While "Robinhood (HOOD 0.12%) investors" burst onto the scene during the meme-stock frenzy that propelled names like Gamestop to astronomical heights, many of these investors seem to be refining their approach over time. When perusing the most popular stocks on Robinhood, one can find several top technology and consumer-facing companies with the occasional meme stock sprinkled in, showing that perhaps Robinhood investors are adhering to the wisdom of legendary investor Peter Lynch and "buying what they know."
Lynch, who posted market-trouncing returns for over a decade as the manager of Fidelity's Magellan Fund, theorized that the average investor could generate good returns by investing in the stocks of companies that they knew from their day-to-day lives. As a whole, these Robinhood investors hold plenty of these types of stocks that you can buy and hold forever. Let's take a look at three of the best.
Coca-Cola (KO -0.31%), the ubiquitous soft drink company with a $280 billion market cap, is certainly a name that Robinhood investors are familiar with from everyday life: The stock is one of the top 50 stocks held on the trading platform. Coca-Cola is a blue-chip consumer staple stock, and consumers around the world buy its products day in and day out on a habitual basis. This resilient demand has helped Coca-Cola and its investors to shrug off 2022's bear market. While the Dow Jones Industrial Average, S&P 500, and NASDAQ indexes are all down by double-digit percentages year to date, Coca-Cola has posted a market-beating return of 12.5%.
Coca-Cola has generated over a century worth of solid returns for investors throughout its history, but that doesn't mean the 130-year-old company can't learn new tricks. For example, Coca-Cola's acquisition of Topo Chico five years ago has since been a rousing success. The company is innovating on its existing product base by teaming up with makers of alcoholic beverages to launch new ready-to-drink (RTD) canned cocktails, such as Jack Daniels & Coca-Cola RTD, which will be available in late 2022.
Coca-Cola also pays out a solid dividend that currently yields nearly 3%. It has increased its dividend payout for an incredible 60 years and counting, making it a Dividend King. The defensive nature of Coca-Cola's business, the prevalence and popularity of Coke products, management's ability to continually iterate on the company's well-known product portfolio, and its regularly raised dividend payout all mean that this is a Robinhood stock any investor could add to their portfolio and feel good about holding forever.
Ford (F 2.21%) is another stock that is popular on Robinhood, and Lynch would likely approve of its standing, as Robinhood investors are no doubt familiar with Ford and its best-selling vehicles like the F Series from their day-to-day lives. Beyond the F-Series, which was the top-selling vehicle in the United States in 2021, Ford is increasingly becoming a force to be reckoned with when it comes to electric vehicles (EVs). Ford's EV lineup includes electrified versions of its popular offerings like the F-150 Lightning and the Mustang Mach-E, which are bringing new customers into the fold for Ford.
The company sold 7,669 electric vehicles in July, a 169% increase from July of 2021. Overall, Ford sold 163,942 total vehicles in July, an increase of 36.6% from the year-ago period. These numbers are impressive in and of themselves, but what makes them stand out even more is that they come at a time when vehicle sales for the industry are estimated to have declined by 10.5%.
In addition to its impressive sales results, Ford also recently increased its dividend payout by 50%, to $0.15 per quarter, which gives it a yield of almost 4%. This sizable increase and significant yield separate Ford from its competition, as other prominent automakers like Telsa (TSLA 1.78%) and General Motors (GM 1.47%) do not pay shareholders dividends. With a lineup of traditional and electric vehicles that looks to be gaining increasing traction with customers, in addition to a growing dividend payout, Robinhood investors are smart for making Ford one of their top holdings.
Amazon (AMZN 0.18%) is another top holding for Robinhood investors, and another wise choice. Anyone who has taken a walk around their neighborhood and marveled at the number of houses with Amazon packages on their doorsteps knows that this is the type of stock Peter Lynch can get behind. Millions of consumers utilize Amazon's Prime two-day delivery service to order everything from groceries to toys and electronics daily.
There's a lot more to Amazon than its enormous consumer-facing e-commerce business, though. The company is a leader in cloud computing, and multiple analysts have discussed the fact that the company's AWS (Amazon Web Services) division could be worth more than the e-commerce division; in fact, some argue that it should be a stand-alone company. During the most recent quarter, AWS's revenue grew by an impressive 33% to almost $20 billion.
In addition to AWS, Amazon is home to another intriguing business with massive potential: Digital advertising. As a platform that consumers are generally using with the intent of buying a specific type of product, Amazon offers an attractive value proposition to advertisers. As such, during the second quarter, digital advertising revenue grew by 18% year over year to about $8.76 billion, or nearly double the revenue that a company like Snapchat brings in in a year.
With a consumer business that has become a deeply entrenched part of everyday life in the United States, combined with the long-term potential of its AWS and advertising businesses, Amazon is another business that Robinhood investors, and all investors, can feel good about buying now and holding for decades to come.