Through all the market chaos this year, Robinhood followers have emerged as a proxy for the retail investor. A list of the top 100 Robinhood stocks includes a broad mix from blue chip companies to speculative biotech and technology names.
Those looking to create a diversified portfolio have a good resource in the Robinhood list. A dive into three stocks on the list in different sectors shows a blend of what Robinhood investors love right now. But should investors pull the trigger on Walt Disney (DIS 0.68%), Workhorse Group (WKHS +0.00%), and Aphria (APHA +0.00%)?
Image source: Getty Images.
A tumultuous year
It's hard to think of a diversified company whose businesses were all impacted more than Disney's this year. Its theme parks, movies, cruises, and media sports business were all virtually shut down by the pandemic. The company responded by firming up its balance sheet by raising capital, and suspending its semiannual dividend payments.
Along the way, though, management was accelerating the plan for its streaming business that had been in the works since the large acquisition of Twenty-First Century Fox assets. At its investor day on Dec. 10, Disney said that it already has more than 137 million paid subscribers across its Disney+, Hulu, and ESPN+ services.
The success of the streaming platform has been the one light in the business throughout the pandemic. As the other businesses slowly return, Disney is set up to prosper again. That is not lost on investors who have put the name on the list of Robinhood's most popular stocks.
The Workhorse C1000 delivery van. Image source: Workhorse Group.
Electric vehicle mania
The astounding run in Tesla shares this year has put the electric-vehicle (EV) sector in the spotlight. Workhorse Group's niche is the "last mile" box truck for short-distance deliveries. Its two C-Series electric trucks offer 650 or 1,000 cubic feet of cargo space, and have 100 miles of range. This would seem to be a good niche for EVs, and the company is already manufacturing trucks. But its 2021 production volume target is just 1,800 vehicles. It's hard to justify today's valuation on that basis.
While shares of both Tesla and Workhorse Group are up more than 600% just this year, the difference in the price-to-sales ratio is notable.
WKHS P/S Ratio data by YCharts.
The company has also applied for Federal Aviation Administration certification for its HorseFly drone that can deliver packages or be used with sensors and cameras. It will take more than just a large increase in its EV delivery-truck business for the company to grow into today's valuation.
Positioning for the U.S. market
Cannabis is another sector that has experienced investor euphoria after Canada legalized recreational marijuana use in October 2018. Canadian grower Aphria was part of that, but the stock has dropped about 50% since then.
In that time, though, the company has steadily grown revenue, and the U.S. election has recently boosted the stock price. The election gave cannabis investors hope that a Biden administration will be more sympathetic to the industry.
Federal legalization in the U.S. may still be fairly far down the road, but Aphria is preparing its business for the possibility. It recently spent $300 million to acquire U.S. craft brewer SweetWater Brewing Company. SweetWater makes hemp beer that gives drinkers a cannabis aromatic experience.
Besides the cultural fit with the brewer, SweetWater gives Aphria distribution infrastructure in the U.S. that can be used for its cannabis product if legalization occurs. This potential is something that should attract investors to the stock.
Robinhood as a resource
The introduction of Robinhood has been a force for the retail investor. Its list of the most popular stocks has, at times, moved markets. At the very least, it can be a good resource for those looking to gauge the mindset of investors.
Its most popular stocks may not all be worth jumping into. But a diversified portfolio can certainly be built from its suggestions. Disney and Aphria fit into very different places in a portfolio, but both could be worth owning.
While Aphria is speculative, it is positioned well as a bet on cannabis legalization in the U.S. Workhorse Group is also a speculative bet in a field of growing competition and potentially disruptive technologies, but I would wait for its price to come down before making it an EV holding in my portfolio.
