In this article, we will take a look at the 11 best stocks to buy on Robinhood for beginners.
The retail investor activity that gained pace after the pandemic continues to lose gas amid the volatile macroeconomic situation. Retail investors who used platforms like Reddit and initiated trades on Robinhood suffered bruising losses after meme stocks started falling. This has caused a massive retreat of beginner investors from retail investing platforms. According to Vanda Research, in January 2023, trading activity of retail investors hit its lowest levels since January 2020. According to Wall Street Journal, data from Vanda Research says that average portfolio of the individual investors has fallen by 27% since touching peaks in December 2021. During the same period the S&P 500 index fell about 13%.
Retail Investors Retreat
According to data from Goldman Sachs, households are expected to pull a whopping $100 billion from the market this year. This would mark the first net outflow since 2018. Goldman Sachs noted that individual retail investors remain the biggest holders of US equities, and their exit from the market will pull support for major US companies, which are already suffering amid major stock declines.
The retreat of the individual investors from the market is evident from the declining number of visitors on stock trading platforms, the most important of which is Robinhood. Last month, Robinhood reported weak data for monthly active users for the sixth-straight quarter. The company said its monthly active users in February came in at 12 million, unchanged from the previous month.
The FOMO Rally
When the US stock market started to post huge gains earlier this year without any solid catalysts, some investors to quick to call it a bear market rally. In January, retail trading orders for stocks and ETFs accounted for a whopping 23% of the market’s total volume in late January. This was even more than the levels reached during the 2021 meme stock frenzy.
According to a Bloomberg report in February, Kim Forrest, founder and chief investment officer at Bokeh Capital Partners, said that the rally was based on FOMO (fear of missing out).
“People are just piling in going, ‘Crap, I missed it. I thought it was going to go down another 15%.’ We were overly pessimistic,” Forrest said at the time.
George Catrambone, head of Americas Trading at DWS, also reportedly said that investors should keep in mind that the “Fed is still hiking rates.”
“The danger here is that equities get too far out in front of earnings multiples and aren’t supportive of levels higher than here.”
Photo by Adam Nowakowski on Unsplash
These analysts was right. As subsequent data showed that inflation in the US is far from over and the Federal Reserve made clear that it plans to keep raising interest rates, the stocks started to fall again. This decline was recently exacerbated after serious problems of the banking sector came to the limelight.
Despite this, Robinhood remains one of the most popular platforms for retail traders where millions buy and sell stocks. Not all stocks trading on the platforms are meme stocks. That’s why it’s important to take a look at which stocks are currently trending on Robinhood are decent options for beginner investors.
Our Methodology
For this article, we checked the Robinhood platform and saw which stocks were trending. We also used the Robinhood Investor Index, which tracks the most popular stocks of the platform. After listing at least 30 stocks trending on Robinhood, we picked 12 stocks with highest number of hedge fund investors. We gauged hedge fund sentiment for stocks using the database of 943 hedge funds and their holdings tracked by Insider Monkey as of the end of the fourth quarter of 2022.
Best Stocks to Buy on Robinhood for Beginners
11. GameStop Corp. (NYSE:GME)
Number of Hedge Fund Holders: 14
A trademark retail investor stock pick, GameStop Corp. (NYSE:GME) continues to remain of the most popular names on the Robinhood platform. GameStop Corp. (NYSE:GME) has suffered over the past few months, but GME bulls believe the stock is offering an attractive entry point for long-term gains.
As of the end of the fourth quarter of 2022, 23 hedge funds reported having stakes in GameStop Corp. (NYSE:GME). The total value of these stakes was $155 million. Some notable hedge fund shareholders of GameStop Corp. (NYSE:GME) include Mason Capital Management ($21.3 million stake), Point72 Asset Management ($11.2 million stake) and Philippe Laffont’s Coatue Management ($7 million stake).
10. AMC Entertainment Holdings, Inc. (NYSE:AMC)
Number of Hedge Fund Holders: 23
Recently, several reports suggested that AMC Entertainment Holdings, Inc. (NYSE:AMC) shareholders approved a 1-for-10 reverse stock split. They also reportedly approved AMC Entertainment Holdings, Inc. (NYSE:AMC)’s plans to increase the total number of shares at the company’s latest special meeting. AMC Entertainment Holdings, Inc. (NYSE:AMC), which once saw huge gains on the back of Reddit-backed meme stock rally, is down about 73% over the past one year. It is still one of the most popular stocks among retail investors.
23 hedge funds out of the 943 tracked by Insider Monkey also had stakes in AMC Entertainment Holdings, Inc. (NYSE:AMC) at the end of the fourth quarter of last year. The biggest stakeholder of AMC Entertainment Holdings, Inc. (NYSE:AMC) was Philippe Laffont’s Coatue Management which has a $12.3 million stake in the company.
9. NIO Inc. (NYSE:NIO)
Number of Hedge Fund Holders: 25
NIO Inc. (NYSE:NIO) ranks 9th in our list of the best stocks to buy on Robinhood for beginners.
Earlier this month, NIO Inc. (NYSE:NIO) posted its Q4 results. Non-GAAP EPADS in the period came in at -$0.44, missing estimates by $0.21. Revenue in the period jumped by a whopping 62.2% on a YoY basis to reach $2.33 billion. However, the revenue figure missed estimates by $230 million.
For the first quarter of 2023, NIO Inc. (NYSE:NIO) said it expects its deliveries to come in between 31,000 and 33,000 vehicles, which will be an increase of 20.3% to 28.1% from the same quarter of 2022.
As of the end of the fourth quarter of 2022, 25 hedge funds tracked by Insider Monkey had stakes in NIO Inc. (NYSE:NIO). The total value of these stakes was about $380 million.
8. Plug Power Inc. (NASDAQ:PLUG)
Number of Hedge Fund Holders: 25
Hydrogen fuel cell company Plug Power Inc. (NASDAQ:PLUG) ranks 8th in our list of the best stocks to buy on Robinhood for beginners. Plug Power Inc. (NASDAQ:PLUG) is under pressure recently after posting a weak quarterly report. Truist analyst Jordan Levy reaffirmed his Hold rating on Plug Power Inc. (NASDAQ:PLUG) but decreased his price target to $16 from $18.
On the other hand, RBC analyst Chris Dendrinos kept an Outperform rating on Plug Power Inc. (NASDAQ:PLUG) but lowered his price target to $17 from $20.
As of the end of the fourth quarter of 2022, 25 hedge funds had stakes in Plug Power Inc. (NASDAQ:PLUG). The biggest hedge fund stakeholder of Plug Power Inc. (NASDAQ:PLUG) was D E Shaw with a $20.3 million stake.
7. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 40
According to Robinhood Investor Index, Ford Motor Company (NYSE:F) is one of the most popular stocks on Robinhood.
Recently, Ford Motor Company (NYSE:F) reported US sales for February, which jumped about 21.9% on a YoY basis. This growth was driven by strong demand of Ford F-150. Electric vehicle sales in the period increased by 68.1% year over year to 3,523 units.
As of the end of the fourth quarter of 2022, 40 hedge funds had stakes in Ford Motor Company (NYSE:F). The net worth of these stakes was about $1.4 billion. The most notable hedge fund stakeholder of Ford Motor Company (NYSE:F) was Ken Griffin’s Citadel Investment Group with a $204 million stake.
Here is what Leaven Partners has to say about Ford Motor Company (NYSE:F) in its Q3 2022 investor letter:
“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Ford (NYSE:F), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”
6. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 75
Pfizer Inc. (NYSE:PFE) is highly popular among hedge fund and retail investors. Recently, an independent advisory panel of the FDA endorsed Pfizer Inc. (NYSE:PFE)’s request to convert the emergency use authorization granted for its oral COVID therapy Paxlovid to a full approval.
As of the end of the last quarter of 2022, 75 hedge funds reported having stakes in Pfizer Inc. (NYSE:PFE). The total value of these stakes was $2.5 billion.
5. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 91
Tesla, Inc. (NASDAQ:TSLA) is one of the most popular stocks among both retail investors and hedge funds. We recently reported in our list of the most promising car stocks how analysts are growing bullish on Tesla, Inc. (NASDAQ:TSLA) for the long term on the back of new growth catalysts. On average, analysts have a price target of around $196 on Tesla, Inc. (NASDAQ:TSLA). Cathie Wood, one of the biggest stakeholders of Tesla, Inc. (NASDAQ:TSLA), believes the stock could hit $500 by 2026.
At the end of the fourth quarter of 2022, 91 hedge funds had stakes in Tesla, Inc. (NASDAQ:TSLA). The net worth of these stakes was about $6 billion. The biggest stakeholder of Tesla, Inc. (NASDAQ:TSLA) was Ken Griffin of Citadel Investment Group with a $926 million stake.
ClearBridge Large Cap Growth Strategy made the following comment about Tesla, Inc. (NASDAQ:TSLA) in its Q4 2022 investor letter:
“Tesla, Inc. (NASDAQ:TSLA), meanwhile, also fits squarely within our earnings reset group. We took advantage of its enterprise multiple falling back to historic lows to initiate a starter position in the leading manufacturer of electric vehicles (EV) and developer of battery technologies. Tesla has a significant structural cost advantage in battery production, EV manufacturing and EV selling, which gives it industry-leading operating margins in EVs. As the auto cycle has softened, the stock has sold off substantially with the rest of the automakers, despite EVs continuing to have a secular growth advantage. Tesla has a clean balance sheet with negative net debt and enormous revenue growth, EBITDA growth and free cash flow generation. Its margin buffer also gives the company the ability to cut prices while still protecting earnings better than competitors, which should help support continued volume growth. There is also significant upside optionality driven by its software offerings, which we do not believe is currently priced into the stock.
That being said, Tesla is highly indexed to a flagging auto market and we expect its earnings outlook to worsen in the near term. We are also monitoring increasing EV competition and the recently emerging risks to the brand and management integrity raised by CEO Elon Musk’s actions at Twitter to determine future position size in the portfolio.”
4. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 99
Entertainment giant The Walt Disney Company (NYSE:DIS) has been gaining investors’ attention in 2023 amid the return of Bob Iger and the steps he’s taking to turn the company around. Recently, The Wall Street Journal reported that most of the Disney+ subscribers kept using the service despite the recent $3 per month price increased. This shows there’s more room for price increases in the future.
As of the end of the fourth quarter of 2022, 99 hedge funds had stakes in The Walt Disney Company (NYSE:DIS). The biggest stakeholder of The Walt Disney Company (NYSE:DIS) during this period was Nelson Peltz’s Trian Partners which has a $785 million stake.
ClearBridge All Cap Growth Strategy made the following comment about The Walt Disney Company (NYSE:DIS) in its Q4 2022 investor letter:
“We exited The Walt Disney Company (NYSE:DIS) to focus on areas of the media industry with better risk/reward. Disney has significant exposure to consumer spending that is showing early signs of weakening. We decided to move on from the name as its traditional linear programming business is dissolving more quickly than expected, while its Disney+ streaming business cannot offset the affiliate fees and advertising revenue that the company has relied on for years. Disney’s parks business has done well recently due to strong pricing power but we have concerns that consumers will continue to spend on such discretionary purchases in a recessionary environment. At this point in the cycle, we believe Netflix has more ways to innovate and improve profitability.”
3. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 113
Retail investors are piling into Alibaba Group Holding Limited (NYSE:BABA) on Robinhood. But hedge funds and institutional investors also like Alibaba Group Holding Limited (NYSE:BABA) for long-term growth. Recently, J.P. Morgan Asset Management launched its China-focused ETF, JPMorgan Active China ETF (NYSEARCA:JCHI). The ETF, according to the bank, offers “best ideas” portfolio of Chinese equities. Alibaba Group Holding Limited (NYSE:BABA) is one of the notable holdings of this ETF.
As of the end of the fourth quarter of 2022, 113 hedge funds had stakes in Alibaba Group Holding Limited (NYSE:BABA), up from 105 hedge funds in the previous quarter. The total value of these stakes was about $5.6 billion. The biggest stakeholder of Alibaba Group Holding Limited (NYSE:BABA) was Philippe Laffont’s Coatue Management.
Artisan Global Equity Fund made the following comment about Alibaba Group Holding Limited (NYSE:BABA) in its Q4 2022 investor letter:
“Finally, within our technology theme, an area that we have trimmed heavily over the year, we exited Alphabet due to deteriorating fundamentals and reinitiated a position in Alibaba Group Holding Limited (NYSE:BABA), a stock we have owned previously, as it enters a new phase in its history, one most likely without founder Jack Ma after he became a lightning rod for the Chinese government’s technology crackdown beginning in late 2020. We are attracted to the company’s secular growth prospects in online and mobile commerce.”
2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 135
Apple Inc. (NASDAQ:AAPL) is one of the best stocks to buy on Robinhood for beginners. It is also a favorite of Wall Street analysts. Recently, Gene Munster, managing partner at Deepwater Asset Management, said in an interview with CNBC that Apple Inc. (NASDAQ:AAPL) is “probably the safest place to be” amid the current market turmoil. The analyst also praised Apple Inc. (NASDAQ:AAPL)’s performance compared to other major tech companies. The analyst continues to believe that tech stocks will start recovering in the second half of 2023 and will have a “great year” in 2024. Earlier this year the analyst gave a $250 price target for Apple Inc. (NASDAQ:AAPL).
At the end of the fourth quarter of 2022, 135 hedge funds had stakes in Apple Inc. (NASDAQ:AAPL). The biggest stakeholder of Apple Inc. (NASDAQ:AAPL) was Warren Buffett’s Berkshire Hathaway which owns an $116 billion stake in the company.
Here is what Distillate Capital has to say about Apple Inc. (NASDAQ:AAPL) in its Q3 2022 investor letter:
“The largest new purchase was Apple Inc. (NASDAQ:AAPL), which after underperforming saw its valuation improve significantly. Over the course of the last year, Apple’s consensus estimated forward free cash flows rose modestly, while its enterprise value fell by around 30%. Apple ranks below the 25th most attractive name in the portfolio and so its weight is capped at 4% vs. 6% for names in the top quartile.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 259
Microsoft Corporation (NASDAQ:MSFT) is one of the best stocks to buy for beginners on Robinhood.
Recently, Evercore ISI increased its price target on Microsoft Corporation (NASDAQ:MSFT) to $295 from $280.
Microsoft Corporation (NASDAQ:MSFT) has been gaining attention in 2023 amid the AI mania. Microsoft Corporation (NASDAQ:MSFT) continues to integrate ChatGPT with its tools and apps.
Microsoft Corporation (NASDAQ:MSFT) is also the most popular stock among the 943 hedge funds tracked by Insider Monkey. A total of 259 hedge funds in Insider Monkey’s database had stakes in Microsoft Corporation (NASDAQ:MSFT). The biggest stakeholder of Microsoft Corporation (NASDAQ:MSFT) after Bill & Melinda Gates Foundation was TCI Fund Management of Chris Hohn which had a $5.3 billion stake.
Ariel Global Strategy made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its Q4 2022 investor letter:
“Enterprise software provider Microsoft Corporation (NASDAQ:MSFT) also traded lower, as higher interest rates and economic concerns have created headwinds for growth-oriented technology companies. We believe this price action runs counter to Microsoft’s solid fundamentals, competitive positioning and long-term business outlook. We continue to anchor on the company driving value creation by capitalizing on a broad and deep set of opportunities, most notably within hybrid cloud infrastructure. The platform continues to demonstrate share gains and strong multi-year purchase intent as enterprises transition to cloud based platforms. At current trading levels, we believe Microsoft’s risk/reward is skewed to the upside.”
You can also take a peek at 15 Most Promising Dividend Stocks According to Analysts and 15 Most Promising Long-Term Stocks.
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Disclosure: None. 11 Best Stocks to Buy on Robinhood for Beginners is originally published on Insider Monkey.
