Please ensure Javascript is enabled for purposes of website accessibility

Investing $5,000 in These 3 Popular Robinhood Stocks Could Make You a Fortune

By Keith Speights – Aug 16, 2020 at 6:47AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Following the crowd doesn't always pay off. But it probably will with these three hot stocks.

Former Indian Prime Minister Indira Gandhi once said, "Popularity is not a guarantee of quality." She was exactly right. And her statement is applicable to investing as much as it is anything else.

For example, there are plenty of stocks that rank among the most popular on the Robinhood trading platform that aren't high-quality investments. Investors, especially millennials, have flocked to some really questionable stocks.

But it's still possible for a stock to be both popular and a smart pick. I think that investing $5,000 in these three popular Robinhood stocks, in particular, could make you a fortune over the long term.

$100 bills raining down on a woman holding a laptop over her head

Image source: Getty Images.

1. Novavax

Seven of the 100 most popular stocks on Robinhood are of companies that are developing COVID-19 vaccine candidates. My view is that Novavax (NVAX -5.30%) could be the biggest winner of the group.

Novavax is currently evaluating COVID-19 vaccine candidate NVX-CoV2373 in a phase 1/2 clinical study. The biotech's preliminary results from the phase 1 portion of this study prompted some analysts to refer to the investigational vaccine as potentially best in class.

When it comes to securing funding for its COVID-19 program, Novavax already ranks among the best. The company has lined up deals that combined total more than $2 billion, including a $1.6 billion agreement with the U.S. government's Operation Warp Speed.

If NVX-CoV2373 wins approval, Novavax could realistically be looking at annual sales of $10 billion and perhaps even more. It also appears to be in a great position to win approval for flu vaccine candidate NanoFlu, which could rake in as much as $1.7 billion per year. With a market cap of around $8 billion, this biotech stock could skyrocket much higher over the next few years.

2. Square 

Robinhood investors also seem to like stocks of companies that can profit from the shift from cash to digital payments. Square (SQ -5.37%) is one of them.

The company's credit card readers are used by many small- and medium-sized businesses. Square also offers a full ecosystem of products and services for its customers, including payroll apps, business debit cards, small business loans, customer loyalty programs, and online stores.

Square doesn't just focus on businesses, though. Its Cash App peer-to-peer payment platform has become a huge growth driver for the company. Square reported more than 30 million active customers using Cash App in June.

Some might wonder, though, if Square is too expensive with shares now trading at more than 260 times expected earnings. I wouldn't be surprised if the stock pulled back somewhat on any signs of weakness in the U.S. economy. However, the long-term trends definitely work in Square's favor. I think the stock could be worth a lot more by the end of the decade.

3. PayPal Holdings

PayPal Holdings (PYPL -2.66%) ranks as an even more popular fintech stock on Robinhood. It hasn't been as big of a winner in 2020 so far as Square has, but PayPal's shares are still up close to 80% year to date.

The company posted its best quarter ever in Q2. Revenue and profits soared as the COVID-19 pandemic fueled a steep increase in online shopping. My view is that one of the biggest and most far-reaching aftereffects of the pandemic will be an acceleration of the trend toward digital payments.

PayPal is also investing heavily in expanding into contactless in-store payments. The company already launched QR code functionality in its products but is still working with merchants to integrate the codes into their point-of-sale systems. This is a really smart move, in my opinion, as it enables PayPal to win in both e-commerce and brick-and-mortar retail.

Like Square with Cash App, PayPal has a gold mine with its Venmo digital wallet. The company has added new functionality to Venmo this year, notably including the capability to do direct deposits. I expect the stock to deliver outsized gains over the next 10 years as consumers and businesses shift to digital payments.

Keith Speights owns shares of PayPal Holdings and Square. The Motley Fool owns shares of and recommends PayPal Holdings and Square and recommends the following options: short September 2020 $70 puts on Square and long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Novavax, Inc. Stock Quote
Novavax, Inc.
$18.57 (-5.30%) $-1.04
PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
$88.70 (-2.66%) $-2.42
Block, Inc. Stock Quote
Block, Inc.
$55.90 (-5.37%) $-3.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.