Online investing app Robinhood is known for its numerous perks. This includes commission-free trading, the gifting of free shares of stock to new users, and the ability to buy fractional shares of companies listed on major U.S. exchanges.

But on Wall Street, the "Robinhood investor" is synonymous with millennial and/or novice investors who choose to chase penny stocks, momentum plays, and otherwise awful companies. Since the average age of Robinhood's users is 31, many fail to understand the power of compounding over the long run. As a result, Robinhood's leaderboard (the 100 most-held stocks on the platform) is packed with no shortage of terrible companies.

The following five companies are perfect examples of awful stocks Robinhood investors can't stop buying.

A hand holding a magnifying glass over volume data in a financial newspaper.

Image source: Getty Images.

GameStop

Is anyone really all that surprised to find multichannel video game and accessories retailer GameStop (NYSE:GME) among Robinhood's top 100? After being whipsawed violently over the past week, GameStop offers the wild volatility that young investors seem to crave.

On one hand, GameStop has made strides to improve its operations. It's been closing some of its physical locations to reduce its costs, all while emphasizing its digital gaming platform. For instance, the company's 2020 e-commerce holiday sales more than quadrupled from the previous year. Figures like this give hope to shareholders that an operating turnaround is possible for a company that's been reliant on its brick-and-mortar presence for decades. 

On the other hand, the only substance behind GameStop's recent megarally looks to be a massive short squeeze (i.e., short-sellers, who want the stock to go down, getting pushed out of their position by the skyrocketing share price). GameStop has lost money in each of the past three years, and its sales continue to spiral downward. This isn't to say a turnaround isn't possible, but it's clearly not going to happen overnight.

With the recent short squeeze sending GameStop to an all-time high, Robinhood investors chasing this stock are playing with fire.

Multiple graphics processing units being used to mine cryptocurrency.

Image source: Getty Images.

Riot Blockchain

In recent months, anything that has to do with bitcoin has been virtually unstoppable, and that includes cryptocurrency stock Riot Blockchain (NASDAQ:RIOT).

Riot is a cryptocurrency miner that uses high-powered computers to solve equations that validate groups of transactions (a block) as accurate and true on bitcoin's blockchain. For doing this, Riot is given a block reward of 6.25 bitcoin tokens, which is worth about $203,000.

However, investing in Riot Blockchain comes with two significant concerns. First, there's minimal emphasis on innovation. Riot is almost entirely at the mercy of bitcoin and its wild vacillations. As I've stated on multiple occasions, I believe bitcoin to be flawed and the most dangerous investment of 2021. Also keep in mind that bitcoin has a history of entering protracted bear markets following parabolic moves higher.

Second, Riot Blockchain has little to currently offer investors. This is a $1.3 billion company that may not even reach $10 million in full-year revenue and has lost $16.6 million in back-to-back years through the first nine months of 2020 and 2019. There's nothing sustainable or guaranteed about crypto mining, especially when there's no barrier to entry. 

A Nikola Badger pickup truck parked on a road.

The Nikola Badger was retired before it even rolled off the assembly line. Image source: Nikola.

Nikola

There's not a trend that Robinhood investors chase after more than alternative/green energy solutions. That includes electric vehicle (EV) auto stocks, all of which look grossly overvalued given the hurdles they still need to overcome. But the most dangerous of all might just be Nikola (NASDAQ:NKLA).

Though it was virtually unstoppable in June 2020, Nikola has been stuck in reverse for months. Much of this disappointment derives from losing out on a major partnership with General Motors (NYSE:GM). It was initially reported in early September that General Motors would take a $2 billion equity investment in Nikola and handle the production of the company's Badger EV, a hydrogen fuel-cell pickup truck. By December, the duo struck a toned-down deal that didn't involve an equity investment and caused Nikola to abandon the Badger.

To make matters worse, Nikola was hit with allegations of fraud and wrongdoing by a short-selling firm. These allegations proved to be enough for the Securities and Exchange Commission to open a probe into the company. And, as the icing the cake, the founder and former executive chairman of the board, Trevor Milton, stepped down via a middle-of-the-night tweet.

Nikola is a rudderless ship in choppy seas, and millennials keep chasing after it for some reason.

An up-close view of a flowering cannabis plant.

Image source: Getty Images.

Aurora Cannabis

Next to EVs, Robinhood investors' next-biggest obsession is with marijuana stocks. Since Robinhood doesn't allow its users to buy over-the-counter-listed stocks, they're left with an array of underperforming Canadian pot stocks on major U.S. exchanges. Somehow, young investors keep gravitating to the worst one of the bunch: Aurora Cannabis (NYSE:ACB).

Aurora has been hammered on all fronts. Canadian federal regulators delayed the launch of higher-margin derivatives in late 2019, and Ontario's provincial regulators have struggled to assign dispensary licenses in Canada's most-populous province. Meanwhile, Aurora overestimated the capacity that would be needed to satisfy demand in Canada, and grossly overpaid for roughly a dozen acquisitions completed since mid-2016. Long story short, the company continues to lose a boatload of money, and it wrote down roughly half of its total assets in the previous fiscal year.

If that's not enough to scare you away, perhaps this next statistic will do the trick. Having financed every deal with its common stock, and regularly issuing shares to pay for its day-to-day operations, Aurora Cannabis' outstanding share count has risen by at least 12,200% since June 2014. There's no way that investors can get ahead when management keeps diluting the daylights out of its shareholders.

An American Airlines commercial plane outside of a terminal gate.

Image source: America Airlines.

American Airlines Group

Among brand-name companies, American Airlines Group (NASDAQ:AAL) might be the biggest head-scratcher of them all. Of these five awful stocks, it's the only one currently in Robinhood's top 10.

I'm not entirely certain why, but millennials really like airline stocks. It's an industry that requires huge capital investments to produce only mediocre margins, at best. It also only thrives when the economy is growing. That's not the case during the coronavirus pandemic, and it's really exposed how weak American Airlines is, relative to its peers.

As of the end of September, American Airlines had more than $41 billion in outstanding debt and about $33 billion in net debt. Even if it has enough capital to survive the pandemic, the company's balance sheet will be weighed down by this added debt for a long time to come. This means no capital return program whatsoever (i.e., no share buybacks and no dividends).

As my Fool.com colleague Adam Levine-Weinberg pointed out in 2018, American Airlines also has a knack for making poor business decisions and wasted investors' money by upgrading its fleet well before it was necessary.

With high debt, weak margins, and no capital return program, there's no reason investors should be anywhere near American Airlines' stock.

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.