No matter how long you have been an investor, there is nothing that could have prepared you for 2020. The 2019 coronavirus disease pandemic (COVID-19) has taken a heavy financial and physical toll on the US and global market, in addition to establishing itself records regarding the volatility of the stock market.
If there is a silver lining to this insanity, it is that the opportunity is often found during periods of panic and increased volatility. Every stock market correction in history (except the current one) has finally been put firmly in the rearview mirror by a bull market recovery. In other words, investors who have a long-term vision and buy high-quality deals at a discount tend to get ahead.
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But periods of panic and volatility don’t always bring out the best investment habits. In recent months, Robinhood investors have earned a good reputation for their short-term mindset and their willingness to go after seemingly horrible companies. While it’s great that the Robinhood online trading platform was able to attract younger investors to put their money to work in the stock market, Robinhood’s retail investors have become an informal joke on Wall Street.
However, there is good news. While there are plenty of Robinhood millennials who have a get-rich-quick mindset and basically play roulette with their money on a daily basis, there are also Robinhood investors who are making wise decisions with their money.
After carefully reading the most popular additions to the online platform in recent months, I am pretty sure that the following four main actions will enrich Robinhood investors, if they just continue to stick around for the long term.
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Livongo Health
If it weren’t for a small handful of potential COVID-19 vaccine developers, there is a very good chance that Livongo Health (NASDAQ: LVGO) It would be the hottest action in the health sector. Livongo shares have more than quadrupled since the year began, and the total number of Robinhood accounts with Livongo shares rose from around 4,500 in February to more than 34,000, as of last weekend.
What makes Livongo Health so intriguing is the company’s focus on helping patients with chronic illnesses live healthier lives. While there are countless medications and devices available for patients with chronic illnesses, ensuring half of the challenges is ensuring that these patients are aware of their illness and lead healthier lives. That’s where Livongo comes in.
Livongo aggregates mountains of patient data and uses artificial intelligence to send suggestions and “nudges” to its members to help them make smarter decisions. It’s a victory for everyone involved as patients live longer, healthier lives, insurers face lower medical costs linked to fewer chronic disease hospitalizations, and Livongo benefits from a steady stream of highly predictable cash flow.
At the end of March, Livongo had more than 328,000 Diabetes members, double what it had at the end of March 2019. The company also recently announced that its second-quarter earnings would be well ahead of its own previous guidance. All of this comes with Livongo which has penetrated just 0.95% of the US diabetes market (34.2 million people). If Livongo is already making small profits with less than 1% of the diabetes market share, imagine how beast this company will be once it gets a bigger slice of the pie and expands on hypertension, prediabetes, and weight management.
Image source: Facebook.
Another action that is sure to make Robinhood investors rich is the social media giant. Facebook (NASDAQ: FB), which recently hit a record high. When the year started, approximately 126,000 Robinhood accounts owned a stake in Facebook. But as of last weekend, more than 233,000 accounts were stakeholders, making Facebook the platform’s 26th most popular action.
Social media is predominantly a numbers game, and Facebook is winning in that column for a landslide. At the end of March, Facebook had 2.6 billion monthly active users, as well as 2.99 billion monthly family active people (this includes all unique visitors to company-owned platforms). There is simply no other social platform where advertisers can access to access nearly 3 billion eyeball games. This allows Facebook exceptional pricing power, and is a great reason why it continues to grow at double-digit percentage.
Perhaps the craziest thing about Facebook is the untapped potential of the company. While you have been monetizing Facebook for a long time and started placing ads on Instagram in recent years, you have barely started monetizing WhatsApp or Facebook Messenger. Combined, these are four of the seven most visited social platforms. Once Facebook begins to monetize all of its assets, its growth rate can rebound again.
Image source: Amazon.
Amazon
Robinhood investors also won’t regret their decision to buy and hold the e-commerce giant Amazon (NASDAQ: AMZN). Since the end of February, the number of accounts with Amazon has more than tripled from approximately 106,000 to more than 344,000. Today, it is the fourteenth most maintained stock on the platform.
Most people know Amazon for its mastery of e-commerce. In February, Bank of America He estimated that the company had a whopping 44% market share in the US e-commerce market, which is light years from Walmart, which ranks second with 7% of the US e-commerce market share, Amazon has rotated its online dominance over 150 million Prime memberships worldwide. These membership fees are a big key to Amazon lowering the price of large retailers and keeping consumers loyal to the Amazon product ecosystem.
Of course, the key growth engine for Amazon is not the company’s e-commerce segment. Rather, it is the Amazon Web Services (AWS) infrastructure as a service segment. We were already witnessing more companies connecting online and into the cloud long before COVID-19. However, the pandemic has accelerated this trend. With cloud services producing considerably higher margins than advertising or retail revenue, Amazon is seeing its operating cash flow explode as AWS grows at a higher percentage of total sales.
Image source: Plaza.
Square
Finally, there has been a definitive attraction in recent months for fintech stocks. Square (NYSE: SQ). With its share price more than tripling its lower level in mid-March, the number of Robinhood members holding Square shares has increased by almost 40,000 in four months.
Just as Amazon’s e-commerce platform has caught investors’ attention, so too has Square’s seller ecosystem for the past half decade. But small and medium-sized businesses are no longer the keys to Square’s payment network. Instead, the company has seen a significant increase in the gross payment volume of the largest companies (defined as $ 125,000 or more in the annualized gross payment volume). Given that Square is focused on the consumer-driven US market, an increase in usage from larger companies would be great news for its fee-based revenue channel.
However, the long-term growth catalyst for Square appears to be the online cash payment platform Cash App. The Cash App took just two years to more than triple its monthly active user account from 7 million to 24 million (in December 2019). But in March and April, Square reported record enrollment for the Cash app, primarily due to the coronavirus pandemic and cash aversion. At the rate the Cash app is growing, it could be responsible for half of Square’s gross profit in 2022.
Square, along with Amazon, Facebook, and Livongo Health, has what it takes to enrich long-term focused Robinhood investors.
