The 3 best Robinhood stocks to buy in November
Whether you’ve been investing for five months or 50 years, 2020 has been difficult. While volatility is still present in the stock market, stocks have been causing a whiplash for investors on a near-monthly basis since February. It certainly tested the resolve of long-term investors.
This savage volatility has also drawn millions of millennial and newbie investors to the stock market in hopes of getting rich quick. If you don’t believe me, take a closer look at the membership figures of the Robinhood online investing app.
Robinhood, which is best known for offering free shares to new members, offering investments in fractional shares and enabling commission-free transactions on major US stock exchanges, has seen its membership grow by the millions. The average age of the typical Robinhood user is only 31.
On the one hand, it’s fantastic to see young investors put their money to profit on the stock market. There simply has not been a greater creator of wealth in the long run.
On the flip side, Robinhood hasn’t done a great job giving its members the tools or knowledge to understand the power of long-term funding or investing. Robinhood investors therefore often have chasing horrible companies and focus on the short term.
Fortunately, some members get the message. Robinhood’s ranking (meaning the 100 most owned shares on the platform) holds three absolutely glaring buys for November.
Bank of America
The first is the giant of money centers Bank of America (NYSE: BAC). You might be thinking “Yuck, bank stock”, but long-term investors are seeing dollar signs of an industry that has historically benefited from long expansions in the US economy. Recessions are inevitable and also good times to pick up bank stocks.
Bank of America is the large bank most sensitive to interest rates. When the Federal Reserve begins to hike its fed funds rate in or around 2024, BofA will likely see the biggest advantage in the interest income column. Given that the Fed is unwilling to make the fed funds rate negative and the BofA is much better capitalized than it was during the Great Recession, investors can safely assume that the company has bottomed out.
Bank of America has also done a remarkably good job of controlling its non-interest spending. In particular, BofA has invested heavily in digitization, which has boosted online and mobile transactions. As more and more of its customers switch to digital transactions, BofA has consolidated some of its branches and reduced spending.
Bank of America is not a sexy choice for investors, but it is going to save them money.
Did anyone mention a recession? Because Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) I did not receive this memo. After a relatively minor setback in the second quarter, the parent company of search engine Google, YouTube and Google Cloud reported a 14% year-over-year revenue increase in the third quarter.
Robinhood investors seem to have figured out that Alphabet is the way dominating this company in the search space. Over the past 12 months, Google’s share of global search has ranged from 91.9% to 93%. This is essentially a monopoly status and demonstrates how willing advertisers are to pay for premium placement on Google’s search platform. Like Bank of America, Alphabet is prone to short periods of weakness during recessions, but since economic expansions last much longer than recessions, Alphabet’s advertising business is almost always growing.
Yet Alphabet’s appeal lies in its booming ancillary operations. YouTube has emerged as one of the top three most-visited platforms in the world and has rightly seen its ad revenue skyrocket, but Google Cloud is perhaps more intriguing. Cloud infrastructure margins easily outweigh advertising margins. As Cloud, which reached record third quarter revenue of $ 3.44 billion, achieves a larger percentage of Alphabet’s total sales, operating margin and cash flow could seriously expand.
Of course, Square has high expectations to meet. Its share price has roughly quadrupled from its March 2020 low after the company completely blew up Wall Street expectations in the second quarter. While it is possible that Square will struggle to meet the high expectations, no matter what it offers operationally this week, the big picture remains incredibly bright for the company.
Square’s oldest operating model is its seller ecosystem, which provides merchants with point-of-sale devices and data analytics. Over the past seven years, the seller ecosystem has seen gross payments volume catapult from $ 6.5 billion to $ 106.2 billion, an average growth of 49% per year. While this growth will be hampered by the 2019 Coronavirus Disease (COVID-19) recession, this merchant fee-driven ecosystem will shine in the long run as large companies have started to adopt the platform.
Yet Square’s biggest growth opportunity lies in the peer-to-peer payment platform Cash App. Between the end of 2017 and mid-2020, the monthly number of active Cash App users increased from 7 million to 30 million. Cash App is taking advantage of the avoidance of cash during the pandemic, as well as the younger generation simply preferring digital transactions. The Cash app allows Square to collect merchant fees, transfer fees, and bitcoin exchange fees, and could well become the main gross profit generator for the business within a year or two.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.