Break|
|2. Tesla Motors||27. Maritime Beaver|
|3. AMC Entertainment (NYSE: AMC)||28. Ali Baba|
|4. Producers of sundials (NASDAQ: SNDL)||29. Moderna|
|5. Ford||30. Bank of America|
|6. General Electric||31. Netflix|
|7. NIO (NYSE: NIO)||32. Blackberry|
|8. Microsoft||33. Canopy growth|
|9. Walt disney||34. FuelCell Energy|
|ten. Amazon||35. Ideanomics|
|11. Nokia||36. Advanced micro-systems|
|12. Aphria||37. Tilray|
|13. GameStop (NYSE: GME)||38. Facebook|
|14. Zomedica||39. Twitter|
|15. American Airlines Group (NASDAQ: AAL)||40. Norwegian Cruise Line|
|16. Connect the power||41. AT&T|
|17. Pfizer||42. General Motors|
|18. Cannabis Aurora (NASDAQ: ACB)||43. Galactic Virgo|
|19. Churchill Capital||44. Zynga|
|20. Carnival Corp.||45. United Airlines|
|21. Go Pro||46. Boeing|
|22. Delta Airlines||47. Coca Cola|
|23. OrganiGram Holdings||48. Starbucks|
|24. Palantir Technologies||49. Cronos Group|
|25. Naked brand group (NASDAQ: NAKD)||50. Workhorse Group|
A great thirst for elk and penny stocks
If there’s one thing that stands out like a sore thumb on this list, it’s that Robinhood investors can’t get enough. penny stocks and the momentum of high volatility is playing out for their portfolio.
In particular, you’ll notice that many of the more popular stocks discussed on Reddit’s WallStreetBets discussion board are in the top 50 positions on Robinhood. Companies like GameStop and AMC Entertainment, which are the poster children of the retail investor-fueled Reddit frenzy, are the 13th and third most-held shares on the platform, respectively. Both GameStop and AMC have high short-term interest rates, mostly from institutional investors or hedge funds. This made them ideal targets for brief pressure from retail investors.
Unfortunately you will find little or no substance behind their rallies. GameStop is probably working on its fourth consecutive annual loss as it struggles to transition to a digital gaming environment. Meanwhile, AMC Entertainment has narrowly avoided bankruptcy and is watching the traditional cinema operating model be decimated by the pandemic and selecting streaming providers.
The other thing that Robinhood investors probably don’t realize is that penny stocks are almost always priced in pennies for good reason. For example, intimate clothing retailer Naked Brand Group hasn’t turned a profit for at least six years, and the company is now in the midst of an organizational change that will focus on e-commerce. Naked Brand shows that tiny stocks are often tiny for very good reason.
Cannabis, cannabis and more cannabis
The love affair of Robinhood investors with marijuana stocks continues for another month. As I noted earlier, Robinhood does not allow its members to buy over the counter (OTC) listed companies. This means that they are mostly stuck buying the underperforming Canadian stocks that are listed on the major US stock exchanges. Seven of the top 50 holdings are Canadian potted stocks.
If there’s any good news to report, it’s that Aurora Cannabis has slowly fallen through the ranks of the most held Robinhood shares. Once the most held title across the platform, Aurora now sits at No. 18. Even though the new management has significantly reduced costs, it does not change the fact that the number of outstanding shares of the company has up over 12,000% since June 2014, or that the finish line to achieve positive profit before interest, taxes, depreciation and amortization (EBITDA) has been moved back several times.
The bad news is that Robinhood investors might have replaced Aurora Cannabis with an even worse pot stock: Sundial Growers. Although Sundial has an estimated $ 680 million in cash, it has accumulated its coffers on the backs of its shareholders. The company has issued more than 1.1 billion shares via offers and debt-to-equity swaps in five months. It is also now focusing on retail, not wholesale, which will only exacerbate short-term losses at a time when most North American jar stocks are becoming profitable.
Alternative energies and transport remain essential for Generation Y
If you thought cannabis was well represented in the Robinhood rankings, take a look at the alternative energy and transport games. Almost 30% of the top 50 are automotive stocks, airlines or a company focused on clean / renewable energy solutions. Suffice it to say, Robinhood investors expect a surge in travel demand, after the pandemic, and an increased focus on renewables from the Biden administration.
But, as noted, they also potentially play with fire by chasing dynamic stocks that have completely broken away from their underlying fundamentals. Chinese electric vehicle (EV) maker NIO is still worth $ 73 billion after a 25% decline, but has only shipped a little north of 82,800 electric vehicles since its inception. Being based in China, the world’s largest car market for electric vehicles, could no doubt contribute to its long-term prospects. However, $ 73 billion for such young and unproven company it is a bit too much.
Likewise, stacking in American Airlines doesn’t seem like a safe idea. Even during the best of times airline actions generate poor margins and are able to return capital to shareholders through buybacks and dividends. But after taking out a coronavirus relief loan, American Airlines is excluded from redemptions and dividends. It also has the highest debt of any major airline ($ 41 billion). Even if he survives the pandemic without seeking bankruptcy, he will be so constrained financially by his debt that most growth initiatives can be thrown out the window.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.