Volatility isn't something that the typical investor looks forward to. But over the past year, we've learned that millennials aren't like typical investors.
Online investing app Robinhood, which is well-known for offering commission-free trades, fractional share investing, and gifts free shares of stock to new members, gained 3 million new users last year. With an average age of 31 for its user base, Robinhood's investing platform has acted as lightning rod for young investors.
Perhaps the most interesting aspect of Robinhood is the relative transparency of its platform. Nearly every day, Robinhood updates its leaderboard, which is a snapshot of the 100 most-held stocks on the platform. This gives Wall Street and Main Street an under-the-hood look at what stocks have the attention of millennial investors.
Over the past year, five stocks have, at one time, held the No. 1 position on Robinhood's leaderboard. Let's take a brief look at each one.
Image source: Getty Images.
Aurora Cannabis
Your eyes are not deceiving you. Through May 11, 2020, Canadian marijuana stock Aurora Cannabis (ACB -1.86%) was a fixture as the most-held stock on Robinhood. It should be noted that Aurora had a single-digit share price, making it a likely candidate to be gifted to new members. This, I believe, played a big role in keeping the company at No. 1 for so long.
Furthermore, since Robinhood investors can't buy over-the-counter (OTC)-listed stocks, they had little choice but to focus on New York Stock Exchange (NYSE) or Nasdaq-listed Canadian pot stocks like Aurora. Since marijuana is illegal in the U.S. at the federal level, cannabis companies that directly deal with the plant in the U.S. aren't able to list their shares on the NYSE or Nasdaq. You could rightly say that Robinhood investors are missing out on some serious green.
Interestingly, Aurora Cannabis didn't lose the coveted top spot because it drowned its investors in share-based dilution (which would have been a very good reason for investors to sell). Since mid-2014, the company's outstanding share count is up by more than 13,500%. Rather, Aurora enacted a 1-for-12 reverse split to avoid being delisted from the NYSE on May 11, 2020. This split ultimately liquidated investors who held fewer than 12 shares, thusly booting it from Robinhood's No. 1 spot on the leaderboard.
The electric 2021 Mustang Mach-E. Image source: Ford.
Ford Motor
After Aurora Cannabis got the boot, Detroit automaker Ford Motor (F -0.41%) became the head honcho on Robinhood. Like Aurora, it had a single-digit share price, making it a candidate to be gifted to new members.
But unlike Aurora, Ford Motor had history -- and lots of it. Ford has been making vehicles for more than 100 years. It's a brand-name that transcends generations and can create emotional attachments with drivers young and old. Although it's traditionally been a slow-growing company, and it doesn't fit the mold of the investments that young investors usually seek out, Ford is also a cyclical play that typically shines during periods of economic recovery.
Even though it's no longer the most-held stock on Robinhood, Ford has consistently remained a top-six holding on the platform. The company's commitment to spend $22 billion on electric vehicles (EV) and an additional $7 billion on autonomous vehicles between 2018 and 2025 has the market enthused about its prospects. Ford's rich history and existing infrastructure may give it an edge in gobbling up early stage EV market share.
Image source: Apple.
Apple
For the vast majority of the past 10 months, technology kingpin Apple (AAPL -0.81%) has been the most-held stock on the Robinhood platform. Though it's been dethroned for two very short periods in 2021 -- I'll cover this in a moment -- it's otherwise been a rock-steady presence as the most-held stock.
The "Why Apple?" argument is simple. Apple is one of the most-recognized brands in the world, and its iPhone is the undisputed most-popular smartphone in the United States. Having introduced its first 5G-capable phone last year, Apple generated record revenue from iPhone sales in its most-recent quarter. You could rightly say that it has a cult-like following, both for its products and its stock.
What makes Apple such an intriguing long-term investment is the operating shift that's under way. CEO Tim Cook is overseeing Apple's transition to a services company. With subscriptions offering juicier margins and more predictable revenue than the products the company sells, the expectation is Apple will see its operating margin and cash flow expand over time. It's one of only a handful of stocks investors can buy and completely forget about for a long time.
A Tesla Model S plugged in for charging. Image source: Tesla.
Tesla Motors
For a couple of days in mid-January, EV giant Tesla Motors (TSLA -1.06%) surpassed Apple to become the most-held stock on Robinhood. It's no secret that young investors love chasing after momentum stocks, and Tesla's nearly 1,000% gain on a trailing 12-month basis, as of mid-January, made it an insatiable lure for young investors.
Tesla's track record is impressive for having been built from the ground up. It's the first successful auto stock in over five decades to reach mass production. Last year, the company came within a whisker of hitting CEO Elon Musk's delivery goal of 500,000 EVs, although it did produce its first full year of adjusted profits. The expectation is that Tesla's superior battery technology and first-mover advantages will allow it secure a sizable portion of the U.S. and China EV markets.
Then again, the current No. 2 on Robinhood's leaderboard has some concerning holes in its long-term story. It's yet to generate a full-year profit without the help of selling renewable energy credits, and it's unclear if the company's competitive advantages can stand up to the likes of Ford Motor shelling out $29 billion in a seven-year stretch. Tesla is a game-changer, but its premium is enough to make even the most aggressive growth investors blush.
Image source: Getty Images.
AMC Entertainment
Fifth and finally, for a period of about two days in early February, movie theater chain AMC Entertainment (AMC 9.56%) rocketed to the No. 1 spot on the Robinhood leaderboard. AMC has since fallen to the No. 3 slot, behind Apple and Tesla.
AMC quickly rose the ranks to become the most-held stock among millennial investors because it was a core part of the Reddit rally that took shape in late January. Retail investors on Reddit's WallStreetBets (WSB) chatroom banded together to buy shares and out-of-the-money call options in heavily short-sold companies and/or penny stocks. Aside from GameStop, AMC was arguably the most popular play among the WSB community. With young investors loving momentum stocks, they chased after AMC Entertainment.
Of all the most-held Robinhood stocks over the past year, AMC is, without question, the worst. It's a company that narrowly avoided bankruptcy in mid-January, and it isn't even certain to have enough cash to make it through 2021.
What's more, the company's operating model looks to have shifted for the worse. In the wake of theater closures, select streaming services have been releasing new movies. This could ultimately shorten the exclusivity period given to movie theaters, or perhaps even cut them out of the loop entirely. AMC is not a stock that investors should have in their portfolios.
