Robinhood Markets' trading app was the talk of Wall Street in 2021, generating tremendous buzz and fueling the meme stock trading frenzy that catapulted names like GameStop and AMC Entertainment Holdings to the moon. Robinhood brought stock trading to everyday investors with its easy-to-use trading app, and lets users peek at the most popular stocks among its traders.
While you don't want to buy any old stock from this list, it can provide insight into what stocks retail traders are piling into. Combining this information with what millionaire money managers are buying can uncover some appealing investment ideas. Two stocks gaining popularity among Robinhood and top money managers are PayPal Holdings (PYPL 3.69%) and Coinbase Global (COIN 7.10%).
In the second quarter, David Shaw at D.E. Shaw purchased 3.9 million shares of PayPal, nearly doubling the hedge fund's position. Bridgewater Associates, the world's largest hedge fund, added 1 million shares.
PayPal was a big winner from the pandemic, which nudged more shopping online and heralded a new era of widely available contactless payment methods. Over two years, PayPal added 122 million new accounts and grew its revenue by 43%. Management realized this rapid growth couldn't continue and guided down the company's expected earnings for this year on multiple occasions.
After a disappointing year for PayPal, activist investor Elliott Investment Management added a $2 billion stake in the fintech company to help turn things around. One of its first measures is to cut costs and reinvest those savings into its highest-conviction high-margin opportunities. The company plans to cut $900 million in costs by year-end, with $1.3 billion in total savings by next year.
PayPal is one of the most prominent players in the digital payment industry and is currently experiencing some growing pains. As a result, the stock trades at a price-to-sales ratio of just 4.3 -- its lowest valuation since going public, and now could be an excellent time to grab this growth stock while it's still on sale.
2. Coinbase Global
In the second quarter, Jim Simons' Renaissance Technologies added 3.2 million shares in Coinbase, while David Siegel at Two Sigma Advisers added nearly 3 million shares.
Coinbase is another fallen growth stock that enjoyed success amid the pandemic when cryptocurrency prices exploded in value. This year has been challenging for the cryptocurrency exchange, with Bitcoin falling 54% since the start of the year as investor interest wanes. Trading on the Coinbase platform has fallen 34%, and the company went from $2.4 billion in net income in the first half of last year to a $1.5 billion loss this year.
Coinbase has been a popular stock with short-sellers, such as Jim Chanos. Chanos argues that trading fees in the crypto sector will likely come down over time. These fees represent a significant portion of Coinbase's total revenue. The company is looking to cut costs and shift toward services-related revenue, which could help soften the blow if trading fees fall.
On a positive note, Coinbase announced a deal with BlackRock, the world's largest asset manager, to provide its institutional and wealthy private clients with access to Coinbase's crypto trading platform. This could be a massive win for Coinbase if institutional investors embrace crypto.
Coinbase has had a rough year, but with the stock down 80% since going public and a new deal with BlackRock, now could be a good time to build a small stake in the crypto exchange.