[Editor’s Note: “10 Hot Stocks Young Investors Bought as Coronavirus Hit” was originally published in April 2020. It has since been updated to include the most relevant information.]
Believe it or not, “Robinhood investors” — or young investors that, as a side gig, buy and sell stocks, commission-free, through the Robinhood trading app — are beating hedge fund managers in 2020. And not by a little. By a lot.
They heeded the advice of Warren Buffet, got greedy when everyone else was fearful and bought the March coronavirus dip in the stock market with both hands.
In an interview with CNBC’s Jim Cramer, Robinhood’s co-Chief Executive Officer said that buying activity on the trading platform rose 60% month-over-month in March as young investors went on a stock market shopping spree during the market’s rout.
That shopping spree has, of course, paid off. The S&P 500 is up more than 40% from its March lows — marking its biggest 50-day rally ever.
To that end, here are the hot stocks that young investors bought big in March and have used to beat Wall Street pros over the past few months:
- Inovio (NASDAQ:INO)
- Ford (NYSE:F)
- American Airlines (NYSE:AAL)
- Boeing (NYSE:BA)
- Carnival (NYSE:CCL)
- General Electric (NYSE:GE)
- Microsoft (NASDAQ:MSFT)
- Disney (NYSE:DIS)
- Aurora (NYSE:ACB)
- Tesla (NASDAQ:TSLA)
Hot Stocks for Young Investors: Inovio (INO)
Young investors didn’t just buy the coronavirus dip. They also chased the rally in some red-hot coronavirus stocks, including bio-pharmaceutical company Inovio.
Inovio burst onto the scene amid the coronavirus pandemic as the company developed a possible Covid-19 vaccine, supposedly within just a few hours. That possible vaccine is widely considered to be one of the leading vaccine candidates out there right now, and is presently going through clinical trials. If those trials yield positive results, then this tiny stock could fly higher over the next 12 months.
Young investors were probably attracted to Inovio for two reasons. One, the huge upside potential in the stock in the event that the company’s Covid-19 vaccine works. Two, the low price tag. INO stock has, for the most part, featured a sub-$10 price tag over the past few months (though it doesn’t anymore).
I’d caution against chasing this rally in INO stock.
There are a lot of companies out there developing potential vaccines and treatments for Covid-19. Almost all of them have red hot stocks right now. But only a few of them will make it through clinical trials, and actually produce any revenue or profit from these vaccines and treatments. As such, the risk-reward profile on INO stock seems asymmetrically skewed towards the downside at the current moment.
One beaten-up stock that young investors bought on the coronavirus dip was Ford.
The U.S. automaker saw its stock price crumble from $9 in early February, to below $4 in late March. Young investors were likely attracted to buy this dip on the idea that: 1) Ford is a huge car company that will survive this crisis, 2) automobile demand trends will rebound once pandemic fears fade, and 3) the stock slipped to dirt-cheap levels not seen since the Financial Crisis.
I agree on all fronts. Ford stock is a buy here. And I’d like to add one very important point.
Led by the Mach-E, Ford is unveiling a broad portfolio of electric vehicles over the next few years. This electrification of Ford’s antiquated vehicle roster will re-charge demand trends, and spark several years of positive volume, revenue, and profit growth.
Ford hasn’t seen a streak of growth like that for a long time, and it should push this stock way higher by 2023/24.
Stocks for Young Investors: American Airlines (AAL)
Another bottom fishing favorite of young investors in March was American Airlines.
Much like Ford stock, American Airlines stock was killed in March as the coronavirus pandemic brought the global economy to a screeching halt. But, as they did with Ford stock, young investors bought the dip in American Airlines stock, probably because they see airline demand rebounding once the pandemic fades.
That will happen.
Air travel is a huge part of our society. It’s not going away anytime soon. Once this pandemic passes, air travel demand trends will gradually recover. Within a few quarters, they will be back to fully normal. Indeed, this is already happening. U.S. air travel traffic is up more than 500% from its early April lows.
Also of note: the airlines are getting bailed out by the U.S. government. There is no insolvency risk here. American Airlines will survive this crisis. Sure, growth will be hampered by restrictions on the other side. But, with insolvency risks mitigated and a potential demand rebound on the horizon, AAL stock does look too cheap for its own good.
Yet another beaten-up stock which young investors bought on the dip in March was Boeing.
The airplane maker and aerospace and defense contractor saw its shares get decimated in March. BA stock was flying high around $350 in early February. By late March, it was trading below $90.
Young investors bought the dip. And reasonably so. Government aid will prevent this company from going under. Air travel demand will rebound once the pandemic passes, leading to increased demand for Boeing airplanes. Revenues and profits — although they will be wiped out this year — should rebound in 2021, and get back on a steady growth path over the subsequent few years.
As all that happens, BA stock will rebound. Perhaps not back to $350. The stock was overvalued up there. But BA stock does have visible runway to $250-plus prices.
Stocks for Young Investors: Carnival (CCL)
Cruise line operator Carnival was another decimated stock which young investors bought in March.
The cruise line industry has arguably been the hardest hit industry from the coronavirus pandemic. Not only has the pandemic brought the global economy to a screeching halt, killed discretionary spend, and kept consumers in their homes, but it has also been disproportionately affiliated with cruises, thanks to the plethora of cruise ships which had to undergo quarantine and were kept at sea for weeks.
As a result, cruise stocks have fallen off a cliff. Carnival, the biggest U.S. cruise line operator, has been no exception. CCL stock dropped from $40 highs in mid-February, to below $8 in late March.
Young investors bought the dip. If you have time on your side, I’d follow them on this trade. Cruise demand will be impaired for the next few years. But it will recover, because consumers will forget about this pandemic and because they have a strong appetite for travel and experiences.
As it does recover, cruise stocks will bounce back, and CCL stock will lead that recovery rally.
To be sure, this recovery will take longer than the airline or hotel recovery. So, if you don’t have time on your side, forget CCL stock, and go with a hotel stock or an airline stock for your potential rebound candidate.
General Electric (GE)
Industrial conglomerate General Electric was just starting to get its groove back in late 2019 and early 2020. GE stock rose from $8 in Aug. 2019, to $13 in Feb. 2020, as the company’s cost-cutting focused turnaround initiatives were starting to bear fruit.
Then the coronavirus pandemic struck. The global industrial economy came to a screeching halt. GE’s already heavily levered balance sheet came under tremendous financial pressure. And GE stock sunk… to new lows below $6.
Young investors think that GE stock will get its groove back. They bought the dip in March.
I agree with the young investors on this one. The balance sheet risks are enormous. But I think GE has enough assets and financial levers they can pull to weather this storm and avoid insolvency. Assuming they do, then industrial economic trends will recover over the next few quarters, GE’s businesses will rebound, and the big GE turnaround that was starting to take hold in late 2019, will resume in late 2020.
As it does, GE stock will bounce back.
Stocks for Young Investors: Microsoft (MSFT)
Young investors saw March weakness in tech giant Microsoft as a long-term buying opportunity — and they are right.
Of course, the coronavirus pandemic creates near-term headwinds for Microsoft. Consumer and corporate IT spend have dried up.
But, longer-term, the pandemic actually creates multi-year tailwinds for Microsoft, by accelerating the consumer and corporate pivots towards cloud-hosted services. That is, the pandemic has been a not-so-subtle reminder that the physical world can be shut down at any moment by a pandemic, and therefore, everyone and every corporation needs to be able to work digitally.
In order to do that, everyone and every corporation needs to be on the cloud. Consequently, over the next few years, there should be a demand surge of Microsoft’s cloud infrastructure, productivity, and communications tools, like Azure, Office 365, and Microsoft Teams.
This demand surge will propel Microsoft’s revenues, profits, and stock price all materially higher.
Young investors didn’t shy away from the big dip in Disney stock in March.
And they shouldn’t have. Disney stock down around $100 is a great long-term buy.
Yes, most of Disney’s businesses are getting hammered by the pandemic. Cruise lines aren’t operating. Theme parks are closed. So are movie theaters. TV advertising budgets have been slashed. Everywhere you look, the pandemic has hurt — and altogether killed in some cases — Disney’s various revenue streams.
This won’t last forever. The pandemic will pass. When it does, Disney’s cruises will be back up and running. The theme parks will be as busy as ever. Movie theaters will re-open (indeed, they are already re-opening in some states). TV advertising will rebound.
In the meantime, Disney’s new streaming service — Disney+ — has been a huge success, piling up 50 million subscriber in 5 months. This big streaming growth, coupled with a fortified balance sheet, will help Disney weather the coronavirus storm over the next few months.
Big picture: DIS stock should stabilize here around $100, before rebounding big in the back-half of 2020 as the global economy recovers from this pandemic.
Stocks for Young Investors: Aurora (ACB)
Young investors didn’t forget about pot stocks during the coronavirus pandemic. Instead, they bought the dip in pot stocks, especially in Aurora stock.
I like this bullishness on pot stocks. I broadly believe that the cannabis sector is due for a big rebound in the second half of 2020.
Once the pandemic passes, new vapes and edibles products coupled with a more aggressive retail store opening process in Canada will spark accelerated demand growth. Concurrently, production cuts from the industry’s major producers will curb the market’s supply glut. Rising demand plus falling supply is a recipe for rising revenues, expanding margins, and narrowing losses across the whole industry.
This big rebound has already started. ACB stock is up a jaw-dropping 230% over the past few weeks on the back of explosive third quarter earnings which included accelerating revenue growth, expanding margins, and narrowing losses.
This big rally in ACB stock will continue. Other pot stocks, like Canopy Growth (NYSE:CGC) and Cronos (NASDAQ:CRON), will rally big, too. This whole category is due for big gains in the second-half of 2020 on the back of materially improving fundamentals.
Last, but not least, on this list of hot stocks that young investors bought big in March is Tesla.
So far, dip-buying Tesla in March has been the perfect call. Tesla stock dropped to $350 in March. Today, shares trade around $1,000.
Going forward, here’s my two cents: buy TSLA stock on dips below $800, and hold for the long haul.
Tesla is a long-term winner. Electric vehicles are the future of automobile transportation. Tesla is just miles ahead in the electric vehicle game when its comes to technology, branding, production capability, and much more. As such, this company is the first inning of turning into one of the world’s largest — if not the largest — automobile company in the world. For that reason, TSLA stock is worth holding for the long haul.
But price matters. And above $800, valuation is a slight issue for Tesla stock. As such, buy the stock on dips below $800, and hold for the long haul.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been rated one of the world’s top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he was long MSFT, TSLA, AAL, and CGC.