It's been an exciting year for millennial investors. With stock market volatility running well above historical norms since late February, millennial and novice investors have piled into equities.
If you're wondering how we know this, just look at online investing app Robinhood. The app, which is well known for offering commission-free trades, fractional share investing, and gifts of free shares of stock to new members, has gained millions of new users in 2020. The average age of its user base is only 31.
A quick look at Robinhood's leaderboard (the 100 most-held stocks on the platform) shows that young investors have a penchant for high-risk, high-reward growth stocks, as well as Wall Street's flavors of the week. The following 10 stocks are the most widely held on Robinhood.
Absolutely no surprise here: Apple ( AAPL 2.50% ) is the most popular and widely held stock. Apple's iPhone is the dominant player in the U.S. smartphone market, and the company should receive a healthy boost in sales now that its first-ever 5G-capable smartphone is available.
Additionally, Apple CEO Tim Cook is overseeing the transition from focusing on physical products to services and wearables. Services can be especially lucrative for Apple given that they offer higher margins and more stable quarter-to-quarter revenue than the physical products the company has relied on for decades.
2. Tesla Motors
With Wall Street putting the pedal to the metal in 2020 on electric vehicle (EV) stocks, it's also not a shock to see Tesla Motors ( TSLA -0.62% ) park in the No. 2 spot on Robinhood. Tesla seems on track to deliver north of 500,000 vehicles this year. It's currently on the leading edge of battery innovation for EVs, which is a big reason its first-mover advantage remains intact. The big question now is whether Tesla can maintain a $500 billion-plus valuation without producing generally accepted accounting principle (GAAP) profits solely from EV sales.
Robinhood investors really like auto stocks. For a while we saw Ford ( F 1.20% ) hold the top spot on the leaderboard. Nowadays, Ford is the third most-held stock, with ample opportunity to grow its market share in China. The company is going big on EVs, too, with $11 billion in dedicated investments between 2018 and 2022. As the icing on the cake, the Ford F-Series pickup has been the most popular vehicle sold in the U.S. for the past four decades.
4. General Electric
The fourth most-held stock on Robinhood is downtrodden conglomerate General Electric ( GE 4.05% ). The company has undergone a major reorganization to restore focus to its industrial roots. Millennial investors are likely enamored with its perceived low share price and potentially small price-to-earnings ratio. Unfortunately, General Electric's crippling debt load and an aviation industry troubled by the coronavirus disease 2019 (COVID-19) pandemic have made the path forward very difficult.
Millennial investors happen to be big fans of brand-name companies they can relate to, like the fifth most-held stock on the Robinhood platform, Microsoft ( MSFT 0.48% ). Ol' Softy is generating big-time sales growth across the board, with its cloud-focused offerings really packing a punch. For example, Azure grew sales by 47% on a constant currency basis in the latest quarter. For as large as Microsoft is ($1.63 trillion market cap), it's truly incredible that it keeps growing by a low double-digit percentage.
6. American Airlines Group
Perhaps the most baffling obsession for Robinhood investors is their love of airline stocks like American Airlines Group ( AAL 11.22% ). The airline industry is capital-intensive and low-margin. It requires the economy to be running on all cylinders to generate a profit. American Airlines is the most indebted of all airline stocks (roughly $33 billion in net debt), and it can no longer pay a dividend or repurchase its own stock as a condition of receiving COVID-19 federal assistance. It's probably the worst company of Robinhood's most popular stocks.
Have I mentioned that Robinhood investors love EV stocks? China-focused EV manufacturer NIO ( NIO -0.15% ) is on the leading edge of innovation in the largest auto market in the world. Over the past two quarters, NIO has delivered more than 22,500 of its premium SUV EVs -- more than the company delivered in the entirety of 2019. Depending on the company's production capabilities, NIO could become profitable on a recurring basis by as early as 2022.
All of the FAANG stocks can be found on Robinhood's leaderboard, but only Apple and Amazon ( AMZN 2.01% ) are in the top 10. Amazon continues to dominate the e-commerce landscape, with eMarketer estimating the company will hold a 38.7% share of U.S. online sales in 2020. It's also been able to use its online dominance to sign up more than 150 million people worldwide to a Prime membership.
As with Microsoft, Amazon's future is all about the cloud. Amazon Web Services (AWS) now sports an annual revenue run-rate of $46 billion, with the company's operating margins expected to climb significantly as AWS grows into a larger percentage of total sales.
The company behind the happiest place on Earth -- Disney ( DIS 2.78% ) -- is anything but a "Goofy" pick. Few companies are as good at emotionally engaging with consumers as Disney. It's taken quite the hit due to COVID-19 because its theme parks have sporadically closed throughout the year. Still, Disney's intellectual property is priceless, as evidenced by the 73.7 million subscribers the company courted for its Disney+ streaming service one year after launch.
10. Delta Air Lines
Rounding out the top 10 most-held stocks is another head-scratcher: Delta Air Lines ( DAL 9.17% ). With six of the 51 most-held Robinhood stocks being airlines, millennials must believe that COVID-19 vaccines will allow life to return to normal sooner rather than later. Like American Airlines, Delta Air is lugging around a lot of debt ($45.3 billion in total debt, to be exact). Servicing this debt is going to constrain reinvestment activity for a long time to come, which makes Delta Air Lines a risky bet.