It's been an exceptionally volatile year for the stock market, and that's been music to the ears of millennial and novice investors who envision getting rich quick on these wild vacillations. Online investing app Robinhood, which is known for its commission-free trades, fractional share investing, and gifting of stock to new members, has gained millions of new users in 2020 -- yet the average age of its user base is only 31.
While it's great to see young people using time as leverage to invest for their future, it's also unnerving that Robinhood hasn't given these millennial and novice investors the tools needed to truly succeed. Many don't understand the importance of long-term investing or compounding, and have instead chosen to chase penny stocks or otherwise awful companies.
Yet you might be surprised to learn that some of the most widely held Robinhood stocks were purchased hand over fist by billionaire money managers during the third quarter. Here are four of the most sought-after Robinhood stocks in Q3.
This is not a joke. Chronic underperforming marijuana stock Aurora Cannabis (ACB -1.16%) was a popular purchase among 13F filers in the third quarter, and among a handful of billionaire money managers. Jim Simons' Renaissance Technologies opened a 447,378-share position during the quarter, with Ken Griffin's Citadel Advisors adding 418,994 shares to an existing position.
Despite once being the most-held stock on the Robinhood platform, Aurora has been a train wreck, which is what makes these billionaire buys so surprising. This is a company that's been ravaged by regulatory issues at the federal and provincial level in Canada, as well as the overzealousness of its previous management team. Aurora Cannabis grossly overestimated its capacity needs and overpaid for its acquisitions by a sizable amount. Last year's $3.3 billion Canadian net loss was predominantly the result of writedowns tied to overpriced buyouts and overextended capacity.
Aurora Cannabis has also shown little desire to do what's best for shareholders. Between June 2014 and October 2020, the company's outstanding share count grew by more than 11,800%, with the company's board recently approving a $500 million (that's U.S.) at-the-market offering to raise capital whenever it sees fit. It's drowning its shareholders in dilution and isn't even a lock to survive at this point.
Although it only became a public traded company on the final day of the third quarter, 13F filings show that data-mining company Palantir Technologies (PLTR 3.20%) was a hot buy among 13F filers and select billionaires. Steven Cohen's Point72 Asset Management gobbled up 29.9 million shares, with Larry Fink's BlackRock and Soros Fund Management, run by George Soros, picking up about 29.3 million and 18.5 million shares respectively.
The lure of Palantir is twofold. First, it opted for a direct listing instead of a traditional initial public offering. Without investment banks cheerleading on the sidelines, Palantir's initial valuation didn't skyrocket into the stratosphere. This allowed money managers and retail investors to build a position at a somewhat reasonable valuation.
The other factor that excited investors is Palantir's accelerating growth amid the pandemic. Providing its data-mining and analytics services for the federal government via its Gotham platform is certainly lucrative. Yet it's Palantir's opportunity with enterprise clients via the Foundry platform that'll be the longer-term and safer growth driver. Investors should expect double-digit annual sales growth for a long time to come.
Another stock billionaires couldn't stop buying during the third quarter was hydrogen fuel-cell solutions provider Plug Power (PLUG 0.37%). In aggregate, 13F filers increased their stakes by more than 18% in Plug Power in Q3, with BlackRock's Larry Fink taking the biggest bite at an additional 7.63 million shares.
Concerns over climate change are driving a renewable energy revolution that goes well beyond broad-scale electric utilities. Plug Power is providing its hydrogen-powered technology mobility solutions (e.g., forklifts) to a number of brand-name retailers and grocers. This desire to go green, coupled with the coronavirus disease 2019 (COVID-19) pandemic dramatically increasing demand for many of Plug Power's core clients, has made for a banner year. Plug's full-year guidance implies year-on-year sales growth of around 35%.
Additionally, Plug Power has wisely locked in some of its most important clients with warrant deals. In 2017, Amazon (AMZN 2.20%) was granted warrants to acquire up to 55.3 million shares of Plug stock, with these warrants vesting based on Amazon's orders of fuel cell and hydrogen technology from Plug. Considering that Plug Power's stock has soared since this announcement, Amazon is fully incentivized to exercise these warrants and continue deepening its relationship with Plug.
Though still years from recurring profitability, renewable energy stock Plug Power definitely has Wall Street's attention.
Fourth and finally, billionaire investors and high-dollar money managers were intrigued by software-as-a-service (SaaS) stock Slack Technologies (WORK). In total, 13F filers added over 50 million net shares of Slack to their portfolios in the third quarter, with Larry Fink's BlackRock upping its position by 6.65 million shares.
The Slack buy thesis is built on the same premise that's been driving SaaS stocks for much of 2020: Businesses are becoming more dynamic and remote, so technology in the workplace needs to adapt to quickly share information. Slack is set up to be that trusted intercompany collaborative service. In the July ended quarter, it added approximately 8,000 net new paying clients and tallied 87 paying customers with north of $1 million in annual recurring revenue.
But Slack is also competing against some powerhouses. Microsoft's (MSFT 0.64%) Teams communication platform and Zoom Video Communications (ZM 0.42%) have really held Slack's valuation at bay. Microsoft's deep pockets and branding, along with Zoom's seemingly exponential video growth, have raised doubts about Slack's ability to compete for and keep clients. Then again, with Zoom focused on video and Microsoft working on more projects than I can count, it's also possible Slack has the upper hand on becoming the go-to collaborative service (perhaps not on the video end) in the workplace.
It's certainly a stock to keep a close eye on.