Robinhood Markets flipped the investing world upside down when it introduced commission-free stock trades, forcing the rest of the industry to play catch-up. Years after that move, Robinhood still holds significant influence over investors, especially with the younger cohort.
Robinhood has more than 20 million active accounts on its platform, and they tend to skew toward millennials, as the average account holder on Robinhood is in his or her early 30s, making the trading app a good indicator of what younger investors are buying. Robinhood makes that easy to track as it publicizes the top 100 most popular stocks on the platform.
If you're looking for stocks to buy and hold forever, this list has a few good candidates right now. These are stocks that have a track record of outperformance, a clear set of competitive advantages, and a reasonable valuation.
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1. Taiwan Semiconductor: World's biggest chipmaker
Taiwan Semiconductor Manufacturing (TSM 1.26%) may not be a household name the way other big tech stocks are, but chances are you use its products every day.
Taiwan Semi is the world's biggest third-party chip manufacturer, owning roughly 55% of the market share for contract chip fabrication. Among Taiwan Semi's biggest customers are Apple, Qualcomm, Advanced Micro Devices, Broadcom, Nvidia, and Intel.
TSMC's extraordinary market share gives it a competitive advantage. Its scale in chip fabrication is unmatched, and the company has an even larger market share of advanced chips, with an estimated 90% share among third-party foundries.
The strength of its business is evident in its financial results. It reported a 41.7% operating margin even though revenue was off due to cyclical headwinds in the semiconductor industry. However, revenue growth should soon return, especially as the AI boom begins to gain traction with chip production ramping up.
Taiwan Semi stock also looks reasonably priced, at a price-to-earnings ratio of 19.
2. Visa: Riding the rails of global commerce
Few companies have a stronger set of competitive advantages than Visa (V -0.23%), which essentially operates in a credit card duopoly with Mastercard, and those companies have easily withstood threats from digital payment apps, buy-now-pay-later services, and cryptocurrencies.
Millions of merchants around the world depend on Visa to allow them to easily and swiftly collect payment, and that relationship, in which Visa offers a valuable service with high switching costs and network effects, has allowed it to generate a huge profit margin, which came in at 54% in its most recent quarter.
Looking ahead, Visa should continue to benefit from the growth of the global economy and the ongoing transition from spending cash to credit cards. The company aims to expand its geographical reach, increase penetration of existing products, and launch new products.
The stock trades at a modest premium to the S&P 500 at a P/E ratio of 31, but it's worth paying up for a stock with as wide of an economic moat as Visa.
3. Realty Income: A proven real estate winner
Most of the top stocks on Robinhood are tech or growth stocks, but Realty Income (O -0.17%) offers something different. The company is a real estate investment trust (REIT), meaning it's required to pay at least 90% of its profit to investors as dividends.
Realty Income is also unusual because it pays a monthly dividend. The company even calls itself the Monthly Dividend Company. It just raised its dividend for the 123rd time.
The REIT owns more than 10,000 properties and specializes in triple net leases, favoring stable tenants such as Walgreens and 7-Eleven. A triple net lease means the tenant is responsible for property taxes, insurance, and maintenance, removing much of the risk of owning properties from the landlord.
That strategy has worked well for Realty Income. Its business has grown steadily since its 1994 IPO, and the company continues to grow through acquisitions, recently agreeing to take over Spirit Realty in a $9.3 billion deal.
Realty Income now offers a dividend yield of 5.4%, and investors should expect that dividend to continue to grow, given the company's aggressive track record of dividend increases. For dividend investors, Realty Income looks like a great long-term stock to own.
