After the market’s latest round of volatility, it may not seem like the right time to get into Robinhood (NASDAQ:HOOD) stocks. As inflation, rate hikes and other factors point to more rocky times ahead, some of the most popular stocks out there (many of which are great for first-time investors) could continue to make moves lower.
With this in mind, steering clear of the more high-flying names popular with retail investors who use brokerage apps like Robinhood may be a wise move. But while you may want to stay away from meme stocks, “story stocks” and other overvalued names, that doesn’t mean you should put your plans to start investing fully on hold.
There are many widely held stocks that offer relatively lower levels of risk, trading at relatively low price-to-earnings (P/E) multiples, with the potential to produce solid returns.
Many of these names are “old economy” sorts of stocks. Think automakers, banks, and pharmaceutical companies. Yet at the same time, tech isn’t excluded. The recent tech sell-off has pushed some high-quality big tech leaders to more than reasonable valuations.
So, if you’re new to investing, which Robinhood stocks should you add to your portfolio? Keep these seven, all meeting the low-risk, reasonably priced criteria, on your watchlist as potential buys:
- Bank of America (NYSE:BAC)
- Ford (NYSE:F)
- Meta Platforms (NASDAQ:FB)
- General Electric (NYSE:GE)
- Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG)
- Pfizer (NYSE:PFE)
- SPDR SPY 500 ETF (NYSEARCA:SPY)
Robinhood Stocks: Bank of America (BAC)
There are plenty of sectors that are seeing a negative impact from rising interest rates, but when it comes to bank stocks, it’s the opposite. After years of a near-zero interest rate environment, bank profitability will improve. The Federal Reserve’s rate hikes are set to bring about a “back to normal” for banking.
A great way for newbie investors to play this trend is to buy shares in a large money center bank, like Bank of America. Granted, the stock has been on a big run over the past year. First, due to the pandemic recovery, and now, due to rate hikes.
Yet while BAC stock may be up more than 49% over the past year, and up around 11% year-to-date (while major indices are in the red so far this year), that doesn’t mean a big drop is in the cards.
Barring the inflation/rate hike issue having a severe negative impact on the economy, the bank is projected to see a nice boost to earnings per share (EPS) between 2022 and 2023.
During this period, analyst estimates call for BAC’s EPS to rise from $3.26 to $3.79, a more than 16% increase. If you’re looking for a stock that’s benefiting from changes in monetary policy, and could continue to perform strongly, consider buying this venerable financial institution.
Last year, due to its big pivot into electric vehicles (EV), Ford almost entered meme stock territory. It shot “to the moon,” as investors grabbed it as yet another wager on the vehicle electrification megatrend.
However, since last month, when the latest wave of “EV mania” faded, F stock has experienced a sharp pullback, falling around 14.7%. This drop is modest compared to what we’ve seen with EV pure plays like Lucid Group (NASDAQ:LCID).
Still, there may be the concern that, as investors dial down their excitement for EV plays, shares in the Detroit automaker could give back more of their “electrified” gains from 2021.
Then again, unlike Lucid, or Rivian (NASDAQ:RIVN), the electric truck and van startup that Ford owns a piece of, a low valuation (P/E of 8.6x), and a rebound for its legacy gas-powered vehicle business (as the global chip crisis eases) not only could soften the blow.
As I recently discussed, potential catalysts like the sale of a minority stake in its EV unit could help F stock rev up in price much sooner than with LCID, RIVN, or even Tesla (NASDAQ:TSLA).
A value stock with growth characteristics, it’s one of the Robinhood stocks that looks like a great opportunity in today’s market.
Meta Platforms (FB)
Tanking after its latest quarterly results and guidance update, Meta Platforms (formerly Facebook Inc.) is now on sale. Shares in the social media conglomerate and aspiring metaverse company saw an immediate 23% drop in price following its earnings release on Feb 2.
This has been followed by more declines. In total, FB stock has dropped more than 30%. Yes, with its rate of growth slowing down, a pullback may have been justified. Yet a pullback of this degree? This is an overreaction.
With this big drop, Meta shares have fallen to a very low valuation. The FAANG component now trades for 17.2x earnings, taking into consideration its high-quality. Specifically, its high margins, strong balance sheet and economic moat.
This is a name deserving of a much higher multiple. Also take into account that the company’s “metamorphosis,” could be the catalyst that helps it re-accelerate growth in the years ahead. Even if excitement about it has dropped off since last fall.
At some point, the market will realize its mistake, and bid back up FB stock. Before this happens, you may want to grab it. Chances are, this “wonderful company” isn’t going to remain available at not just a more than fair price, but at a deep value price at that.
Robinhood Stocks: General Electric (GE)
Compared to the market at-large, GE stock has held up reasonably well since the start of 2022. Bouncing back after its own pullback experienced during last month’s sell-off, shares in the industrial conglomerate are back to near $100 per share.
With its pending divestment plans under which GE Aviation, GE Healthcare, and GE Energy will become independent, investors are taking an “on the fence” view about it. After its poor performance over the past five years and many missteps, it makes sense why there’s high skepticism whether this latest gambit will do the trick for shareholders.
However, as Barron’s sees it, there may be merit in buying it ahead of its dismantling. Per a sum-of-the-parts calculated, the company split into three may be worth 30% more than what it trades for today. On top of this, CEO Larry Culp is still at work implementing his turnaround plan.
Both these moves may enable GE stock, trading sideways for the past year, to make a leap toward prices well over $100 per share. Although a shell of its former self, this well-known company remains a popular play among Robinhood investors. Going forward, after its underwhelming performance? It could become a profitable Robinhood play as well.
Trading for around $2,800 per share, GOOG stock on the surface appears to be an expensive addition to a beginner’s portfolio.
After all, unless you are using Robinhood’s fractional shares features, just buying a single share requires a four-figure investment.
However, shares in Alphabet (parent company of Google), which have never had a stock split, are about to have one. The tech giant plans to split its shares, on a 20-to-1 basis. Of course, a stock split does not make it a better or worse buy, fundamentals-wise. Yet this increased accessibility stemming from it could give it a boost.
That’s not all. In contrast to its peer Meta Platforms, the company’s latest earnings report (released on Feb. 1) was well-received by Wall Street. Its core advertising business remains strong. Alphabet continues to see strong growth for its cloud segment as well. Cloud revenues were up 45% year-over-year.
With all this, it’s no surprise that shares have quickly bounced back, after plunging during January’s sell-off. However, still a great buy-and-hold play for those starting to invest, consider putting this Robinhood stock on your watchlist.
Still reasonably-priced (P/E of 24.4x), continued earnings growth plus the upcoming split may enable it to make its way back to its all-time highs above $3,000 per share.
The big pharma company’s shares spiked in late 2021. Investors bet big that new variants like omicron would increase and extend demand for booster shots.
Not only that, investors were excited about PFE stock in particular because of the company’s Covid-19 antiviral treatment, Paxlovid.
Since hitting an all-time high of $61.71 per share back in December, the stock has pulled back around 16.4%. Hopes for a longer runway for its vaccine, co-developed with BioNTech (NASDAQ:BNTX), have dimmed.
However, it’s possible that the market is too focused on its vaccine revenue and not focused enough on Paxlovid’s potential. Sales for this treatment could hit $20 billion this year. Depending on how long the virus persists, it could remain a blockbuster for Pfizer through 2023.
Another of the well-known Robinhood stocks, even if vaccine sales drop off significantly next year, it’s still a cheap stock. At around $50 per share today, it trades for just 7.7x projected 2022 earnings, and 10x projected 2023 earnings. With a fairly high dividend yield (3.01%) to boot, it’s a great opportunity for both first-time and experienced investors.
Robinhood Stocks: SPDR SPY 500 ETF (SPY)
After looking at six individual stocks, let’s look at an exchange-traded fund (ETF) that’s popular among Robinhood investors. As its name suggests, the SPDR SPY 500 ETF tracks the performance of the widely-followed S&P 500 Index.
Fully replicating the portfolio allocation of the stock market benchmark, This ETF is a great, low-cost way to “own the market.” Buying SPY stock is a form of index investing, or passively investing in the market, without trying to “beat” it through individual stock selection.
This strategy can be a winning one for most small investors. It can be a “set it and forget it” way to grow wealth. During bull markets, you see solid returns, without worrying about being stuck with stocks that are underperforming the overall market. During bear markets, the S&P 500 does go lower. Yet its pullback may not be so severe as it may be with a basket of potentially more-volatile individual stocks.
Keep something in mind, though. Past performance is not indicative of future results. The Fed’s easy money policies were a boon for the market. Now, as the Fed hikes rates, stocks overall could experience more multiple compression. This may result in more subpar returns when it comes to just “buying the S&P,” instead of actively managing your portfolio.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.