It's no wonder that AMC Entertainment (AMC -3.41%) and GameStop (GME 1.28%) remain wildly popular with Robinhood investors. They rank among the three biggest winners of the top 20 most widely held stocks on the trading platform.
You could call AMC and GameStop FOMO stocks. The fear of missing out (FOMO) is a big factor why many investors have either bought or considered buying the stocks.
If you're thinking about investing in AMC or GameStop, though, don't act too hastily. These two Robinhood stocks are much better picks.
One key argument for buying shares of GameStop is that the company hopes to transform itself from a brick-and-mortar retailer to an online gaming giant. GameStop has even hired former Amazon.com and Chewy executives to top spots as part of this strategy.
However, the most popular Robinhood stock is already an online-gaming giant and beats GameStop on practically every front. That stock is none other than Apple (AAPL -1.43%). Nearly 28% of the more than 3.4 million apps sold on Apple's App Store are games.
Of course, gaming isn't Apple's primary business. That honor goes to the tech giant's overall iPhone ecosystem. In the fourth quarter of 2020, Apple generated nearly $66.6 billion in iPhone sales. It made another $15.8 billion in services revenue, which includes the App Store, advertising, and cloud services. Combined, that's nearly 12,700 times greater than GameStop's revenue in all of 2020.
Granted, being bigger doesn't necessarily make Apple a better stock to buy than GameStop. But Apple's financial strength certainly makes it a lot less risky. There's a good case to be made that Apple's growth prospects are a lot more attractive than GameStop's, as well.
High-speed 5G networks present an enormous opportunity for Apple to sell more devices and apps. Augmented and virtual reality are two other hot growth markets for the company. Apple reportedly plans to launch a mixed-reality (which is one step up from augmented reality) headset next year and augmented reality glasses by 2025.
The COVID-19 pandemic seriously wounded AMC's business. Many theaters across the country were closed for long stretches of time. However, AMC now has reopened most of its U.S. locations. The company hopes that audiences will fill more seats as more people are vaccinated.
Pfizer (PFE -1.08%) stands as one of the most critical players in bringing an end to the pandemic. It's also a top 20 Robinhood stock that's a much better choice than AMC.
Sure, Pfizer has been a laggard over the last few years. That'll almost certainly change going forward.
The company's growth in the past has been held back by its older drugs that lost patent exclusivity. Pfizer is no longer weighed down by those products, though, thanks to the November 2020 merger of its Upjohn unit with Mylan to form a new entity, Viatris.
Pfizer's lineup features several blockbuster drugs with solid sales growth. Its pipeline includes 95 programs, with more than 30 in late-stage testing or awaiting regulatory approval.
Most importantly, Pfizer has COVID-19 vaccine BNT162b2. The vaccine could generate sales topping $20 billion this year. Pfizer expects the emergence of new coronavirus variants will mean that annual booster shots are required. That should translate to billions of dollars in annual recurring revenue for the drugmaker.
The pandemic could set the stage for Pfizer to become an even bigger winner down the road. While Pfizer worked with its German partner BioNTech on BNT162b2, the big pharma company plans to develop messenger RNA (mRNA) vaccines on its own going forward. The potential for mRNA technology is enormous and could pave the way for Pfizer to become a powerhouse in other viral diseases, as it already is with COVID-19.
Boring is often better
You might think that Apple and Pfizer are boring compared to the excitement currently surrounding AMC and GameStop. However, the sizzle with FOMO stocks can quickly fizzle.
Achieving success by investing in stocks depends on wisely balancing potential risks against potential rewards. So-called boring stocks are usually much less risky than loudly hyped stocks. In many cases, they also offer better long-term growth prospects.
When it comes to risk-reward propositions, Apple and Pfizer appear to be hands-down winners over AMC and GameStop.