3 Proven Stocks Robinhood Investors Are Buying Left and Right

Robinhood has certainly found itself in the spotlight in 2020. Young investors have flocked to the platform in record numbers this year, especially following the record volatility that plagued the market earlier this year.

About 6 million new online trading accounts were opened in the first half of the year, according to Barrons, and Robinhood was responsible for half of those. There were 4.3 million trades processed by Robinhood during the month of June, surpassing all other brokerage platforms. To put that number into context, it was almost four times that of competitor E*Trade, recently acquired by Morgan Stanley.

Although traders using the app have made some downright questionable investment choices, there are also plenty of high-quality stocks on Robinhood’s most popular stocks list. Let’s take a look at three of these top picks and why other investors should also consider sourcing from these companies.

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PayPal: A Proven Leader in Digital Payments

Robinhood investors were absolutely gaga PayPal (NASDAQ: PYPL) in recent weeks, buying back shares in the digital payment processor like there’s no tomorrow. The world’s original online payment option is also the 14th most popular action on the Robinhood app this month.

The onset of the pandemic has brought new urgency to contactless payment methods, which has been a boon for the digital payment pioneer. In fact, when PayPal released its second quarter results in early August, it was the company’s best quarter ever. never.

Revenue reached $5.26 billion, up 22% year over year, while earnings per share of $1.29 soared 86%. The increase in cash generation was even more impressive, with free cash flow of $2.19 billion, up 112%.

What prompted this impressive growth spurt? In a word, customers. PayPal added a record 21.3 million new net active accounts, marking the largest quarterly additions in company history. To give that perspective, PayPal added 37 million new accounts in all of 2019.

PayPal is not stopping there, expanding into Latin America with its investment in MercadoLibre (NASDAQ: MELI), becoming a payment option on the company’s platforms in Mexico and Brazil, while offering cross-border payment options. PayPal has also teamed up with Gojek, a mobile e-commerce provider in Asia, adding its 170 million users to PayPal’s network.

Digital payments were already growing in adoption, but this was accelerated by the pandemic. As an industry leader, PayPal is well positioned to continue to benefit, so it’s easy to see why it’s a favorite with Robinhood investors.

Several people are running around wearing face coverings.

Image source: Getty Images.

Nike: Winning with e-commerce

Investors in the Robinhood platform have undoubtedly been drawn to Nike (NYSE: NKE) for its easily recognizable brand, but there are also other factors at play that have made the sportswear giant the 12th most popular stock on the investment platform. One of the unexpected results of the pandemic and resulting stay-at-home orders is a renewed interest in fitness. People suddenly found themselves at home with more free time. With fewer leisure activities to choose from, consumers finally had the time and inclination to exercise.

Even as consumers continue to shun physical retail, Nike surprised investors last month with quarterly results that beat expectations. Revenue of $10.6 billion was flat year-over-year, but topped consensus analyst estimates of more than $1 billion. Earnings rose, with earnings per share of $0.95 up 10%.

The headline was the performance of the company’s e-commerce efforts, as digital sales for the Nike brand soared 82%, recording double-digit growth in North America, China and the Asia-Pacific/ Latin America (APLA). It also generated triple-digit growth in its Europe, Middle East and Africa (EMEA) segment.

Nike has sought to capitalize on the growing adoption of online sales by expanding its online retail business. CEO John Donahoe said: “[D]digital is a new normal. Today’s consumer is digitally entrenched and simply won’t turn back.”

It’s also worth noting that Nike pays a dividend that earns 0.76% and only uses 55% of its profits to fund the payouts. The company also has a payment history dating back over 18 years.

Nike has a long track record of success in athletic footwear and apparel, so it’s no surprise that Robinhood investors are running to Nike.

Young woman smiling and wearing headphones while playing a video game.

Image source: Getty Images.

Activision Blizzard: The Game Begins!

Millennials grew up with joysticks in their hands, so video games are second nature. This has no doubt influenced their investment choices over the past few weeks as many have bought stocks in the video game pivot ActivisionBlizzard (NASDAQ: ATVI)making it the 10th most popular choice among Robinhood investors.

Consumers looking for new sources of home entertainment have turned to an old favorite – video games – to pass the hours, and many have turned to popular games from Activision. The company is known for its flagship product Call of Duty, World of Warcraftand Monitoring franchisees, among others.

This was evident in the company’s winning financial results in the second quarter. Net income of $1.93 billion was up 38% year over year, while earnings per share of $0.75 were up 74%. The underlying user metrics were even more impressive. Monthly active gamers jumped 100 million, up 30% year over year, while engagement soared as time spent on Activision games increased 70% .

There is reason to believe that his impressive performances will continue. Call of Duty: Warzone, the company’s free-to-play battle royale game, debuted earlier this year to rave reviews and high demand, engaging 75 million players to date. At the same time, the number of hours of play has increased eightfold in the Call of Duty: Modern Warfare universe. It must not be forgotten candy CrushActivision’s free franchise, which was the top-grossing franchise in US mobile app stores during the quarter.

Activision also pays a dividend which earns around 0.50% and uses only 17% of its earnings to support the payment. The company has been issuing shareholder checks since 2010 and has increased its payout every year since.

Given the company’s tailwinds and even stronger financial results, it’s no wonder Robinhood investors think Activision has the game.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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