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.”
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.
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).
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.
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.
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.
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%.”
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.
