While Robinhood users have a reputation for backing risky growth stocks and short-squeeze pushes on troubled companies including GameStop and AMC Entertainment, investors on the platform actually hold a fairly diverse array of stocks. Some of these companies will likely go on to crush the market, and the increasing influence of millennials and other individual investors means it's worth monitoring what's hot on the commission-free trading platform.
We asked three Motley Fool contributors to identify a stock that's widely held by Robinhood users and looks like a great buy right now. Read on to see why they think that these popular stocks have the potential to be big winners for your portfolio.
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Zynga
Keith Noonan: If you set aside video game retailer GameStop, Zynga (ZNGA) stands as the single-most commonly held gaming stock among Robinhood investors. The publisher isn't as big as Activision Blizzard or Electronic Arts, but I think traders on the platform are right that the stock stands out as one of the most attractive investment opportunities in the video game space.
While Zynga typically doesn't make games for PCs or console platforms, it actually stands as the largest mobile publisher in the U.S. by revenue. The company has earned that status by sustaining long-running franchises with regular content updates and bringing new properties and developers into the fold through acquisitions. It's a successful formula that Zynga should be able to continue employing, and the game maker will likely be able to continue capitalizing on long-term industry tailwinds.
Interactive entertainment has never been more popular, and it's a safe bet that gaming will continue to account for an increasing share of the overall media market through the next decade and beyond. Growth for the global middle class and increasing availability of high-performance mobile hardware and internet service should prove to be a major catalyst for top publishers, and Zynga looks primed to benefit. Potentially revolutionary technologies including 5G and augmented reality could also open up a wide range of new opportunities that drive performance.
The gaming industry is on track for more strong growth, and Zynga has plenty of avenues for tapping into that momentum and delivering impressive returns for shareholders.
AT&T
Jamal Carnette: At first glance, AT&T's (T 1.17%) inclusion in Robinhood's top 50 list seems like a mismatch. After all, why would these young YOLO traders invest in what's widely considered a "widows-and-orphans" stock? However, the kids are onto something as AT&T is simply too cheap to ignore at current prices.
First, the bad: AT&T stock has significantly underperformed the stock market. In the last five years, shares have provided a total return -- including reinvested dividends -- of only 8%, versus the greater S&P 500 that has returned 125%. Part of this is based on the major acquisitions (and resulting debt) undertaken by prior CEO Randall Stephenson, most notably the disastrous acquisition of DIRECTV.
However, another acquisition could be AT&T's growth catalyst. The 2018 acquisition of TimeWarner included HBO. After a slow start, HBO Max has started to steal market share in the streaming space. Additionally, HBO Max augments AT&T's core offering of wireless telephony service as it's free for the company's more expensive unlimited data plans.
Therein lies an opportunity for AT&T's management: Currently, commercial-free HBO Max operates as a loss leader for these wireless subscribers. However, there's an added revenue driver as HBO Max is in the process of bringing an ad-supported version to market in June. Shifting wireless subscribers to the ad-supported version seems like a no-brainer proposition even a first-year MBA student would recommend.
Will this be an initial huge driver of growth? Probably not, but it does show that AT&T has optionality the market is overlooking. Furthermore, the stock doesn't need to show massive growth as it's trading at 1.3 times sales and 10 times forward earnings versus the greater S&P 500 that is valued at 3 times and 24 times, respectively. Simply put, AT&T is comparatively priced for Armageddon, and any semblance of growth improvement should be well received in the market.
Finally, with a very sustainable dividend yield approaching 7%, the stock doesn't have to have significant price gains to match the stock market's long-run returns of 9%. Despite their reckless reputation, it appears the kids (on Robinhood) are alright with AT&T as a top-50 holding.
Apple
Joe Tenebruso: 5G is one of the hottest trends in the stock market right now and for good reason. Fortunes will be made by those who invest wisely in this game-changing fifth-generation wireless technology.
One of the safest ways to invest in 5G is by buying shares of Robinhood-favorite Apple (AAPL 0.64%). The tech titan is in the midst of a 5G-fueled iPhone upgrade supercycle that's resulting in huge increases in its sales and profits.
Better still, Apple is benefiting from several other major trends, including the growth of remote work during the coronavirus pandemic. Combined with the superior performance of its new in-house-designed computer chips, these trends are also boosting demand for Apple's iPads and Macs. Meanwhile, strong device sales are turbocharging Apple's high-margin service revenue, as its massive customer base purchases more apps and subscribes to its ever-growing array of offerings.
All told, Apple's revenue soared 54% year over year to $89.6 billion in its fiscal second quarter. Its net income, in turn, more than doubled to $23.6 billion, or $1.40 per share. Apple also raised its quarterly cash dividend payout by 7% to $0.22 per share and increased its enormous stock buyback program by $90 billion.
With its sales and profits set to grow even larger thanks in part to the growth of 5G, Apple's shareholders can expect to be rewarded with even larger capital returns in the years ahead.
