Move over, Tesla: there’s a new most-held stock on Robinhood

In just over four months, when the curtain closes on 2021, we will no doubt remember the year that retail investors made their mark on Wall Street. Even though retail investors have been putting their money to good use on Wall Street for over a century, they have never had such a demonstrable effect on stock prices as since January.

In particular, retail investors have flocked to Robin Hood (NASDAQ: HOOD), the online investment app that went public less than four weeks ago. As market volatility increased in 2020 and early 2021, Robinhood had no problem forcing retail investors to join its platform.

Image source: Getty Images.

Tesla has long been the most owned stock on Robinhood

Arguably the best thing about Robinhood is its transparent ranking. The company regularly updates the 100 most owned stocks on its platform, giving existing clients a resource to see what other retail investors have bought or held for their own portfolios.

For four months, the manufacturer of electric vehicles (EV) Tesla Motors (NASDAQ: TSLA) had always held the top spot in Robinhood’s leaderboard – and it’s not hard to see why.

For starters, Robinhood investors love dynamic stocks. Between May 2019 and January 2021, the Tesla share price catapulted from the adjusted average level of $ 30 to an intraday high of around $ 900 per share. Time and time again, any drop in the Tesla share price during this time has proven to be a buying opportunity for dynamic investors. When Tesla rose to No. 1 in Robinhood in April, he was coming back from a decline of less than $ 600 a share.

Another reason Tesla was a logical choice as the most held stock on the platform is its ties to green energy. Many Robinhood users are young investors; and young people are considerably more likely to be concerned about climate change than older generations of Americans. Electric vehicles are considered one of the easiest ways for the United States to fight its dependence on fossil fuels and reduce its carbon emissions. In other words, Tesla Motors’ mission aligns with the environmental views of many young investors.

Additionally, Tesla has easily identifiable competitive advantages that act as a magnet for the Robinhood retail community. For example, its battery technology currently offers the best capacity, range and power of any other automotive inventory. CEO Elon Musk, who himself can be described as a competitive advantage, also oversaw the expansion of the company’s production capacity at an annual operating rate of around 800,000 electric vehicles.

The Tesla Model S plugged in for charging. Image source: Tesla.

Last week he was dethroned

But since last week, Tesla has been dethroned as the most owned Robinhood stock.

If you are wondering why Tesla no longer holds the top spot, the answer might lie in its recent stock market performance and operating results.

As noted, Robinhood retail investors love to profit from dynamic stocks. But in the past eight months, Tesla’s share price has really not changed. While the company’s stock price has been volatile, the seemingly exponential uptrend the stock had enjoyed since spring 2019 ended in early January. With the weakening of stock price dynamics, retail investors might look elsewhere.

Tesla’s operating performance also leaves much to be desired. Before the second quarter of 2021, Tesla had announced a series of quarterly earnings, all of which should have been marked with an asterisk. That’s because the company relied on selling regulatory emission credits to other automakers to boost its bottom line. Without these regulatory emission credits, nor its one-off profit from the sale of Bitcoin, which is on Tesla’s balance sheet, the company had not made any real profit until this last quarter. It’s a bit worrying that a $ 667 billion company wasn’t really profitable selling its commodity (VE) until the previous quarter.

Image source: Apple.

Here is the new stock # 1 on Robinhood

With Tesla backing up and falling to second in the Robinhood leaderboard, the new most held stock on the platform is (drum roll) … Apple (NASDAQ: AAPL). Sorry, AMC Entertainment enthusiasts, but your stock has been blocked at n ° 3 on the platform since the beginning of February.

Why Apple? Branding is probably a good reason. According to Visual Capitalist, Apple was the most valuable global brand of 2020 – and it’s not even close. Using a methodology that takes into account a company’s financial forecast, the role of its brand, and the strength of its brand, Visual Capitalist fixed the value of the Apple brand at $ 323 billion in 2020, up from 38 % from 2019. The next closest company is Amazon, which represents a brand value of $ 201 billion. Apple brand value is almost double that of Microsoft and Alphabetfrom Google, which are respectively $ 166 billion and $ 165 billion.

Another reason Apple has likely regained the top spot from Robinhood is its operational dominance. It is the leading smartphone supplier in the United States, with its iPhone line seeing a huge increase in demand since the rollout of 5G-enabled devices late last year. In the previous three quarters, Apple sold $ 153.1 billion in iPhones, an increase of $ 41.8 billion from the comparable period of fiscal 2020.

Retail investors are also likely in awe of CEO Tim Cook’s relentless efforts to make Apple a more service and subscription-based business. To be clear, Apple doesn’t have customer loyalty concerns. Nonetheless, promoting subscription-based services should lead to less flat-rate revenue recognition, as well as progressively higher operating margins over time.

Finally, don’t overlook Apple’s blue chip shareholder return program. According to YCharts, the world’s largest company by market capitalization has averaged $ 15.7 billion in quarterly share buybacks over the past five years. It has also increased its quarterly dividend by 132% over the past nine years. Tim Cook and Apple’s board of directors are more than willing to reward long-term shareholders for their patience as Apple shifts to a platform-based business.

While we’ll no doubt see Robinhood’s rankings continue to change over time, it would be surprising if Apple ever falls below # 2 in the rankings.