There was a time when most investors might have dismissed the collective wisdom of the crowd using the online brokerage app Robinhood (HOOD 2.47%) to trade stocks. The platform attracts many smaller, newer investors, who haven't always made great decisions.
These small-time newbies have grown very sophisticated very quickly, though, picking up some blue-chip stocks that plenty of investing veterans would be (and are) proud to own. Here's a closer look at three of their favorite picks you might want to permanently pick up for your own portfolio.
Microsoft (MSFT -1.43%) isn't just a software company. It's been a centerpiece of the personal computing world since the 90s, offering the planet's most popular operating system and setting the standard for personal productivity apps.
The organization is so much more than PCs these days, though. Cloud computing solutions, video gaming, search, and even professional networking -- Microsoft owns LinkedIn -- are also in its wheelhouse. Point being, this company's got a lot of ways to drive sales, and each of those ways ultimately positions Microsoft to make another sale.
Owners of Xbox gaming consoles, for instance, may be interested in purchasing subscription-based access to different video games via a platform called the Xbox Game Pass.
That business model is increasingly being adopted in other slivers of the computing market. Microsoft's cloud computing interface Azure can be "rented' rather than purchased outright, giving clients constant access to the latest version of the software. Office 365 is online, browser-based access to an up-to-the-minute version of the company's popular Office productivity suite.
This is no small shift. While the company is a bit cryptic about how much of its annual revenue is subscription-based, it's a lot, and it's growing every year. This recurring revenue makes Microsoft a reliable profit producer, and it will remain so as long as the world continues using computers and mobile devices.
Bank of America
It might not be a particularly exciting name by Robinhood's average clients' standards, but Bank of America (BAC -0.45%) is certainly a smart pick they've come to know and love.
It's not a name that needs much of an introduction. B of A is the country's second-biggest bank as measured by assets under management, boasting $2.5 trillion worth of money under its umbrella. Aside from traditional banking services like lending and checking, the company offers wealth management, investment banking, and brokerage services through its subsidiary Merrill Lynch. A little over half of last year's net income, in fact, was driven by businesses that aren't linked to any interest rate.
That's set to change this year in a big way and continue changing for at least a couple more years.
It's been a headwind so long that many investors have forgotten it, but interest rates have been abnormally low for the better part of the past 15 years. We're paying a price for that now in the form of inflation. The Federal Reserve just upped the Fed Funds rate last month in an effort to curb inflation but tentatively plans to raise them by a couple of percentage points by the end of 2024.
What's this got to do with Bank of America? The profitability of lending is directly correlated with interest rates themselves. The higher the rate, the more profitable it is to be a lender. Ergo, it's arguable that the entire banking industry is stepping into a multi-year boom. Bank of America is a top pick from the banking business, of course, if for no other reason than it's one of the industry's biggest and best-established.
You know this company, too. Alphabet is, of course, parent to search engine giant Google, which, according to numbers from Global Stats, handles a whopping 91% of the world's web searches.
Alphabet is also the name behind the mobile operating system Android and the web's biggest repository of digital videos, YouTube, where more than two billion people gather at least once a month to watch something online. It works as something of a tollbooth to much of the internet's content, collecting a few pennies every time a web ad is displayed to a consumer and collecting a whole lot more if someone actually clicks on an advertisement.
This position as a middleman is a key reason the company has only failed to grow year-over-year revenue in two quarters since 2010, and one of those quarters was the first full quarter COVID-19 was spreading in North America (and everyone was in a panic).
It's more than recovered in the meantime.
Don't look for this growth streak to end anytime soon either, if it ever does. As was the case with Microsoft, the world has become reliant -- almost to the point of being dependent -- on Google, YouTube, and Android, which again, according to Global Stats, is installed on 72% of the planet's actively used mobile devices. Barring the unlikely chance that we all suddenly decide to stop using the internet, Alphabet's place as the internet's virtual tollbooth is secure.