There is no doubt that Wall Street and investors will remember 2020 for a long time. The 2019 coronavirus disease pandemic (COVID-19) was responsible for creating the most volatile environment in the history of the stock market.
During the first quarter, the benchmark S&P 500 It plummeted 34% in less than five weeks, marking the fastest decline in bear market territory. Then in the second quarter, the S&P 500 made its best profits since 1998, with heavy technology Nasdaq compound shooting to a new high after another.
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Higher volatility hasn’t brought out the best in some investors
Although this volatility may seem nauseating at times, it is the perfect recipe for wealth creation for long-term investors. This is because every correction (except for the current COVID-19 correction) has finally been put in the rearview mirror by a bull market recovery. If long-term investors just buy big business and hold on for a long period of time, they tend to do pretty well.
Of course, not all investors have turned to long-term thinking. Investors on the online platform Robinhood have a penchant on Wall Street for being short-sighted and willing to go after today’s hottest stocks. Although there are undoubtedly some long-term investors on the platform, Robinhood’s focus on attracting younger / millennial investors is certainly showing, based on the shares held by the members.
Recently, I covered some exceptionally popular, but absolutely horrible, stocks that Robinhood investors have been buying. But all these horrible companies pale in comparison to the worst actions that, for some reason, Robinhood members can’t get enough of. I’m talking about TOP boats (NASDAQ: TOPS).
Learn about the worst stocks Robinhood investors love
TOP Ships is a 20-year-old Greek-based shipping company responsible for the shipment of crude oil, petroleum products, and selected liquid chemicals. Since the mid-2010s, and indeed before the Great Recession, average daily rates for shipping and storing raw products have been declining. This is a by-product of the shipping companies that flood the market with new ships, and the price of crude oil falling from more than $ 140 per barrel (briefly) in June 2008 to its current price per barrel of around $ 41 for West Texas Intermediate Crude and $ 43 for Brent Crude.
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However, TOP Ships has been a new level of horrible. Instead of allowing its shares to be removed from the list for not maintaining a minimum listing price of $ 1, the company has reversed nine times, included eight times since April 2014. Six of these reverse divisions have been 1 by 10 or more. As a result, the record high for TOP Ships, set on November 29, 2004, resolves to $ 182,498,394,112 per share. I did not lose a comma or forget a point. We are talking about a decrease of approximately $ 182.5 billion dollars per adjusted share divided to $ 0.10 today.
No matter where you draw the starting line, investors always seem to lose money with TOP Ships. These are her returns based on various final time frames, as of July 16, 2020:
- 1 month: minus 29.65%
- 6 months: less 88.74%
- 1 year: minus 98.90%
- 3 years, 5 years, 10 years and 15 years: all only a fraction of less than 100%
And I’m not done yet. Over the past four months, TOP Ships has sold its common stock through registered direct offers to raise capital 10 times separately! In total, 751,427,500 shares have been issued, by my count, with these 10 offers. TOP Ships is burying its shareholders under a constant barrage of dilution.
Despite this true sea of red flags, it is the 36th most popular celebration among Robinhood members. Since the year began, the number of Robinhood investors holding TOP Ships shares has increased nearly 100-fold, from around 2,100 to 208,000. By context, more Robinhood investors currently hold TOP Ships than hold shares of Netflix, Starbucksor ExxonMobil.
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Penny stocks are often penny stocks for a reason
It is not uncommon for new or young investors in the stock market to chase volatile stocks or buy perceived “cheap” companies with low stock prices. The thought process behind such a move is that it is much easier for a penny stock trade to $ 0.10 to double to $ 0.20 than it would be, for example, $ 100 per share to double to $ 200 per share .
But this way of thinking is usually wrong. The fact is, penny stocks are often trading low for a reason. In the case of TOP Ships, it is because the company has had operational difficulties and has been diluting the daylight of its shareholders to keep its business afloat. Generally, if you are looking for big and / or game-changing businesses with a proven track record, you will do much better in the long run than throwing darts at penny stocks like TOP Ships.
Drink Apple (NASDAQ: AAPL) as a good example Once a high-growth stock, the king of innovation has established itself in a more mature growth phase. It doesn’t offer the wild volatility of a TOP Ships, nor is it perceived as affordable, with a triple-digit share price. But given the ability to buy fractional shares with some brokerage houses, and with the understanding that how much you invest, not how many shares you own, is what really matters, Apple has become a foolproof winner.
Investors could have bought Apple four years ago for around $ 105 a share. Today, that vanilla investment is going for almost $ 387 a share, which is good enough for a 269% return, not including dividend payments. Apple has leveraged the strength of its brand to drive consumer loyalty, turning it into a new line of high-margin, portable devices and services that are growing at a significantly faster rate than its core products, such as phones. smart.
If you are a young or new investor who is excited about taking over your financial future, I implore you not to be fooled by the idea of getting rich quickly. Wealth creation takes time, and can be done with minimal hassle by simply buying from big business and allowing your investment thesis to take shape.
