In this article, we discuss the 11 best Robinhood stocks to buy according to hedge funds.
Equity trading applications have become more famous as the rapid digitization of the world ushers in an era of smartphones and computers. Robinhood Markets, Inc. (NASDAQ: HOOD), the California-based financial services platform, dominates this market. The company debuted on the stock market earlier this year, raising close to $2 billion in an initial offering that valued the firm at more than $32 billion. The company revealed that it had more than 22 million funded accounts in July this year, up from 18 million at the end of March.
The average age of users of the Robinhood Markets, Inc. (NASDAQ: HOOD) application is around 31, attesting to claims that the forum is populated with young retail investors who like to invest in high growth offerings. These retail investors have engaged in a battle for market supremacy with hedge funds this year, resulting in losses worth billions to hedge funds. This has increased the interest around stocks popular on the application. However, for investors who want to trade in reliable growth options, it might be a good idea to compare these with hedge fund picks.
Some of the best Robinhood stocks to buy according to hedge funds include Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and The Walt Disney Company (NYSE:DIS), among others discussed in detail below. After reporting a 309% year-on-year increase in revenue in the first quarter, Robinhood Markets, Inc. (NASDAQ: HOOD) reported a revenue of $565 million in the second quarter, up 131% year-on-year. Despite the rosy outlook, the stock still suffers from volatility and trading has been halted twice due to this since the IPO.
Photo by Adam Nowakowski on Unsplash
Our Methodology
With this context in mind, here is our list of the 11 best Robinhood stocks to buy according to hedge funds.
We picked the most popular stocks on Robinhood and checked hedge fund sentiment for each of them to narrow down to the most popular Robinhood stocks among the 873 funds tracked by Insider Monkey.
Growth catalysts and analyst ratings for each stock are also discussed to provide readers with information that should help them make smarter investment decisions.
Why pay attention to hedge fund holdings? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Best Robinhood Stocks To Buy According To Hedge Funds
11. Naked Brand Group Limited (NASDAQ:NAKD)
Number of Hedge Fund Holders: 4
Naked Brand Group Limited (NASDAQ:NAKD) is one of the oldest firms that market swimwear for men and women. The company was founded in 1946. Today, the business has evolved to include intimate apparel in addition to swimwear. Interest in the stock has soared since the firm announced in late August that it had reached a merger agreement with an unnamed company. The stock rallied more than 18% after the announcement of the deal and is up 451% over the past twelve months.
Naked Brand Group Limited (NASDAQ:NAKD) is placed eleventh on our list of 11 best Robinhood Markets, Inc. (NASDAQ: HOOD) stocks to buy according to hedge funds. Perhaps one reason the stock has rallied this year is the digital transformation of the firm. Initiated in January this year, the company has focused on strategic purchases in the ecommerce space to drive revenue growth with free cash flow.
At the end of the second quarter of 2021, 4 hedge funds in the database of Insider Monkey held stakes worth $618,000 in Naked Brand Group Limited (NASDAQ:NAKD), the same as in the previous quarter worth $206,000.
10. Aurora Cannabis Inc. (NASDAQ:ACB)
Number of Hedge Fund Holders: 9
Interest in the cannabis sector has soared on the back of reports that the US plans to legalize marijuana at a federal level. In late September, the House Judiciary Committee cleared the bill in a major win for those backing for the decriminalization of marijuana. Aurora Cannabis Inc. (NASDAQ:ACB), one of the key players in the cannabis market, is expected to be one of the biggest beneficiaries of a cannabis boom if the bill is passed into law. The company is ranked tenth on our list of 11 best Robinhood stocks to buy according to hedge funds.
Another bill that allows banks to deal with cannabis firms without fear of punishment has already passed the House of Representatives. Aurora Cannabis Inc. (NASDAQ:ACB) stock has jumped 48% this year on the back of these positive developments.
At the end of the second quarter of 2021, 9 hedge funds in the database of Insider Monkey held stakes worth $62 million in Aurora Cannabis Inc. (NASDAQ:ACB), down from 12 the preceding quarter worth $48 million.
Just like Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and The Walt Disney Company (NYSE:DIS), Aurora Cannabis Inc. (NASDAQ:ACB) is one of the stocks that hedge funds are buying.
9. BlackBerry Limited (NYSE:BB)
Number of Hedge Fund Holders: 20
In an era of smartphones that have ditched the iconic keyboard of Blackberry devices of the past, the firm has capitalized on the encryption and security features it boosted on those phones, transforming itself into a cybersecurity firm. It is placed ninth on our list of 11 best Robinhood Markets, Inc. (NASDAQ: HOOD) stocks to buy according to hedge funds. The firm narrowly beat market expectations on earnings per share and revenue in the second quarter.
BlackBerry Limited (NYSE:BB) also recently unveiled plans to team up with professional services company Deloitte to provide original equipment manufacturers with the software services they need for their Internet of Things (IoT) devices. The global market for IoT devices is expected to be worth more than $165 billion by the end of this year, growing at a compound annual growth rate of over 13%.
Out of the hedge funds being tracked by Insider Monkey, Canada-based investment firm Fairfax Financial Holdings is a leading shareholder in BlackBerry Limited (NYSE:BB) with 46 million shares worth more than $570 million.
8. Plug Power Inc. (NASDAQ:PLUG)
Number of Hedge Fund Holders: 34
The renewed focus on clean energy under a new White House administration has forced hedge funds to place clean energy firms at the center of their investment strategies. Perhaps this is one reason why Plug Power Inc. (NASDAQ:PLUG), the hydrogen energy cell firm, has emerged as a hedge fund favorite this year, according to the latest 13F filings. The firm is ranked eighth on our list of 11 best Robinhood stocks to buy according to hedge funds. The stock was recently given a Buy rating by investment advisory Citi with a price target of $35.
Plug Power Inc. (NASDAQ:PLUG) has also ramped up investments overseas as the clean energy business grows. In September, the company announced that it was expanding operations in Europe with a new headquarters to be set up in Germany. The firm has had a presence in Europe for over a decade already, putting it ahead of American competitors as it has built strong relationships with industrial clients.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in Plug Power Inc. (NASDAQ:PLUG) with 14 million shares worth more than $507 million.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and The Walt Disney Company (NYSE:DIS), Plug Power Inc. (NASDAQ:PLUG) is one of the stocks on the radar of growth investors.
In its Q2 2020 investor letter, Massif Capital, an asset management firm, highlighted a few stocks and Plug Power Inc. (NASDAQ:PLUG) was one of them. Here is what the fund said:
“We also closed our short position in Plug Power this quarter as the market was subsumed with enthusiasm over their recent acquisitions, resulting in an almost 80% rally in the stock over ten trading days. Our decision to exit was painful at the time as we were forced to reconcile with a collective exuberance that was (and is, in our opinion) not grounded reality. In hindsight, it was the correct decision as we avoided most of its recent vertical trajectory.”
7. NIO Inc. (NYSE:NIO)
Number of Hedge Fund Holders: 34
NIO Inc. (NYSE:NIO), the Chinese electric vehicle manufacturer, has earned the right to be called the “Tesla of China” after consecutive quarters of delivery and sales growth. It is placed seventh on our list of 11 best Robinhood Markets, Inc. (NASDAQ: HOOD) stocks to buy according to hedge funds. On October 1, the firm reported that it had delivered 24,439 vehicles in the third quarter of 2021, an increase of over 100% year-over-year. The third quarter was also important because in September, the firm delivered the first batch of vehicles to Norway, expanding its presence in Europe.
Apart from hedge funds, market analysts are also bullish on the firm. On October 7, investment advisory Goldman Sachs upgraded NIO Inc. (NYSE:NIO) stock to Buy from Neutral with a price target of $56, implying upside potential of 65%. Analyst Fei Fang touted the launch of new EV models by the firm, noting that they had “strengthened Nio’s brand equity in the premium space”.
At the end of the second quarter of 2021, 34 hedge funds in the database of Insider Monkey held stakes worth $2 billion in NIO Inc. (NYSE:NIO), up from 28 in the preceding quarter worth $1.3 billion.
Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and The Walt Disney Company (NYSE:DIS) are some of the top stocks on Robinhood, in addition to NIO Inc. (NYSE:NIO).
In its Q2 2020 investor letter, McLain Capital, an asset management firm, highlighted a few stocks and NIO Inc. (NYSE:NIO) was one of them. Here is what the fund said:
“Nio, Inc. (NIO): It’s stock up 360% since the beginning of June on no news, and one of our more troublesome short positions, the Chinese electric vehicle manufacturer is valued at a whopping $17bln on trailing revenue of only $1.1bln. In 2019, the business ran a -17% gross margin, a -140% EBITDA margin & burned ~$1.5bln in cash in 2019. The stock has become one of the most popular stocks among retail traders with approximately 250,000 accounts holding the name just on the popular Robinhood trading platform.”
6. Coinbase Global, Inc. (NASDAQ:COIN)
Number of Hedge Fund Holders: 49
Robinhood is populated mostly by retail investors who like to bet on growth plays. This is one reason why Coinbase Global, Inc. (NASDAQ:COIN) remains popular on the app despite a massive selloff in crypto stocks and a crackdown against crypto in China, one of the largest markets in the world. After a blockbuster IPO in April, the stock has slumped, but hedge funds remain bullish on the firm in the long-term, and 49 funds held stakes in the firm at the end of the second quarter of 2021.
Coinbase Global, Inc. (NASDAQ:COIN) is ranked sixth on our list of 11 best Robinhood stocks to buy according to hedge funds. The stock has been rallying again as Bitcoin, the most popular cryptocurrency, edges back towards $60,000 after diving below $40,000 in the second quarter. Investment advisories like DA Davidson, JPM Securities, and Piper Sandler are all bullish on the firm.
Out of the hedge funds being tracked by Insider Monkey, New York-based firm ARK Investment Management is a leading shareholder in Coinbase Global, Inc. (NASDAQ:COIN) with 5.6 million shares worth more than $1.4 billion.
Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and The Walt Disney Company (NYSE:DIS) are some of the elite stocks on Robinhood, just like Coinbase Global, Inc. (NASDAQ:COIN).
5. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 55
As Ford Motor Company (NYSE:F) invests heavily in electric vehicles to compensate for market losses to EV firms, hedge funds have been forced to acknowledge the progress the firm has made in the space in the past few years. The company recently debuted the F-150 all electric truck, a premier product that combines the convenience of electric power with the reliability that Ford trucks have historically offered to consumers over the past decades. The company has many new EV models in the pipeline and recently reported a 34% month-on-month increase in sales in September, with EV sales up by more than 91% during the period.
Ford Motor Company (NYSE:F) has also announced that it will be building four new factories in the US and hiring more than 11,000 workers. Three of the new plans will be geared solely towards the production of electric vehicles. The company is placed fifth on our list of 11 best Robinhood stocks to buy according to hedge funds.
At the end of the second quarter of 2021, 55 hedge funds in the database of Insider Monkey held stakes worth $2.10 billion in Ford Motor Company (NYSE:F), up from 49 in the preceding quarter worth $2.19 billion.
In its Q1 2020 investor letter, Greenlight Capital Fund, an asset management firm, highlighted a few stocks and Ford Motor Company (NYSE:F) was one of them. Here is what the fund said:
“General Motors (GM) was a disappointment. The damage from last year’s strike consumed most of the cash flow GM would have otherwise generated in 2019. We had expected a strong bounce back in earnings and cash flow in 2020, but the annual guidance, while meeting Wall Street expectations, was worse than we expected. Further, the cash burned during the strike needed to be re-earned in order to protect GM’s investment grade rating. Pre-crisis, there would have been, at best, a minimal share repurchase late in the year. At the analyst day, our hopes that 2020 would finally be the year were dashed. We sold our stock. Over our five-year holding period, we made a 9.6% IRR on GM. In the difficult environment, its most comparable peer, Ford, lost about half its value.”
4. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 60
Tesla, Inc. (NASDAQ:TSLA) is one of the few stocks that enjoys popularity among both hedge funds and retail investors who favor the Robinhood application. The EV firm is ranked fourth on our list of 11 best Robinhood stocks to buy according to hedge funds. The company has navigated the chip supply shortage over the past few months better than peers, reporting earlier today it had sold more than 56,000 EVs in China in September, an increase of 27% month-on-month despite the overall slump in car sales due to the chip crisis.
Investment advisors like Wedbush, Deutsche Bank, and RBC Capital are all constructive on the stock heading into the fourth quarter despite the fact that Tesla, Inc. (NASDAQ:TSLA) has historically done most of the annual business in the first three quarters of the fiscal year. The firm recently announced plans to move headquarters from California to Texas as it expands operations in the US.
At the end of the second quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $9 billion in Tesla, Inc. (NASDAQ:TSLA), down from 62 in the previous quarter worth $10 billion.
Here is what Baron Partners Fund has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2021 investor letter:
“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, energy storage solutions, and battery cells. The stock fell during the quarter as a result of general market dynamics and a potential production slowdown due to parts shortages. A refreshed S/X and China Model Y ramp could also have a negative impact on margins in early 2021. We anticipate strong growth and improved margins driven by new production capacity, manufacturing efficiencies, localization of its manufacturing and supply chain, and maturation of Tesla’s full self-driving technology.”
3. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 112
The Walt Disney Company (NYSE:DIS) is a surprise inclusion in the list of most popular Robinhood stocks. In the hedge fund universe, the stock has long enjoyed elite status that few others can match. It is placed third on our list of 11 best Robinhood stocks to buy according to hedge funds. The firm has benefited from the post-pandemic economic recovery, beating market expectations on earnings per share and revenue in the second quarter. It has also expanded operations in the internet space.
One of the success stories of The Walt Disney Company (NYSE:DIS) is the popularity of the Disney+ streaming service that has grown to more than 116 million subscribers after launching in late 2019. However, production delays due to the pandemic are likely to affect this growth in the coming months.
At the end of the second quarter of 2021, 112 hedge funds in the database of Insider Monkey held stakes worth $10 billion in The Walt Disney Company (NYSE: DIS), down from 134 in the preceding quarter worth $12 billion.
In its Q4 2020 investor letter, Harding Loevner, an asset management firm, highlighted a few stocks and The Walt Disney Company (NYSE:DIS) was one of them. Here is what the fund said:
“One of the original constituents of the Nifty Fifty holds a place in our portfolio today. When we bought Disney three years ago, we wrote that “we view Disney theme parks in the US, Europe, and China as resistant to online substitution.” We did not reckon on a pandemic, which closed all of them, and sent all of usto our couches. Disney, however, wasready for us, brilliantly illustrating the importance of management foresight and change management. Or, as Louis Pasteur said, “chance favors the prepared mind.
A century after its founding in 1923, Disney is in the middle of a bold shift from its legacy media networks & entertainment model—with cable TV, theme parks, and theater films dominating its earnings—to a direct-to-consumer streaming media model. The keys to Disney’s transition: matchless storytelling, coupled with financial strength. The company reliably creates content that people all over the world are eager to consume. It also hastened spending on original content to attract subscribers to its new streaming platform. These factors have allowed Disney to weather the pandemic having expanded its direct engagement with customers. Such connections yield a rich harvest of insights used to customize offerings on a mass scale, reinforcing that engagement in a virtuous circle and thereby raising the lifetime value of each customer. Subscribers to Disney+ reached 86.8 million one year after launch, compared to the 60 – 90 million management projected to reach in 2024. To be sure, Netflix, Apple, and Amazon remain formidable competitors in new-era streaming entertainment (mind what we said about everyone standing up at once), but there’s fight left in this old dog.”
2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 138
Apple Inc. (NASDAQ:AAPL) is ranked second on our list of 11 best Robinhood stocks to buy according to hedge funds. The firm enjoys top status on both Robinhood and among hedge funds. In addition to being one of the most popular smartphone manufacturers in the world, the company has recently also seen a rise in PC sales, even as overall PC sales slow, according to a new report from market research firm Canalys. The stock was recently named among a list of high conviction picks by investment advisory UBS.
Apple Inc. (NASDAQ:AAPL) has crossed $2.3 trillion in market capitalization. In late September, a report in the South China Morning Post claimed that the firm had received more than 5 million pre-orders for the new iPhone model from China, quashing rumors about a slowdown in sales of the product in Asia.
At the end of the second quarter of 2021, 138 hedge funds in the database of Insider Monkey held stakes worth $145 billion in Apple Inc. (NASDAQ:AAPL), up from 127 in the preceding quarter worth $131 billion.
In its Q1 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ‘20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 271
Amazon.com, Inc. (NASDAQ:AMZN) is the premier ecommerce stock on the market. As such, it is placed first on our list of 11 best Robinhood stocks to buy according to hedge funds. The firm has increased investments in physical stores as it seeks to expand. Earlier this month, the firm opened its first non-food store in the United Kingdom. The store will sell books, electronics, toys, games and homeware. A day before the opening, investment advisory JPMorgan maintained an Overweight rating on the stock with a price target of $4,100, labeling it a “long-term” growth pick.
Amazon.com, Inc. (NASDAQ:AMZN) has also been hiring more workers to keep up with the increased demand for goods in the post pandemic economy. In September, the company announced plans to hire 125,000 new workers in the US, ahead of an announcement to increase the basic pay to $18 per hour.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. (NASDAQ:AMZN) with 3.8 million shares worth more than $13 billion.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ:AMZN) was one of them. Here is what the fund said:
“Amazon (AMZN):We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment:1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon, we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is …”read the entire letter here]
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Disclosure. None. 11 Best Robinhood Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.
