Volatility has been the name of the game for the stock market in 2020, and millennial investors have loved every minute of it. We know this because online investing app Robinhood, whose user base averages only 31 years old, has added millions of new users throughout the year.
Lacking experience, many of Robinhood's millennial and novice investors have chosen to focus on the short term and chase a number of terrible companies. The platforms' leaderboard (i.e., 100 most-held stocks) is littered with companies and industries that can best be described as dangerous.
Yet, among these many dart throws are a handful of Robinhood stocks that have the makings of surefire winners. If you're looking for inspiration in December, consider buying into the following three surefire Robinhood stocks.
Though past performance is no guarantee of future results, it's pretty tough to look past the long-term outperformance of Warren Buffett's conglomerate Berkshire Hathaway (BRK.A -0.44%) (BRK.B -0.44%). Between 1965 and 2019, Berkshire's share price averaged an annual gain of 20.3%, which is more than double the 10% total return (i.e., including dividends) of the S&P 500 over the same stretch. A 10.3% annualized difference might not sound like a lot, but it's resulted in Buffett's company outperforming the S&P 500 by more than 2,700,000% over the past 55 years.
If you're wondering what's made Berkshire Hathaway such a top performer, here's a hint: Warren Buffett! It's not that Buffett has done anything truly groundbreaking on the investment front that other investors can't do. What's set the Oracle of Omaha apart is his willingness to stick by his investments for very long periods of time, as well as his narrow research focus, which has allowed him to become exceptionally knowledgeable about financial stocks and consumer staples.
Buffett has also aligned Berkshire Hathaway's investment portfolio with the health of the U.S. and global economy. Even though recessions are inevitable, periods of economic expansion are measured in years, while contractions typically last for months or a few quarters. It's a simple numbers game, with Buffett betting on steady long-term growth in the U.S. and global economy.
As one final note, Buffett and his right-hand man Charlie Munger have been aggressively repurchasing Berkshire Hathaway stock. In consecutive quarters, the company has bought back a record amount of stock, with approximately $22 billion in repurchases over the last nine quarters. This buyback activity should help lift earnings per share and make Berkshire Hathaway stock look all the more fundamentally attractive.
Another great company that Robinhood investors have latched onto is cloud-computing solutions giant salesforce.com (CRM -0.55%). Salesforce is about 20% below its all-time high, hit in early September, which means opportunistic investors are receiving an early holiday treat.
It's tough to go broke buying industry leaders, and that's exactly what investors will get with Salesforce. It's the leading provider of customer relationship management (CRM) solutions in the world. CRM software is used by businesses to maintain customer information, manage marketing campaigns, and identify prospective sales opportunities. According to Gartner, the 18.3% share of global CRM spending controlled by Salesforce is a full 10 percentage points higher than its next-closest competitor, SAP, and almost equal to its three closest competitors combined!
Aside from its dominant market share, what makes Salesforce such a beast is the longer-term potential for CRM software to infiltrate other industries. Retail is a logical place to find businesses using CRM software. But it's demand from manufacturing, distribution, finance, information technology, and the service industries that is fueling constant double-digit sales growth for Salesforce.
Add to this momentum the fact that Salesforce announced a $27.7 billion cash-and-stock deal to acquire Slack Technologies (WORK) last week. Assuming the deal gets approval from shareholders and regulators, Salesforce will be able to cross-sell to Slack's growing base of enterprise clients, similar to how Microsoft uses Teams as a platform to pitch its CRM solutions.
Investors would struggle to find a more appealing long-term growth story.
Bank of America
A third Robinhood stock that looks to be a surefire long-term winner is Bank of America (BAC -1.14%).
There's no need to sugarcoat things: Bank stocks aren't much to look at right now. The Federal Reserve's decision to keep interest rates at or near record lows through 2023 will constrain their ability to grow interest income. At the same time, the uncertainties of the coronavirus pandemic may increase credit and loan delinquencies in the quarters to come. As a result, banks have had to set aside billions to cover their potential loan losses.
But just as Warren Buffett has set his investment portfolio up for long-term success, buying into financial stocks like Bank of America during a recession is the perfect time to strike. BofA is the most interest-sensitive of all the big banks, implying that it'll be the biggest beneficiary of an inevitable increase in the federal funds target rate.
What's more, Bank of America has done an exceptionally good job of improving its operating efficiency over the past decade. We've seen digital and mobile engagement improve, which is allowing the company to consolidate some of its branches and reduce its noninterest expenses.
Management has also proved willing to reward long-term investors. Prior to the pandemic, BofA was on track to return a combined $37 billion in repurchases and dividends to investors between July 2019 and June 2020. This was after completing a $26 billion capital return program between July 2018 and June 2019.
Bank of America may not be much to look at now, but it's primed for long-term success.