Who said you must be a Wall Street pro to find great investments? Don't tell that to the users of Robinhood Markets (HOOD 3.60%), a stock trading platform popular with retail investors. The platform will even show you the most popular stocks being held by its users.
The stocks on the top 100 stocks owned list aren't all winners, but nobody always gets it right. Still, this Fool took a recent look at the list and saw three excellent stock ideas jump out.
Using Robinhood's users as inspiration, I would consider buying and holding these three popular stocks for the long haul.
1. Microsoft: A diversified tech conglomerate
Microsoft (MSFT 1.57%) has evolved and grown for decades, a rare feat for many companies in an industry where competition and technological advancements constantly threaten. Today, Microsoft still dominates its legacy business -- enterprise software such as Windows and Office -- but it has also developed and grown new segments like cloud computing and gaming.
The numbers illustrate Microsoft's firm footing in its markets. For example, approximately 70% of the world's desktop computers run on Windows operating systems. Its cloud platform Azure is the second largest in the world, and its Xbox gaming brand is one of three major gaming companies, not including a massive market for PC games, which it also dominates.
NASDAQ: MSFT
Key Data Points
Collectively, Microsoft is a juggernaut of strong individual businesses that add up to a behemoth that carries a market cap of over $2 trillion. The stock might not make you rich overnight, because growing when you're this big is hard. However, analysts believe the company can grow earnings by an average of 12% to 13% over the long term, plenty to continue creating returns for shareholders.
2. Tesla: The electric leader in transportation
Tesla (TSLA 0.88%) has overcome a lot of skepticism and adversity. It went public in 2010, on the heels of the Great Recession. It nearly went bankrupt in 2019 while growing production volumes of the Model 3 electric vehicle (EV). Today, Tesla is on much better financial footing. The company is the clear BEV (battery electric vehicle) leader, with roughly 20% market share of all BEVs sold.
The company is also producing them profitably, generating $6 billion in free cash flow on $94 billion in revenue over the past 12 months. Tesla has built its business around electric vehicles since day one. In contrast, most of its competitors built their businesses on combustion technology and must now embrace the new EV segment while juggling the old gas segment.
NASDAQ: TSLA
Key Data Points
There are over 1 billion vehicles on the world's roads, and electric vehicles still represent a tiny sliver of the total market, at about 26 million. That's years of opportunity for Tesla to increase production and steadily gobble market share. Its upcoming Cybertruck could spark further sales, given that an estimated 2 million are on preorder already.
3. Nvidia: Powering the AI of the future
Nvidia (NVDA 1.58%) is arguably this year's biggest winner, and the race may not be close. The stock is up a tremendous 195% since January. The reason? Artificial intelligence (AI) has emerged as technology's next potential frontier. Nvidia makes graphic processing units (GPUs), chips that power demanding applications like gaming, autonomous driving, and AI, which all require processing tons of information quickly.
Analysts estimate that Nvidia currently holds somewhere around 70% of the chips used for AI applications, a huge number considering that the economic potential for AI could eventually be trillions of dollars. Nvidia has also aggressively developed software to use with its chipsets, which could make switching difficult down the road. There's a good chance that competition will go after Nvidia, but it will be from a position of weakness, not strength, after Nvidia's massive headstart.
NASDAQ: NVDA
Key Data Points
The stock has gone wild this year, but long-term investors still have some value, even if it's not as much as before. It trades at a forward price-to-earnings (P/E) of 40, and analysts believe earnings growth will average 33% annually over the long term. That's a price/earnings-to-growth (PEG) ratio of 1.2, which signals a solid deal considering Nvidia's potential growth. While potential can be a tricky word, it's clear that Nvidia is a central player in AI and should carry growth for the foreseeable future.
