Market watchers can’t escape the headlines screaming about investing application Robinhood. After price surges in Luckin Coffee (NASDAQ:LK) following a resumption in trade, traders on the investing app bought up Hertz (NASDAQ:HTZ) stock. And when Robinhood traders are willing to ignore Luckin’s accounting irregularities and Hertz’ bankruptcy, it only makes sense that experienced traders would be wary of those companies proving popular on the app.
But Robinhood provides trading liquidity for algorithmic trading platforms as well as offering its users the opportunity to trade fractional shares, not just whole ones. This puts stock holding in the hands of more individual investors than previously thought possible.
Although holding a single dollar in an ETF or stock will not move the market, it still sends “buy” signals because algorithms amplify overall trading volumes. Sadly, this means fundamental investing will matter less than momentum trading. Plus stocks that are more popular, in terms of the number of individuals holding them, may matter more.
Here are the 7 most exciting Robinhood stocks investors should consider:
- Ford Motor (NYSE:F)
- General Electric (NYSE:GE)
- Walt Disney (NYSE:DIS)
- Aurora Cannabis (NASDAQ:ACB)
- Boeing (NYSE:BA)
- Alibaba (NYSE:BABA)
- Moderna (NASDAQ:MRNA)
Bear in mind that the Fed’s continued support of the stock and debt markets is removing prior opposing risks. This amplifies the buying signal for stocks even more.
7 Exciting Robinhood Stocks: Ford Motor (F)
The demand for Ford vehicles will fall sharply due to the stay-at-home order of the past few months. The work-from-home mandate is a longer-lasting trend that will hurt automobile sales. But if Tesla (NASDAQ:TSLA) continues to enjoy high valuations because of the electric vehicle craze, there’s no reason Ford can’t attract more buyers to F stock.
Ford recently offered more details on its upcoming Mustang Mach-E electric sports utility vehicle. Just as Tesla offers Autopilot and General Motors (NYSE:GM) has GM Super Cruise, Mach-E will have Active Drive Assist. More importantly, it will use crowdsourced data to estimate driver route efficiency.
This route efficiency data will give the company a more accurate estimate of the Mach-E’s driving range. Any feature that Tesla does not offer will give consumers a reason to buy a Mach-E instead of a Model Y. And that data will give Ford deeper consumer insight besides, always a plus.
On July 13, Ford will launch its new Bronco. By doubling down on its bet that demand for gas-powered SUVs and trucks will grow, the company hopes to increase its average selling price, which will lift profit margins in the long-term.
For now, Ford expects to lose billions because of the pandemic. But after cutting costs and pushing ahead on product development, Ford could come out ahead of the competition, including beating Tesla.
General Electric (GE)
As of last week, GE is the second most popular holding on Robinhood. Often considered a stock for an older generation of investors, younger traders nevertheless have recognized the upside potential of the industrial conglomerate. GE declared just a penny ($0.01) in quarterly dividends on July 19. This largely symbolic move aims to re-affirm investor confidence by illustrating that the company has the requisite cash flow to reward suffering shareholders.
On the chart we can see that GE’s moving average convergence divergence (MACD) signaled a ‘buy’ twice:
Chart courtesy of Stock Rover.
GE updated investors on June 10, saying the company can achieve positive free cash flow in 2021. Preserving cash and reducing costs are part of the transformation that will increase General Electric’s FCF.
The company’s Aviation unit offers the most opportunity. Depending on the rate at which passenger traffic grows post-lockdown, GE’s jet engine sales could start recovering. Conversely, GE expects strong demand from its Military segment will offset the lost business from airliners.
The Gas Power business is an ongoing drag. Although GE will take on additional costs in the nearterm to fix the business, these actions will give margins and free cash flow a positive lift in the future.
Walt Disney (DIS)
The reopening of theme parks and a resumption in movie production will lift Disney’s prospects for the rest of the year.
Disney opened its Hong Kong Disneyland theme park on June 18. Although that attraction won’t reach full capacity for some time, the anticipated daily increases in attendance will help Disney post better revenue. The company has proposed re-opening its Florida Walt Disney World on July 11.
In the interim, the firm may lean on Disney Plus to offset the lost cash flow. Demand for entertainment in lockdowns has been so strong that the company ended its free trial account offering.
Tipranks, which collects analyst price targets, reported an average target of $113.00 on Disney shares. Analysts downgraded Disney stock in recent weeks, from a ‘buy’ to a ‘hold.’
Chart courtesy of Stock Rover
Without a 7-day free trial, Disney will see a boost from subscription revenues sooner than investors thought at the service’s launch. In April, the company had over 50 million subscribers, up by 22 million since Feb. 2020.
Aurora Cannabis (ACB)
After the epic 2019 collapse of cannabis stocks, Aurora Cannabis is still an investor favorite on Robinhood. Buying interest sent the stock rallying in May 2020 when the company entered the U.S. market with an acquisition. And despite the lack of any consequential news on June 8, Aurora stock spiked to around $16 off of frenzied buying.
On simplywall.st, Aurora has a financially healthy balance sheet. That should limit the risks of a stock sale or debt raise that would hurt shareholders:
On May 20, Aurora announced a strategic entry into the U.S. market. The company acquired Reliva LLC, a market-leading mass retail Cannabidiol (CBD) platform. Aurora will buy the company through the sale of $40 million worth of its shares. The deal will not cost any cash or debt, though it does slightly hurt existing investors.
Still, the acquisition expands Aurora’s market beyond Canada. With operations in the European medical market and the U.S. via hemp-derived CBD, this deal improves Aurora’s revenue prospects.
Aurora will likely continue growing revenue but incurring large losses. The stock is not a compelling buy at this time and is one to watch for now.
Boeing fell to as low as $89.00 during the massive March 2020 market swoon. But BA stock still managed to trade above $200 recently, earning a top spot on the Robinhood leaderboard.
Boeing must overcome two headwinds. Boeing needs the Federal Aviation Administration (FAA) to certify its beleaguered 737 MAX. Without that certification, Boeing will need to take on more debt to fund its daily operations. Second, airliners require a steady boost in traffic. Otherwise, airline companies will cancel their 737 MAX orders.
In the near-term, news that a whistleblower alleged systemic problems with 737 MAX will not help Boeing stock. A Boeing engineer wrote to the Senate committee and said that the jet’s design “must be fixed before the 737 MAX is allowed to return to service.”
That’s no small undertaking and will almost certainly further delay sales of the 737 MAX. Still, Boeing cannot afford to launch a flawed plane that will crash again and kill more passengers.
In the medium term, Boeing may need a cultural change that promotes safety and design checks over near-term profit growth. As a rejuvenated company, shareholders would be invested in aerospace having the top engineers developing superior products.
I’ll give Robinhood investors credit for knowing how to differentiate great Chinese companies from merely good ones. Alibaba fits the bill, given its moat in mobile e-commerce and cloud services.
Over the past few years, Alibaba posted strong gross merchandise (GMV) values (GMV is the total value of all orders). This suggests revenue and profits will keep growing at an incredible pace. And that suggests that Alibaba stock is currently too discounted to ignore.
Analysts have an average price target of around $258 on Alibaba stock:
Data courtesy of tipranks
Meanwhile, Alibaba stock has high scores on everything except value:
Data courtesy of Stock Rover
In the fiscal fourth quarter, Alibaba posted non-GAAP earnings of $1.30 a share. Revenue grew 22% Y/Y to $16.14 billion. The astonishing pace of growth dwarfs that of Tesla or Amazon (NASDAQ:AMZN). Chinese companies will likely trade at a discount for years to come.
On the off chance that this negative sentiment disappears, investors will see BABA stock trading sharply higher.
The bullish plays on drug companies developing treatment options for the novel coronavirus have continued unabated and Robinhood investors are no exception. Moderna is a strong contender in this space with its mRNA platform.
Moderna recently posted safety results from a series of mouse studies. And even though an animal model does not guarantee the same safety results in humans, that’s still a positive development. The result clears Moderna to begin testing the vaccine on thousands of healthy people.
Thanks to at least two stock sales in the last year and strong growth prospects ahead, Moderna has a strong future and a healthy balance sheet:
Data courtesy of simplywall.st
Moderna enjoys a high market capitalization not only for its coronavirus vaccine prospects but for its mRNA platform for treating other diseases. This technology is ahead of older offerings. So if Moderna’s secular growth prevails, it could bring a new class of virus vaccines to the market.
Disclosure: the author owns shares of Ford. He also runs the DIY Value Investing marketplace.