Robinhood, the popular no-commission trading app, has become controversial in recent months.
Critics have accused traders on the app of inflating a volatile market into bubblicious territory, and attracting speculative bets on stocks like Genius Brands that have quickly unraveled. Meanwhile, some researchers have said the app's simplicity makes it too easy for novice investors to take big risks, which can result in ruin.
However, Robinhood has been a positive influence on the investing world in a number of ways. It has democratized trading with it's no-fee commissions, which forced major industry players like ETrade and Charles Schwab to follow, and it's attracted thousands, if not millions, of millennial investors into the market, helping them build wealth from an early age.
It's also a mistake to assume that every Robinhood stock is a fly-by-night penny stock like XPresSpa Holdings or an unproven IPO like Nikola. There are a number of blue-chip stocks on the list of Robinhood's 100 most popular names, including three of the most bulletproof stocks you can own today: Amazon (NASDAQ: AMZN), Alibaba (NYSE: BABA), and Apple (NASDAQ: AAPL). Let's take a look at what these stocks have to offer, and why they are perfect for buy-and-hold investors.
Amazon: A long-term champ
Amazon needs little introduction. At least 92% of Americans have shopped on its website and the company controls approximately 40% of all e-commerce sales in the U.S.
Its Prime loyalty program is perhaps the most powerful economic moat in the business world, attracting more than 150 million members around the world for $119 a year in the U.S., with a slew of benefits including free one-day shipping on millions of items and free video streaming on Prime Video. Prime has locked in customers and blocked out competitors, and it's driven other growth engines like its third-party marketplace business and logistics as it now delivers nearly two thirds of its domestic packages.
But e-commerce isn't even the company's most profitable business. That title goes to its cloud computing juggernaut, Amazon Web Services, which generated $6.4 billion in operating income in the first half of the year, and continues to grow quickly, with revenue up 31% through the first half of the year.
Throughout its history, Amazon has jumped on emerging technologies like e-commerce and cloud infrastructure, and it's doing the same in areas like voice-activated technology with Alexa, cashier-less retail with Amazon Go, and even telehealth with Amazon Care.
The famous Day One mentality ingrained in the company from Founder and CEO Jeff Bezos should ensure that Amazon's advantages endure and get stronger over time. Though the stock is expensive according to traditional metrics, that has always been the case with Amazon. It's a familiar criticism, but with the stock at all-time highs, every single investor that has passed up the opportunity to buy the stock for valuation reasons has been wrong.
Alibaba: Get exposure to China
Despite suspicions of fraud at Chinese companies and attacks from the Trump administration on China, it behooves long-term investors to get some exposure to the world's biggest country by population. China is currently the world's No. 2 economy, behind the U.S., but it is growing much faster and on track to surpass the U.S. within the next 10 or 20 years.
Then there's China's exploding middle class, which is driving its transition from an industrial, manufacturing-based economy to one more driven by consumer spending. Arguably, no company is better-positioned to take advantage of this shift than Alibaba. It is China's biggest e-commerce business by gross merchandise value, operating Tmall, the high-end site for brands, and Taobao, a marketplace more closely resembling EBay, in addition to other businesses in cloud, digital entertainment, food delivery, logistics, digital payments, and e-commerce in other regions including Southeast Asia.
In its most recent quarter, Alibaba's revenue jumped 34% to $21.8 billion, and it now has 742 million consumers on its marketplaces. That's more than double the U.S. population. Its cloud business was particularly strong, posting 59% growth to $1.7 billion, and overall operating income rose 42% to $4.9 billion.
Despite its strong growth and profitability, Alibaba trades at a modest P/E ratio of just 30, essentially the market average. Given the company's track record, its competitive advantages, and the growth opportunity in China, the stock looks like a great bet to outperform the market over the long term.
Apple: Unbeatable in consumer tech
Apple stock may be getting frothy, but there's no denying the company has built an impenetrable fortress in consumer technology. Its devices, including the iPhone, iPad, Mac, and Airpods, are must-have items in much of the world, and have given it a valuation of more than $2 trillion. Apple may now be the world's most profitable company, on track to generate more than $60 billion in net income in the current fiscal year.
The iPhone-maker has an installed base of more than 1.5 billion active devices, creating a powerful ecosystem that encourages Apple users to buy Apple products. If you already have an iPhone, for example, you're more likely to purchase an Apple Watch or Airpods as they will work best with an iPhone. That base of users and devices has also enabled it to create a powerful high-margin services business, collecting commissions from its App Store, and subscriptions from products like Apple Music, Apple Care insurance, and Apple TV+.
During the pandemic, Apple's devices have become necessities, making it even more entrenched in the daily lives of people around the world, and the company appears set for another wave of growth. It's expected to start selling a subscription bundle and release 5G-compatible phones this fall, which has driven a recent surge in the stock.
Apple's huge profits ensure a steady stream of shareholder returns through dividends and share buybacks, helping to lift earnings per share and pay investors increasing dividends. Though the valuation may cool off the stock's growth, there's little that can knock the company off of its pedestal, considering its competitive advantages and enormous brand equity.
10 stocks we like better than Apple
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Amazon. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd., Amazon, and Apple. The Motley Fool recommends eBay and recommends the following options: long January 2021 $18 calls on eBay, short January 2021 $37 calls on eBay, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.
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