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3 Best Robinhood Stocks to Buy for 2021

By Matthew Frankel, CFP® - Dec 30, 2020 at 6:13AM

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Robinhood traders have picked some winners in 2020, but some of the platform's top stocks could have a long way to go.

Robinhood investors have a reputation for picking high-risk, high-reward stocks. To be fair, you'll find quite a few of them on the list of the platform's 100 most popular stocks. But others don't have a ton of risk and still look extremely attractive for patient long-term investors.

Here are three in particular that could be worth a closer look as we head into 2021. 

Company (Symbol)

2020 Total Return

Market Capitalization

General Motors ( GM -2.15% )

13.4%

$59.3 billion

Walt Disney ( DIS -0.67% )

22.6%

$321.2 billion

Square ( SQ -5.64% )

239%

$94.5 billion

Data source: Robinhood, CNBC. Total returns and market capitalization data as of Dec. 29, 2020.

The only EV stock I'll buy

I've said before that General Motors is the only electric vehicle stock I'll put my own money into. That's for a good reason. The massive automaker is still in the early stages of ramping up its EV production with its much-anticipated Hummer electric pickup set to be released next year. This is just the beginning. GM recently announced that it plans to hire 3,000 new engineers to build out its electric vehicle production and that it plans to launch 30 electric models by 2025.

Electric vehicle charging.

Image source: Getty Images.

GM has deep pockets to invest in electric and autonomous technology, and its brand loyalty gives it a big competitive advantage. It could emerge as one of the big players in the EV race. At less than seven times expected 2021 earnings, it's too cheap to ignore.

One of the pandemic's biggest long-term winners

Disney's theme parks have either been closed or running at limited capacity for most of 2020. Its cruise line is not operational, and it can't put any billion-dollar blockbusters in movie theaters. In short, Disney's business got hammered in the COVID-19 pandemic. Yet the stock is up by nearly 23% this year.

The massive success of the Disney+ streaming platform is the main reason for the rise. When Disney launched the platform in late 2019, it set a seemingly ambitious five-year goal of 60 million to 90 million subscribers by 2024. Thanks to the stay-at-home world we've been living in, Disney has achieved its goal already. At its recent investor day, we learned that there were 86.8 million Disney+ subscribers as of Dec. 2. It's entirely possible Disney will surpass the upper end of its original goal by the time you're reading this. Now, management's 2024 target is for 230 million to 260 million subscribers. Based on an $8 monthly cost, this translates to about $23.5 billion in annual revenue. That's not including Hulu or ESPN+ subscribers or upsell purchases like the recent Mulan movie.

Once the pandemic ends, demand for Disney's parks, cruise ships, and movies is likely to be as strong as ever. Now there's a massive stream of recurring subscription revenue on top of it.

A huge opportunity to transform the financial lives of millions

Fintech giant Square's core business is providing payment processing hardware to businesses. This part of the company continues to grow impressively. About $100 billion in annualized payment volume flows through Square's terminals. That figure is likely to increase significantly as the pandemic comes to an end and people can go out more freely. Plus, Square has built a business ecosystem around its payment processing, including its Square Capital business lending platform and newer offerings like the Square Online Store omnichannel platform.

However, the real long-tailed growth story is the Cash App. Over the past year, Cash App's active user base has doubled. The company has added stock trading capability to the already impressive functionality of the app. It's now estimated that one-fourth of U.S. bitcoin volume comes from the Cash App. This could just be the beginning of Square's monetization of it -- the company could eventually launch high-yield deposit accounts, insurance products, and personal loans. 

Buy for the long term

I'll be honest. I have absolutely no idea what any of these stocks will do over the next few months as we head into 2021. Nobody does. There are simply too many unknowns when it comes to the COVID-19 pandemic, political developments, and other factors that have little to do with the long-term health of each business.

Having said that, all of these stocks are in a strong position to prosper not only while the pandemic gradually ends, but also for the next several years. I'm confident that patient long-term investors who add them to their portfolio in 2021 will be glad they did.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

General Motors Company Stock Quote
General Motors Company
GM
$59.71 (-2.15%) $-1.31
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$146.22 (-0.67%) $0.98
Square, Inc. Stock Quote
Square, Inc.
SQ
$181.31 (-5.64%) $-10.84

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

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