Robinhood seems to have an unending popularity with the rising demographic of younger investors looking to get involved in the stock market. One of the features that the investment platform offers is to keep an updated list of the 100 most popular stocks based on how many users own positions in those stocks. The companies on this list offer an interesting insight into the investment strategies and interests of these new investors.
Here are the four most popular stocks listed on Robinhood as of July 21.
Ford (NYSE:F), like most auto companies, is in a confusing spot. The car company has had relatively stagnant revenue over the last few years, and the pandemic and ensuing shutdown did not help the case. Revenue fell 15% year over year in the first quarter to $34.3 billion, with a net loss of $2 billion compared to net income of $1.1 billion in the year prior. With second-quarter results due on July 30, investors will get to see the full brunt of the damage caused by the economic shutdown.
In all, Ford is a tricky stock. Prior to the pandemic, slower sales limited the stock's ability to find bullish traction. It is most certainly tradable, but it has rewarded more long-term-oriented investors very little over the last five years. The loss of the dividend makes it even harder to love.
General Electric (NYSE:GE) stock is cheap, with a trailing price-to-earnings (P/E) ratio of 11.2. That is one of its more appealing virtues for Robinhood investors. However, sometimes things are cheap for a reason. The storied American company has had more than its share of headaches in the last decade. Conglomerate businesses have a disproportionate performance when it comes to creating cash flow. GE's aviation division creates most of the business's cash flow, with healthcare also providing positive cash. The rest of the company has been a financial drain, which puts GE in a constant tug and pull.
It's tough to get too enthusiastic about a company that has had such painful losses over the last few years. Larry Culp, the company's CEO since 2018, has been working to reinvent it and turn the company around. This is going to be a long story that's bent around whether or not GE can balance things out so that it's not relying on aviation to cover the burden of things like energy and power. GE's second-quarter results are scheduled to come out on July 29. Expect that the true effect the current aviation environment is having on GE's most important business will be studied with great scrutiny.
3. American Airlines
Again, the popularity of American Airlines (NASDAQ:AAL) with Robinhood users speaks to the interest in stocks battered down by the economic and pandemic woes of 2020. There seems to be an emphasis on stock prices that are well off their historic highs. Shares are down 60% over the last six months and have garnered more than their fair share of media attention -- along with most airline names.
Weak travel demand is hindering any airline's ability to stage a meaningful comeback, and the road to stronger demand isn't clear. Jamie Baker, an analyst at JPMorgan, noted that it seemed increasingly likely that the airline industry would take years to get back to the business scale that it had in 2019. Baker said that "traffic levels could be expected to recover in 2022 at the earliest given recent travel trends."
The second-quarter earnings report is scheduled for July 23. It could be a bumpy road.
One of my favorite stocks, Disney (NYSE:DIS), has not been spared the onslaught brought onto American business. Having recently reopened its Florida-based Disney World theme park, the company is getting a fair bit of attention right now. The sentiment on reopening is both good and bad.
With its California park and some overseas locations still sidelined, Disney faces a revenue fallout right now. Details of the pain that it caused in the company's fiscal third quarter (the second three months of 2020) won't be released until Aug. 4.
If the company's earnings from the first three months of 2020 are any indicator, it might not be best to make a play on Disney prior to getting the fiscal third quarter results. Operating income from continuing operations (the company phased in the financials from the Twenty-First Century Fox acquisition as well as Hulu) fell 85% year over year in the fiscal second quarter. Net income from continuing operations fell 91% year over year.
Considering that the second quarter of 2020 represented the bulk of the shutdown, one can only assume that Disney's fiscal results for that time frame will have a similar result, if not worse.
Of the most popular stocks on Robinhood, Disney is most certainly the best. The timeline will be tough, but the combination of current assets with the introduction of its streaming services makes Disney a hard one to beat over the long term.