The stock market in 2020 can be defined by many things, but one of the biggest stories since the market bottomed on March 23 is the rise of millenial traders on the popular trading platform Robinhood. Media outlets have had a field day reporting on the surge of new investors buying beaten down stocks, including CNN and The Wall Street Journal. This trend was amplified by the emergence of Davey Day Trader Global, aka Dave Portnoy, who upset numerous “pinstripes” on Wall Street while making hundreds of thousands of dollars investing in airlines and cruises. Bullish was one of the first sites to cover the Barstool Sports founder’s new venture back in March. With this new subset of speculative traders on Robinhood comes even more of Wall Street’s hidden treasure – data.
Created by programmer Casey Primozic, Robintrack utilizes data from Robinhood’s public API to track the number of users holding a stock with the price movement. This information can be extremely useful in tracking sentiment among retail traders. In May, we used Robintrack to see that Robinhood users were buying the dip on travel-related stocks like Delta and Carnival Cruise Lines, both of which are up over 30% since then (nice job millennials). With this in mind, we wanted to take a look at some of the biggest increases and decreases of what Robinhood users are holding over the week of June 15.
In addition to viewing stock’s individually, Robintrack allows you to see a list of the most added and sold stocks on Robinhood over various time periods. Since last week, far and away the most added stock is Ideanomics ($IDEX), a company that attempts to monetize the global adoption of electric vehicles. Over 60,000 Robinhood users piled into this name, and it’s no coincidence that the aforementioned Davey Day Trader bought the stock June 19. Coincidentally, the stock rose over 75% Monday after securing a deal in China. The number of Robinhood users has soared from under 10,000 in early June to nearly 100,000 as of June 22.
While the “Popularity Change” list includes many names similar to this like Nikola Motors (which is certainly a story to be told another time) it is interesting to note that Amazon, Apple, and Tesla have seen significant additions in the past week. While these are certainly popular names, all three have been hitting all-time highs in recent days, suggesting Robinhood users not only are buying the dip on some stocks, but also chasing big-cap tech in the hopes of a continued rally. Buying at all-time highs is never something to scoff at though. If you stopped buying (and sold) these exact names in the past at their highs, you’d have missed some insane gains.
The most sold stocks on Robinhood over the last week include Hertz, Chesapeake Energy and Luckin Coffee. This was not surprising considering Hertz and Chesapeake Energy’s recently announced bankruptcies and Luck Coffee’s current sales fraud investigation. At first, the speculative traders jumped into these trouble companies’ stocks, most likely due to how “cheap” they were on a pure dollar basis (and not based on price-earnings ratio).
Typically when a company files bankruptcy and a billionaire investor sells his shares at a huge loss, the stock doesn’t surge over 1,400%. However, that is exactly what Hertz’s stock did after filing bankruptcy on May 22. With the stock at 40 cents, it miraculously rallied to $6.25, which rose the question: Are the Robinhood traders behind this speculative rally? While the theory of whether or not Robinhood traders pushed the price is debatable, what’s not is the huge increase in users holding, which is now seeing a net decrease as shares of $HTZ snap back to reality.
The data visualization that Robintrack provides is one of the best tools for anyone looking to gain insight into the minds of the retail trading millennials on Robinhood. Over the past few months, we’ve seen that users are starting to come around to the idea that going all in on stocks that have experienced great declines shouldn’t be your only investment thesis, even if it has been quite profitable. The net additions of Amazon, Apple, and Tesla over the last week suggest a shift in trend to more traditional growth investing. And while there are still plenty of people willing to YOLO their money on a company going bankrupt, they may just find out that buying the dip always seems like a fun idea until you realize that stocks can (and sometimes do) go to zero.
The same backwards investment thesis occurred in shares of Luckin Coffee ($LK), which fired its CEO and COO after an investigation of sales fraud. Robinhood users bought on the news and despite the stock being halted for over a month, there are now more users holding shares than before the sales fraud was discovered. With that, some users are now realizing they may be left “holding the bag” on a stock that could be embattled for years.