In this article, we discuss the 10 best Roth IRA stocks to buy according to Reddit.
Roth IRA accounts have been an attractive savings vehicle for many Americans over the past few years, providing account holders with privileges and benefits not afforded to traditional accounts. For example, those who have invested in the account can expect tax-free growth and tax-free money withdrawals provided certain conditions are met. The true value of these accounts lies in their use as a retirement fund, incentivizing savings when young by stipulating a five-year no withdrawal rule for additional advantages.
On average, these accounts offer returns of seven to ten percent each year. Some of the factors influencing these returns, which can vary greatly, are risk, portfolio diversity, and the retirement timeline, among others. Billionaire Peter Thiel, who is one of the most recognizable names in the world of finance, recently made waves in the media as news outlets revealed how he had turned a small Roth IRA account into a multi-billion dollar entity over the course of just two decades, highlighting the potential these accounts offer provided investment choices are wise.
Non-profit investigative journalism house ProPublica, based in New York, released a report on June 24 detailing how Thiel had converted a Roth IRA account worth $2,000 in 1999 into a $5 billion one by 2021, highlighting that Thiel would not be liable to pay tax on the money provided he did not withdraw money from the account till he reaches a previously stipulated approached retirement age. To put things into perspective, ProPublica underlined that an average Roth IRA account was worth only around $39,000 in 2018.
Thiel made the impossible possible through the use of investment acumen, buying up shares in his startup PayPal back in 1999 when they were still cheap, realizing the explosive growth potential they offered, and using the Roth IRA to shield the gains on these from taxes. Internet platforms like Reddit have been buzzing with Thiel-related mentions since the report was published. Retail investors, who comprise the majority of users on platforms like WallStreetBets, an investment-focused Reddit subgroup, all have their novel ideas to follow Thiel.
Some of the firms that these Redditors recommend as a Roth IRA investment include Tesla, Inc. (NASDAQ: TSLA), Apple Inc. (NASDAQ: AAPL), and Shopify Inc. (NYSE: SHOP), among others. It remains to be seen how well these stocks do in the long-term, given the stock volatility that is defining trading these days. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, 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 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. 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.
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With this context in mind, here is our list of the 10 best Roth IRA stocks to buy according to Reddit. These were selected keeping in mind the number of mentions on Reddit forums, the returns offered on investments over the past year, and hedge fund sentiment around each.
Best Roth IRA Stocks to Buy According to Reddit
10. NIO Inc. (NYSE: NIO)
Number of Hedge Fund Holders: 28
NIO Inc. (NYSE: NIO) is an electric vehicle manufacturer based in China. It is placed tenth on our list of 10 best Roth IRA stocks to buy according to Reddit. The stock has offered investors returns exceeding 437% over the course of the past twelve months. In quarterly delivery results posted earlier this week, NIO revealed that it had delivered close to 22,000 vehicles in the second quarter of 2021, an increase of over 110% compared to the second quarter of 2020.
On June 29, investment advisory Citi maintained a Buy rating on NIO Inc. (NYSE: NIO) stock, revising the price target to $72 from $58 on the back of expectations for strong delivery numbers for the second quarter of 2021.
At the end of the first quarter of 2021, 28 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in NIO Inc. (NYSE: NIO), down from 34 in the preceding quarter worth $2.6 billion.
Just like Tesla, Inc. (NASDAQ: TSLA), Apple Inc. (NASDAQ: AAPL), and Shopify Inc. (NYSE: SHOP), NIO Inc. (NYSE: NIO) is one of the best Roth IRA stocks to buy according to Reddit.
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.”
9. Plug Power Inc. (NASDAQ: PLUG)
Number of Hedge Fund Holders: 25
Plug Power Inc. (NASDAQ: PLUG) is ranked ninth on our list of 10 best Roth IRA stocks to buy according to Reddit. It is an energy company specializing in hydrogen fuel cell systems. The company’s shares have offered investors returns exceeding 260% over the course of the past year. In earnings results for the first quarter, posted on June 22, the firm missed market expectations for earnings per share but beat on revenue, reporting gross billings of $73 million.
On June 30, investment advisory RBC initiated coverage on Plug Power Inc. (NASDAQ: PLUG) stock with an Outperform rating and a price target of $42. Joseph Spak, an analyst at the firm, said the valuation of the company was justified since it had a long runway for growth.
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 12 million shares worth more than $433 million.
Just like Tesla, Inc. (NASDAQ: TSLA), Apple Inc. (NASDAQ: AAPL), and Shopify Inc. (NYSE: SHOP), Plug Power Inc. (NASDAQ: PLUG) is one of the best Roth IRA stocks to buy according to Reddit.
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.”
8. Teladoc Health, Inc. (NYSE: TDOC)
Number of Hedge Fund Holders: 42
Teladoc Health, Inc. (NYSE: TDOC) stock has returned 12% to investors over the past four weeks. It is placed eighth on our list of 10 best Roth IRA stocks to buy according to Reddit. The firm is a healthcare company that focuses on virtual care. Earlier this month, analysts at investment advisory Piper Sandler dismissed speculation around Teladoc stock being affected by recent news of Amazon, the e-commerce giant, expanding in the health sector.
On May 28, investment advisory Baird began coverage of Teladoc Health, Inc. (NYSE: TDOC) stock with a Neutral rating and a price target of $162, indicating an upside potential of close to 9% for the firm and identifying drivers of growth like primary care potential.
At the end of the first quarter of 2021, 42 hedge funds in the database of Insider Monkey held stakes worth $3.3 billion in Teladoc Health, Inc. (NYSE: TDOC), down from 50 in the preceding quarter worth $2.6 billion.
Just like Tesla, Inc. (NASDAQ: TSLA), Apple Inc. (NASDAQ: AAPL), and Shopify Inc. (NYSE: SHOP), Teladoc Health, Inc. (NYSE: TDOC) is one of the best Roth IRA stocks to buy according to Reddit.
In its Q4 2020 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Teladoc Health, Inc. (NYSE: TDOC) was one of them. Here is what the fund said:
“Teladoc Health offers remote physician access to patients at home. After experiencing incredible levels of growth throughout the early stages of the pandemic as its unique value proposition rose to the forefront of the healthcare industry, the firm’s shares cooled off a bit as optimistic vaccine data slightly curtailed investor expectations for the firm’s future growth potential. We sold the stock.”
7. NVIDIA Corporation (NASDAQ: NVDA)
Number of Hedge Fund Holders: 80
NVIDIA Corporation (NASDAQ: NVDA) is a company that makes and sells hardware for visual computing and other needs. It is ranked seventh on our list of 10 best Roth IRA stocks to buy according to Reddit. The company’s shares have returned 112% to investors in the past twelve months. Earlier this week, crypto mining firm HIVE Blockchain announced that it had entered into an agreement with NVIDIA to buy GPUs worth $66 million from the firm, with deliveries expected to be completed by the end of the year.
On July 1, investment advisory BMO maintained an Outperform rating on NVIDIA Corporation (NASDAQ: NVDA) stock and revised the price target to $1,000 from $750, underlining that the data centre business of the firm was expected to be worth $32 billion in the coming years.
At the end of the first quarter of 2021, 80 hedge funds in the database of Insider Monkey held stakes worth $6.2 billion in NVIDIA Corporation (NASDAQ: NVDA), down from 88 the preceding quarter worth $8.6 billion.
Just like Tesla, Inc. (NASDAQ: TSLA), Apple Inc. (NASDAQ: AAPL), and Shopify Inc. (NYSE: SHOP), NVIDIA Corporation (NASDAQ: NVDA) is one of the best Roth IRA stocks to buy according to Reddit.
In its Q1 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ: NVDA) was one of them. Here is what the fund said:
“NVIDIA Corp. is the dominant supplier of Graphics Processing Units (GPUs) worldwide. NVIDIA’s GPUs are at the intersection of a number of important computing trends including the movement to the Cloud, artificial intelligence, autonomous vehicles, edge computing, gaming, and more. We previously owned NVIDIA and sold it in the third quarter of 2020 as the price to value gap closed and our margin of safety was reduced. As with all our MVP companies, we continued to follow NVIDIA closely. Since that time, NVIDIA reported excellent results and its value has compounded rapidly. The technology selloff at the beginning of the year negatively affected the stock price while our estimate of NVIDIA’s value per share increased. This happy combination of events created a margin of safety and an opportunity to once again add NVIDIA to the portfolio.”
6. PayPal Holdings, Inc. (NASDAQ: PYPL)
Number of Hedge Fund Holders: 143
PayPal Holdings, Inc. (NASDAQ: PYPL) is placed sixth on our list of 10 best Roth IRA stocks to buy according to Reddit. The stock has returned 63% to investors in the past year. The firm is a digital payments company based in California. On June 24, investment advisory DA Davidson gave the stock a Buy rating with a price target of $325, noting the price changes that the company had recently announced which showed the pricing power of the platform.
On June 30, PayPal Holdings, Inc. (NASDAQ: PYPL) launched a new feature dubbed PayPal Zettle for small businesses to make money management easier. The company had earlier bought a Swiss firm named Zettle for over $2 billion.
At the end of the first quarter of 2021, 143 hedge funds in the database of Insider Monkey held stakes worth $14.7 billion in PayPal Holdings, Inc. (NASDAQ: PYPL), down from 147 in the preceding quarter worth $15.9 billion.
Just like Tesla, Inc. (NASDAQ: TSLA), Apple Inc. (NASDAQ: AAPL), and Shopify Inc. (NYSE: SHOP), PayPal Holdings, Inc. (NASDAQ: PYPL) is one of the best Roth IRA stocks to buy according to Reddit.
In its Q4 2020 investor letter, Polen Capital Management, an asset management firm, highlighted a few stocks and PayPal Holdings, Inc. (NASDAQ: PYPL) was one of them. Here is what the fund said:
“For the full year 2020, one of the top performers was PayPal, which we purchased in 2019, the company continues to take market share in digital payments and has seen an acceleration in user adoption and engagement, especially within their “silver tech” or older user demographic. We expect many more years of ongoing double-digit growth from their various business segments and new initiatives.”
5. Alibaba Group Holding Limited (NYSE: BABA)
Number of Hedge Fund Holders: 135
Alibaba Group Holding Limited (NYSE: BABA) is a technology company based in China that operates an ecommerce platform. It is ranked fifth on our list of 10 best Roth IRA stocks to buy according to Reddit. On June 21, the firm announced that it had extended an agreement with shipping firm Zim that allowed merchants at the ecommerce giant to use the services of Zim. The agreement was first made official last year.
On May 24, Alibaba Group Holding Limited (NYSE: BABA) announced that 250,000 brands had joined the ecommerce platform of the company for an annual shopping festival. The increase has been attributed to lower standards for entry as the firm deals with a government crackdown.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Alibaba Group Holding Limited (NYSE: BABA) with 13.9 million shares worth more than $3.1 billion.
In its Q1 2021 investor letter, Polen Capital Management, an asset management firm, highlighted a few stocks and Alibaba Group Holding Limited (NYSE: BABA) was one of them. Here is what the fund said:
“Alibaba also detracted from performance as the company continues to remain under regulatory scrutiny from both the Chinese State Administration for Market Regulation on antitrust concerns and the U.S. Securities and Exchange Commission on ADR listing requirements. Despite the regulatory overhang, we believe that Alibaba’s competitive positioning and growth outlook remains intact, even if the company must pay fines or modify some business practices. We viewed the current valuation at <20x next twelve month’s earnings as a compelling opportunity to add to our position. Alibaba is the second largest position in the Portfolio.”
4. Microsoft Corporation (NASDAQ: MSFT)
Number of Hedge Fund Holders: 251
Microsoft Corporation (NASDAQ: MSFT) stock has offered investors returns exceeding 34% over the course of the past twelve months. It is a Washington-based firm that makes and sells computer software and related services. It is placed fourth on our list of 10 best Roth IRA stocks to buy according to Reddit. On June 30, telecom firm AT&T announced that it would be selling its network cloud service to Microsoft and moving its 5G network data to cloud servers operated by the software giant.
On June 23, Microsoft Corporation (NASDAQ: MSFT) became the second company after Apple to cross $2 trillion in market capitalization, marking a key milestone for the firm as it ramps up spending on cloud and enterprise software.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Microsoft Corporation (NASDAQ: MSFT) with 23.9 million shares worth more than $5.6 billion.
In its Q1 2021 investor letter, Polen Capital, an investment management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ: MSFT) was one of them. Here is what the fund said:
“We have written extensively about Microsoft in recent commentaries. It was our leading contributor last year and one of our largest weightings within the Portfolio. It continues to experience business momentum through several dominant, essential, and competitively advantaged businesses, like Office 365 and Azure. The markets it competes for are enormous, which gives the company the ability to compound at scale. In the past quarter alone, the company generated over $40 billion in revenue, representing a 17% growth rate. The inherent operating leverage in Microsoft’s business model continues and led to 34% earnings growth this past quarter. Despite the broad rotation we saw in the first quarter and Microsoft’s robust performance in 2020, we think its business fundamentals continue to exhibit strength, and the stock continues to reflect the fundamentals.”
3. Shopify Inc. (NYSE: SHOP)
Number of Hedge Fund Holders: 91
Shopify Inc. (NYSE: SHOP) is a Canadian ecommerce firm. It is ranked third on our list of 10 best Roth IRA stocks to buy according to Reddit. The stock has returned 41% to investors in the past twelve months. On June 21, the firm announced that it had partnered with online publication BuzzFeed to provide content creators a platform to earn. Talks to expand the agreement to more publishers, for example Vox, were also underway.
On June 30, investment advisory Loop Capital Markets maintained a Buy rating on Shopify Inc. (NYSE: SHOP) stock and issued a revised price target of $1,600 from $1,400 on the back of positive growth potential for the firm because of changes to the revenue model.
Out of the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Shopify Inc. (NYSE: SHOP) with 1.7 million shares worth more than $1.8 billion.
In its Q4 2020 investor letter, RGA Investment Advisors, an asset management firm, highlighted a few stocks and Shopify Inc. (NYSE: SHOP) was one of them. Here is what the fund said:
“While we are pleased with the results of these specific purchases, we made a huge mistake of omission at that time. This mistake will likely be one of the biggest we ever make in our careers. Specifically, we did deep work on Shopify and loved everything about the business qualitatively. Unfortunately, we ultimately found ourselves unable to get comfortable with the numbers.
We built our model up from the key performance indicators (KPIs) that drive revenues. Our last save of the model dated 8/3/2016 looked as follows: (Page 2). These numbers seemed right from everything we understood about the company. While we tend not to rely on sell-side consensus estimates before finishing our own workup of the business, we do give them a look once we feel comfortable with how we have approached our analysis as it is often helpful to get a sense of what the average participant in the market expects the business to do. With Shopify, the sell-side consensus was so far from where our numbers were shaking out, it seemed almost impossible that we were basing our analysis on the same underlying information. Our natural next step was thus to take the sell-side consensus data and work backwards to figure out the implied expectations on each of the key revenue drivers. Here is what the sell-side consensus looked like as at the time: (Page 2).
Shopify’s actual revenues for 2016-2018 ended up being $389m, $673m and $1,073m. In other words, not only were we justifiably far more optimistic than the consensus estimate, but we also were far too conservative in terms of how the company actually performed.
The nature of our job as securities analysts is to take calculated risks, in an uncertain world where the “true” answer is inherently unknowable before the fact. We operate in what many call an “efficient market” and subscribe to the belief that for the most part, markets are generally pretty efficient and it requires differentiated analysis to find a return above what the market can offer. So why did we pass on Shopify despite 1) deeply believing in the qualitative elements of the business; and, 2) seeing a meaningful gap between what we expected and the consensus expected? The answer is unfortunate but simple: we lacked confidence in ourselves. It was the first time we truly experienced such a stark divergence between our expectation and the consensus and the result was the inclination was to pound ourselves over the head with how dumb we must be, rather than the other way around. We also learned that the truly great companies use their strong business advantages, smart management and execution to raise the bar every step along the way. Obviously this is a cycle which cannot continue ad infinitum, but especially in instances where our qualitative work identifies the inherent strengths in the business and the numbers shake out to be quite fair, the consistent “raising of the bar” can be a potent driver for the stock.
Please do not judge us too harshly for our mistake on Shopify, for we have from the very beginning made one commitment above all else to both our clients and ourselves: that we will be better today than we were yesterday, and better tomorrow than we are today. While this mistake was quite costly, it ended up being a key confidence and process builder.”
2. Apple Inc. (NASDAQ: AAPL)
Number of Hedge Fund Holders: 127
Apple Inc. (NASDAQ: AAPL) is placed second on our list of 10 best Roth IRA stocks to buy according to Reddit. The company’s shares have returned 53% to investors in the past year. It is a technology company that has interests in the making and selling of electronic devices. On July 2, news publication Nikkei Asia reported that Apple was one of the first big technology firms that were testing the new 3-nanometer chip design and could deploy the tech in their devices as soon as next year.
On July 1, Apple Inc. (NASDAQ: AAPL) allowed marijunana delivery services access to the App Store of the firm, marking a policy shift in this regard for areas where marijunana has been legalised, according to a report in Marijuana Moment.
At the end of the first quarter of 2021, 127 hedge funds in the database of Insider Monkey held stakes worth $130 billion in Apple Inc. (NASDAQ: AAPL), down from 146 in the preceding quarter worth $142 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. Tesla, Inc. (NASDAQ: TSLA)
Number of Hedge Fund Holders: 62
Tesla, Inc. (NASDAQ: TSLA) is an electric vehicle company with a large stake in the clean energy business as well. It is ranked first on our list of 10 best Roth IRA stocks to buy according to Reddit. The stock has returned 182% to investors in the past year. The company is one of the most mentioned stocks on Reddit forums. Although the stock has pulled back in recent weeks after registering record highs earlier this year, it still has a lot of room to run as the adoption of electric vehicles continues to increase across the globe.
On July 2, Tesla, Inc. (NASDAQ: TSLA) announced that it had delivered 201,250 vehicles in the second quarter of 2021, down from around 207,000 deliveries in the previous quarter, but satisfying market predictions which had been between 180,000 to 230,000 vehicles, with the 200,000 mark identified as a key threshold.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Tesla, Inc. (NASDAQ: TSLA) with 24.4 million shares worth more than $16.3 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.”
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Disclose. None. 10 Best Roth IRA Stocks to Buy According to Reddit is originally published on Insider Monkey.
