Online investing app Robinhood, which is best-known for its commission-free trades and gifting of free shares of stock to new members, has earned quite the reputation on Wall Street.
Given that the average age of Robinhood's user base is only 31, Robinhood is known for having its millennial and/or novice investors chase after momentum plays, penny stocks, and otherwise undesirable businesses. Robinhood's young investors also have a tendency to think short-term, with many of the platforms' top-100 holdings being stocks that'll likely be popular only for a few weeks or months.
But, surprisingly, Robinhood's leaderboard is also home to five ultra-popular stocks that I own, and that I don't have any intention of ever selling. Robinhood's young investors might love momentum stocks, but in my view they've picked out a number of top-tier long-term moneymakers.
First up is the leading e-commerce company in the U.S., Amazon (AMZN -3.21%). Amazon is currently the 10th most-held stock on the Robinhood platform, but I believe it should be a lot higher.
It really doesn't matter where you prefer to get your estimates, because the end result is the same: Amazon is the undisputed king of e-commerce. Last year, eMarketer estimated that Amazon's share of online retail would expand by 100 basis points in 2021 to 39.7%. Keep in mind that this estimate was published prior to the worst of the coronavirus pandemic hitting. With more people than ever shopping online, and Amazon's share of U.S. e-commerce something like 33 percentage points higher than its next-closest competitor, it's highly unlike that it'll be toppled as the retail kingpin anytime soon.
However, it's Amazon's role in cloud infrastructure that has me much more excited about its future. Amazon Web Services (AWS) delivered 30% sales growth last year despite the worst economic downturn in the U.S. in decades. Even though AWS only makes up about an eighth of total sales, the substantially higher margins associated with cloud storage and services account for an overwhelming majority of operating income. AWS is going to be responsible for tripling Amazon's cash flow by 2024.
Bank of America
Another extremely popular stock that Robinhood investors have latched onto -- that I have no intention of ever selling -- is Bank of America (BAC -0.61%). BofA is the 31st most-held Robinhood stock at the moment.
The most interesting thing about Bank of America might just be its interest rate sensitivity. Among large bank stocks, BofA is the most interest sensitive. With the Federal Reserve moving its federal funds rate back to historic lows during the coronavirus recession, Bank of America has seen its interest income-earning power decline. However, economic rebounds from recessions are eventually accompanied by yield expansion. When rates do begin to notably rise, no bank is going to benefit more than BofA.
I've also been impressed with CEO Brian Moynihan's cost-saving initiatives. In particular, BofA's investments in digitization are pushing its customers to bank online. Since digital and mobile transactions cost just a fraction of phone and in-branch transactions, Bank of America has been able to consolidate some of its branches to reduce noninterest expenses.
Facebook (FB -7.62%), the world's leading social media platform, is yet another ultra-popular Robinhood stock that I have no intention of ever selling. Facebook slots in as the 37th most-held stock on Robinhood.
The dominance of Facebook's operating model is entirely expressed in its operating results. It ended 2020 with 2.8 billion people visiting its namesake website on a monthly basis, and had another 500 million unique users visiting one of its other owned assets (Instagram and WhatsApp). Put another way, 42% of the global population visits a Facebook-owned asset each month. There isn't a platform advertisers can go to where they're going to have access to a broader or more targeted audience than Facebook. Perhaps it's no shock that ad revenue rose 21% last year during an unprecedented pandemic.
The crazy thing about Facebook -- and a point I've emphasized previously -- is that it hasn't even fully monetized its assets. It generated more than $84 billion in ad revenue last year from Facebook and Instagram, but has yet to meaningfully monetize Facebook Messenger or WhatsApp. Facebook owns four of the six most-popular social sites in the world, yet only half of those are generating big bucks for the company. When Facebook does open the floodgates, watch out!
Lo and behold, Robinhood investors like a high-yield dividend stock! Although young investors are primarily attracted to fast-paced growth stocks, telecom giant AT&T (T 2.02%) is now the 41st most-held stock on the platform. It's also a company that I have no intention of ever jettisoning.
While it's no secret that AT&T's higher-growth days are in the rearview mirror, or that its debt load has become a bit burdensome, the company still has tricks up its sleeve to grow organically in the coming years. In particular, the rollout of 5G networks could represent a healthy boom for its wireless segment. It's been a decade since wireless download speeds were upgraded, meaning consumers and enterprises will likely be champing at the bit to purchase new wireless devices capable of quicker download speeds. Since data is the high-margin driver of AT&T's wireless segment, 5G can be a multiyear shot in the arm of growth for the company.
Equally exciting is AT&T's push into streaming. Although its launch of HBO Max in late May was somewhat muted, subscriptions have picked up big-time in recent months. This may have to do with subsidiary WarnerMedia releasing its new movies in 2021 on HBO Max the same day they'll also hit theaters. This dangling carrot could be just what HBO Max needs to become a major streaming player.
Finally, I'm glad to see that young investors are as excited as I am about fintech stock Square (SQ -9.02%). It's currently the 58th most-held stock on the platform, and certainly a company I have no intention of getting rid of.
Most folks are probably familiar with Square's ecosystem. If you've ever purchased from a local/small merchant, you might have noticed a Square point-of-sale device. The devices and analytics provided to merchants have helped Square's gross payment volume (GPV) grow from just over $6 billion in 2012 to more than $112 billion last year. Prior to the pandemic, GPV was rising by an annualized average of 49%. If the company can attract larger merchants as well, this fee-driven operating segment could become a lot more profitable.
However, Square's bread-and-butter isn't its seller ecosystem. Rather, it's the company's peer-to-peer payment platform Cash App. In three years, Cash App's monthly active user count has more than quintupled. Cash App gives Square an abundance of ways to generate revenue, including merchant fees, bank transfers, investments, and Bitcoin exchange. Cash App should help Square become one of the fastest-growing financial services stocks of the decade.