Last year, a paradigm shift occurred — and I’m not just talking about the novel coronavirus. Certainly, the global health crisis initially devastated economies the world over, and we’re still working through the rubble. But amid the mess, a new wave of investors jumped onto trading platforms like Robinhood (NASDAQ:HOOD), driving up broader market sentiment. But should you chase so-called Robinhood stocks?
Honestly, it’s a yes-and-no situation. Personally, I’ve been surprised that several Robinhood stocks in its top 100 are reasonable entities with strong credible narratives. At the same time, there are plenty of companies on that same list which are highly speculative and are likely to cause severe disappointment.
Losing money in the market is nothing new. The problem comes when newbies enter the arena without a proper education — and skewed expectations of instant riches. Thankfully, the vast majority of rookies live and learn. But in the extreme cases, such as the young trader Alex Kearns who took his life when he mistakenly believed he owed nearly a million dollars, the allure behind Robinhood stocks can be dangerous.
Therefore, it’s imperative that everyone — whether a newcomer or not — have a firm grasp on their risk-reward profiles. This requires self-reflection and honesty.
For myself, I realized over the last year that I could not handle the lifestyle of a day trader. So, I exited a majority of my cryptocurrency holdings and called it a day — and have a house without a mortgage for my troubles. But for others, speculative Robinhood stocks can lead you down a dark path.
That’s not to say that speculation is inherently damaging. Some folks need the adrenaline to feel alive. I get it. However, scientific evidence shows that in certain situations, the average young person is risk-averse. If so, it only makes sense that while you get your feet wet, it’s best to focus on reasonable Robinhood stocks to buy.
- Microsoft (NASDAQ:MSFT)
- Johnson & Johnson (NYSE:JNJ)
- Coca-Cola (NYSE:KO)
- Ford (NYSE:F)
- Exxon Mobil (NYSE:XOM)
- GoPro (NASDAQ:GPRO)
I’ll end on an elaboration on an earlier point: not dialing up the risk factor to the extreme with Robinhood stocks is perfectly okay. I’m much happier not having so much money at risk to a wildly speculative market. It’s given me a joy that’s personally and professionally rewarding and it’s something to consider for the long haul.
Robinhood Stocks: Robinhood (HOOD)
Okay, I’ll admit it: part of me simply wanted to start a list of Robinhood stocks with Robinhood stock. I’m attracted to the symmetry, so there you go.
But on a more serious note, HOOD definitely has a place in your portfolio if you can handle some of the risks involved. Granted, I’m contradicting myself from the above words, where I emphasized that newbie investors should focus on stable enterprises for their Robinhood stocks. As a recent initial public offering with hardly any market track record, HOOD isn’t the classic definition of stable.
However, Robinhood itself is a disruptive force, as a CNBC article pointed out in May of this year. It’s become both a platform and a way of life. I think even the most conservative financial advisors have to give credit where it’s due. Data prior to the pandemic showed that 43% of millennials hadn’t started investing yet, creating longer-term problems for the demographic.
Thanks in part to the pandemic and Robinhood’s attractive gamified interface, these strange bedfellows accomplished what a generation of stuffy-suit advisors failed to do.
Consistently a member of the top-100 most popular Robinhood stocks, Microsoft likely generates attention for its Xbox gaming console-related businesses, and I don’t see a problem with that in the slightest. Well before the pandemic, video games transitioned from the domain of friendless losers — yes, I speak from deep personal knowledge — to a multi-billion-dollar industry.
Heck, the sport of gaming (if you want to generously call it that) attracts folks from a wide array of demographics, which probably was unthinkable when the first commercial arcade video game came out in 1971.
Following the Covid-19 disaster, video games have come out as one of the rare robust beneficiaries. According to information from a Nielsen company called SuperData, in 2020, “55 percent of people picked up video games — out of boredom, to escape the real world, to socialize — during the first phase of lockdowns.”
However, I also think newbies to Robinhood stocks will benefit from Microsoft’s profound domination of professional software, along with connectivity platforms that facilitate remote operations. Even if we all go back to the office, its Software as a Service package is indelible.
Robinhood Stocks: Johnson & Johnson (JNJ)
As one of the top healthcare blue chips, Johnson & Johnson is a great name if you’re looking for slow and steady growth. No, it’s probably not going to make you rich, but at the same time, it’s probably not going to leave you in the poorhouse.
Also, its dividend yield of 2.5%, while not profoundly generous, is much better than the average yield in the healthcare segment at 1.58%.
But believe it or not, JNJ finds itself as one of the top 100 Robinhood stocks, proving that its users aren’t a monolith. Not everyone is interested in speculation.
If you’re a newcomer to the investing realm, you should consider adding dividend-bearing names to your portfolio. In addition to the passive income stream, companies that pay their shareholders tend to mitigate bearish cycles better than pure growth plays.
Also, JNJ is extremely relevant to the ongoing Covid-19 crisis. Obviously, the company has its own vaccine which contrasts to the popular messenger-RNA-based solutions. Also, as a massive provider of over-the-counter medicines, Johnson & Johnson can cynically benefit from other public health threats.
Given its boring nature, you may be surprised to learn that Coca-Cola is one of the most popular Robinhood stocks. But it’s true. Apparently, young traders understand the benefit of well-established consumer staples plays as well as veteran investors do. If you’re a newcomer to the markets, make sure to follow the Robinhood crowd that thinks about more than just speculative stuff.
As a passive income opportunity, KO stock is a bit more attractive than JNJ, with a yield of 3.1%. Moreover, this is conspicuously higher than the average yield in the consumer staples sector at 1.9%.
Another positive aspect about dividend-bearing companies is that the dividend cushions the pain from any negative returns that KO incurs in the capital market.
While there are times to swing for the fences, you also want to control your downside. That’s how you win ballgames and that’s also how you win in finance.
Not to mention, Coca-Cola enjoys a fundamental catalyst as society reopens from the Covid-19 crisis. From live sporting events to the box office to popular eateries, KO stakeholders have a lot to look forward to.
Robinhood Stocks: Ford (F)
I’m going to get this out in the open right now, in the spirit of full disclosure — I own shares of automotive giant Ford. Therefore, I personally benefit from coverage that happens to push shares higher.
At the same time, I genuinely believe this is an underappreciated opportunity in the hyper-competitive auto sector. Hence its inclusion here.
Thankfully, I’m not alone in thinking this way. As it turns out, Ford is also one of the top 100 most popular Robinhood stocks to buy.
Truth be told, there might be some psychological reasoning behind this idea. As an equity unit priced in the low double digits as a I write this, F has speculative appeal. But there’s so much more going on here.
Look, I’m not a big fan of American cars (actually, I hate them) so you can reasonably trust my objectivity when I tell you that the Ford Mustang Mach-E is a gamechanger. Sure, the electric-powered SUV angered enthusiasts of the Mustang brand but the issue is that the times are changing. And auto industry experts are heaping wide praise on the Mach-E.
It’s not surprising, then, that Ford will double production for its upcoming electric-powered F-150 Lightning due to blistering demand. That’s the kind of enthusiasm you can bank on.
Exxon Mobil (XOM)
I’m going to step into another somewhat contradictory angle with Exxon Mobil. Ranked as one of the most popular Robinhood stocks — although admittedly toward the back end at number 78 — the idea of betting on an oil giant doesn’t align with the contemporary ethos of clean and renewable energy. I get it.
At the same time, I’m not sure if it makes sense to be totally sold on the idealistic narrative of green power. While the future of personal mobility and transportation is electric, there are still some questions about when this future will be. Certainly, it’s not going to happen tomorrow. And despite the innovations of the electric vehicle industry and the declining costs of EV battery packs, the vehicles themselves are very expensive.
Like it or not, combustion cars are an economic reality. Combined with the incredible energy density of fossil fuels, XOM will likely have a long upside pathway.
Robinhood Stocks: GoPro (GPRO)
Although the spirit of this list of popular Robinhood stocks is to direct investing newcomers to strong, reliable opportunities, I’m not completely naïve. People are going to speculate. So rather than try to stifle any kind of gambling activities in the market, I believe a more productive approach is to bring up speculative ideas with credible narratives.
One such name is GoPro, the manufacturer of popular action cameras. Before the Covid-19 crisis, GoPro’s products were popular with a growing number of people documenting their journeys for their social media fans. Following the pandemic, this catalyst has grown more relevant because of the initial shutdown of non-essential activities. With nothing better to do — besides playing video games — action cams and social media provided an important outlet for youth.
Unfortunately, it’s extremely awkward to bring this segment up considering recent tragedies but the van life movement has really picked up steam in recent years. Per a report from the New York Times, the “Census Bureau estimated that in 2019, there were more than 140,000 people living in vans, recreational vehicles or boats — a 38 percent increase from three years earlier.”
Covid hasn’t stopped this trend — it might even be encouraging it. GoPro cameras fit well into this burgeoning narrative, which is why you may want to consider GPRO with your speculation funds.
On the date of publication, Josh Enomoto held a LONG position in F. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.