In a little over four months, when the curtain closes on 2021, it'll undoubtedly be remembered as the year retail investors asserted themselves on Wall Street. Even though retail investors have been putting their money to work on Wall Street for more than a century, they've never had such a demonstrable effect on equity prices as they have since January.

In particular, retail investors have flocked to Robinhood (HOOD 12.23%), the online investing app that went public less than four weeks ago. As market volatility picked up in 2020 and early 2021, Robinhood had little issue coercing retail investors to join its platform.

A person holding a smartphone that's displaying a stock chart, along with buy and sell buttons.

Image source: Getty Images.

Tesla has long been the most-held stock on Robinhood

Arguably the best thing about Robinhood is its transparent leaderboard. The company regularly updates the 100 most-held stocks on its platform, thereby providing existing clients with a resource to see what other retail investors have been buying or holding for their own portfolios.

For the past four months, electric-vehicle (EV) manufacturer Tesla Motors (TSLA 1.50%) had consistently held the top spot on Robinhood's leaderboard -- and it's not hard to understand why.

To begin with, Robinhood investors love momentum stocks. Between May 2019 and January 2021, Tesla's share price catapulted from the split-adjusted mid-$30 level to an intraday high of about $900 a share. Time and again, any dip in Tesla's share price over this stretch proved to be a buying opportunity for momentum investors. When Tesla ascended to the No. 1 spot on Robinhood in April, it was working its way back from a dip under $600 a share.

Another reason Tesla was a logical choice as the most-held stock on the platform is its green-energy ties. Many of Robinhood's users are younger investors; and young people are considerably more likely to be concerned about climate change than older generations of Americans. EVs are viewed as one of the easiest ways for the U.S. to combat its reliance on fossil fuels and lower its carbon emissions. In other words, Tesla Motors' mission aligns with the environmental views of many young investors.

Additionally, Tesla has easily identifiable competitive advantages that act as a magnet for Robinhood's retail community. For example, its battery technology currently provides the best capacity, range, and power of all other auto stocks. CEO Elon Musk, who can arguably be described as a competitive advantage himself, has also overseen the expansion of the company's production capacity to an annual run-rate of around 800,000 EVs.

A Tesla Model S plugged into a charging port.

The Tesla Model S plugged in for charging. Image source: Tesla.

Last week, it was dethroned

But as of this past week, Tesla was dethroned as the most-held Robinhood stock.

If you're wondering why Tesla no longer holds the top spot, the answer might lie with its recent share-price performance and its operating results.

As noted, retail investors on Robinhood love to ride the coattails of momentum stocks. But over the past eight months, Tesla's share price hasn't really gone anywhere. While the company's share price has been volatile, the seemingly exponential uptrend the stock had enjoyed since spring 2019 came to an end in early January. With that share price momentum waning, retail investors might be looking elsewhere.

Tesla's operating performance has also left quite a bit to be desired. Prior to the second quarter of 2021, Tesla had reported a string of quarterly profits, all of which should have had an asterisk attached to them. That's because the company had been relying on the sale of regulatory emission credits to other automakers to boost its bottom line. Without these regulatory emission credits, or its one-time benefit from the sale of Bitcoin, which is held on Tesla's balance sheet, the company hadn't generated a bona fide profit until this latest quarter.  It's a bit worrisome that a $667 billion company wasn't truly profitable from selling its core product (EVs) until the previous quarter.

Two excited children playing with iPhones on display in an Apple store.

Image source: Apple.

Here's the new No. 1 stock on Robinhood

With Tesla going into reverse and falling into the No. 2 spot on Robinhood's leaderboard, the new most-held stock on the platform is (drumroll)... Apple (AAPL 0.02%). Sorry, AMC Entertainment enthusiasts, but your stock has been stuck at No. 3 on the platform since early February.

Why Apple? Branding is likely a good reason. According to Visual Capitalist, Apple was the most valuable global brand of 2020 -- and it's not even close. Utilizing a methodology that takes into account a company's financial forecast, the role of its brand, and its brand strength, Visual Capitalist pegged Apple's brand value at $323 billion in 2020, up 38% from 2019. The next-closest company is Amazon, which sits at a brand value of $201 billion. Apple's brand value is nearly double that of Microsoft and Alphabet's Google, which are, respectively, $166 billion and $165 billion. 

Another reason Apple likely ascended back into the top spot on Robinhood is its operating dominance. It's the leading provider of smartphones in the U.S., with its iPhone line seeing an enormous uptick in demand since it rolled out 5G-capable devices late last year. Over the previous three quarters, Apple has sold $153.1 billion in iPhones, which is up $41.8 billion from the comparable period in fiscal 2020. 

Retail investors are also probably impressed with CEO Tim Cook's relentless push to make Apple more of a services/subscription-oriented company. To be clear, Apple doesn't have customer loyalty concerns. Nevertheless, promoting subscription services should lead to less lumpy revenue recognition, as well as progressively higher operating margins over time.

Lastly, don't overlook Apple's top-notch shareholder return program. According to YCharts, the world's largest company by market cap has averaged $15.7 billion in quarterly share buybacks over the past five years.  It's also increased its quarterly dividend by 132% over the past nine years.  Tim Cook and Apple's board are more than willing to reward long-term shareholders for their patience as Apple transitions to a platform-based company.

While we'll undoubtedly see Robinhood's leaderboard continue to change over time, it would be a surprise if Apple were ever lower than No. 2 in the rankings.