The buzz around the Robinhood traders has reached extreme levels. The mainstream business media can’t get enough of it, and the more they cover it, the hotter it burns. Investing in Robinhood stocks seems foolproof in today’s market, which is alarming to the finance experts.
Even high-profile personalities are getting in on the action — none more famous than Barstool’s Dave Portnoy. He’s even picked a public fight with the most famous investor of all time, Warren Buffett.
Meanwhile, Mr. Buffet doesn’t even know he was in a contest and has nothing to prove.
Childish or not, the fight is on, even if one side is unaware of the bout. Kidding or not, Portnoy’s Twitter quote about Buffet that “when it comes to stocks he’s washed up” was ridiculous. It emphasizes that the Robinhood traders are on a field of their own, and only time will test their skills.
Today we examine three of the top 10 most popular Robinhood stocks as of Wednesday. We picked the top, the middle and the last on that list. I am excited about two of the the three, and the last is a meh stock for me long term but still offers a trading opportunity.
Step one, then, is for the investors to decide the type of the trade by determining the suitable time frames. Long-term investors usually can ignore the short-term gyrations. Robinhood-style wranglers are more likely trading than holding long.
Let’s talk about all three in a little more detail.
Robinhood Stocks to Trade: Ford (F)
Ford’s management has been underwhelming for a long time, so it is not a surprise to see F stock languishing in mediocrity as well. In fact, recently it fell so low that it brought back memories of the financial crisis era, where it seemed headed to zero.
Nevertheless, it bounced and is now on a good jag.
The follow-through from the investors is what the concern is now, but this time it could be different. They are at least willing to do something cool to revive the hubbub around the brand. In my household we are Chevy truck fans, but Ford loyalty is still alive and well in the U.S. of A. Every debate I have with the Ford fans is always heated, and that’s a true sign of commitment. They are not fair-weather fans. But investors on Wall Street are different, because they now need to see some consistency from management.
The success of the relaunch of the classic Bronco after a 25-year hiatus could be the trigger to bring the pizzazz back into Ford stock. I know that Main Street and Wall Street are both starved for something to cheer about. The stock has been setting higher lows and challenging prior failure levels.
Eventually the bulls should prevail and continue this recovery breakout. There will be resistance near $7 and $7.75 per share. But if the bulls can take those out, then they can overshoot to $9 from there.
For about a year, AAPL stock has commanded a higher valuation than the olden days. It is now trading with a 40% premium to its prior price-earnings ratio. But the experts assure us that it is appropriate because it is less of a product company and more of one that derives a big chunk of income from services. They are finally making the turn into the new normal of tech stocks, joining the likes of Microsoft (NASDAQ:MSFT).
The fundamentals of Apple are beyond reproach, and while I am not a fan of what Tim Cook is doing strategically, I can’t short it. The problem is that even though the current income no longer depends on the sale of iPhones, the current services do depend on the machines already in circulation. If the innovation fizzles, Android will eat away at Apple’s market share and that can hurt it in the long term.
The diehard AAPL fans would chuckle at this notion, but it is a fact that there are more non-Apple smart phones in the world, and that the threat is real. This alone is not a reason to short the stock — in fact, my message today is to buy it but on dips. Regardless of how great the chart looks, buying full positions into any stock at its all-time highs is full of risk. There is literally more downside than upside from that point.
Technically, I would much rather buy Apple shares near $360, where I know it will find footing on the first drop. An 8% correction in today’s market seems like an improbable event, but they do happen and they don’t announce themselves ahead of time. Conversely, if the bulls can break out beyond $400 then there would be a $30 chase trade from there.
I remember writing on several occasions when GPRO stock spiked to $90 per share that it was a short. In late 2014, as the mania peaked in GoPro it was dubbed the YouTube killer. In fact it was that the straw that tipped me over the edge to come out and short it. The notion was ridiculous then, and my bearish thesis played out to the maximum benefit.
For years now it has been trading mired near its lows, but in reality it’s the more realistic levels where it belongs. This is nothing against the company itself or its products. I love the camera and I own three, but the stock is not going back to the old highs or anywhere near them. Meanwhile, GPRO makes for a good trading vehicle which is probably why it is in the top 10 most popular Robinhood stocks.
Fundamentally the stock is not cheap because they still lose money. But the stock price is only 0.7 of the total yearly sales. This means that the investors do not have a lot of froth or hopium built into the stock. If there is a market correction, GoPro is already lean enough to make the bottom relatively close to current price.
The buyers have been in charge since the March bottom. They also have an opportunity to break out from a level at $5.40 or the trend 20 cents lower. The upside potential if that happens could bring the stock closer to October 2019 high. There is upside room to run but it will need the whole market to go with it. This all starts when they report earnings soon. Investors need to keep in mind that the short-term reaction to the earnings is a complete guess. Not even the CEO of the company could know how it trades on the open the day after.
The Robinhood stocks phenomena is exciting to watch, but it is not a trading thesis all by itself. There is no shortcut to homework and/or proper stock chart analysis. The media is now overly focused on this but that too shall abate. Just make sure you are not left holding that proverbial bag.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities.