Volatility can be unnerving to some investors, but millennials absolutely love it. We know this because online investing app Robinhood gained roughly 3 million new users in 2020. The average age of Robinhood's investing base is just 31.
Though Robinhood is known for offering commission-free trades, fractional-share investing, and gifts of free stock shares to new members, it's perhaps most famous for its users' habit of chasing penny stocks and otherwise poor-quality momentum plays.
But among the sea of questionable investments on Robinhood's leaderboard (i.e., the 100 most-held stocks on the platform) are three superb companies that have the ability to double investors' money. As long as Robinhood investors stick to their investment thesis, these companies should be money in the bank.
Possibly the biggest mistake investors can make with e-commerce behemoth Amazon (AMZN 0.83%) is assuming that a $1.65 trillion company won't be able to double. In my view, not only does Amazon have a pretty easy path to double again, but it could do so in as little as three years.
Most people are familiar with Amazon for its industry-leading online marketplace. An estimate from eMarketer in March 2020 pegged Amazon's share of U.S. e-commerce at 39.7% by 2021. Meanwhile, analysts at Bank of America/Merrill Lynch have said that Amazon controls 44% of all U.S. online sales. Whichever estimate you prefer, the fact is that Amazon is well over 30 percentage points ahead of all other online retailers in the U.S.
Even though retail margins tend to be razor-thin, Amazon has been able to use its e-commerce dominance to encourage more than 150 million people to sign up for a Prime membership. It's worth noting that it's been a while since Amazon updated its Prime membership statistics, and the company might be nearing or over 200 million. The fees Amazon collects from its Prime members help the company undercut its competitors on price and keep consumers loyal to its products and services.
However, it's cloud infrastructure segment Amazon Web Services (AWS) that's going to be responsible for doubling Amazon's stock. Since the margins from cloud services are so much higher than retail and other ventures, AWS' rapidly growing revenue has the potential to triple Amazon's cash flow by 2023. If Amazon were simply to trade at the median of what's its operating cash flow multiple was between 2010 and 2019, its share price would double in value by 2023 or 2024.
One of the biggest flaws with the Robinhood investing platform is that it doesn't allow users to buy over-the-counter (OTC)-listed stocks. Since the vast majority of U.S. marijuana stocks are listed on these OTC exchanges, Robinhood investors are stuck buying underperforming Canadian pot stocks. Thankfully, one Canadian cannabis company has all the tools needed to double investors' money: OrganiGram Holdings (OGI 4.35%).
On the one hand, federal and provincial regulators have held OrganiGram back. The launch of higher-margin derivatives in late 2019 was delayed by two months, and regulators in Ontario have been slow to assign dispensary licenses. This is partly why growers like OrganiGram have seen their sales growth slow dramatically in recent quarters.
The good news is that OrganiGram offers a handful of competitive advantages. For example, it's the only major licensed producer located in the Atlantic region of Canada. Cannabis use among adults is much higher in these Atlantic provinces than the national average.
Furthermore, OrganiGram operates a single cultivation and processing facility in Moncton, New Brunswick. Having only one facility makes it easier for the company to adjust its output and expenses to meet prevailing market conditions. OrganiGram also employs a three-tiered growing system in its cultivation rooms to maximize its licensed space and reduce costs.
With Ontario beginning to work through its supply issues and OrganiGram's future very much reliant on edibles and proprietary beverage additives, the company could really begin to outpace its Canadian peers in 2021.
Zoom Video Communications
Robinhood investors are also sitting on a likely big-time winner in Zoom Video Communications (ZM 0.25%). Despite more than quadrupling in 2020, Zoom has all the tools needed to double again.
Let's get the obvious out of the way: Zoom was possibly the biggest coronavirus pandemic winner in the entire tech sector. With the traditional work environment disrupted, businesses big and small had to turn to cloud-based video conferencing tools to get things done. Zoom Video benefited from this shift in a big way. It controls an estimated 43% of the U.S. web conferencing market, according to an analysis by LearnBonds in April 2020.
Arguably the most impressive statistic from Zoom is the company's 12-month net dollar expansion rate (NDER) for companies with at least 10 employees. In each of the past 10 quarters, its NDER has topped 130%. This means that existing clients with at least 10 employees are spending 30% or more than they did in the previous year. Getting current customers to spend more is Zoom's ticket to skyrocketing margins.
Another important realization is that an eventual end to the pandemic doesn't mean an end to its growth. While Zoom could navigate its way through a period of slower growth as businesses readjust to life after the coronavirus pandemic, Wall Street is still calling for a quadrupling in full-year sales by 2025. Zoom is expected to remain the undeniable go-to for web-based conferencing, which is what makes it such a slam-dunk for patient investors.