Stocks are America's favorite investment. More Americans believe investing in the stock market is a better option than investing in real estate over the next decade, according to a new study by Bankrate.
And, increasingly, they're turning to Robinhood to buy stocks. The commission-free stock-trading platform allows new and experienced investors alike to quickly and cost-effectively invest in their favorite companies.
The following 10 stocks are currently the most popular among Robinhood's more than 10 million users. But which of them are the best buys today?
Seeing Ford Motor (NYSE: F) atop Robinhood's stock rankings is a bit surprising. Ford has underperformed the S&P 500 by a wide margin in recent years, and it's not exactly an exciting growth stock at this point.
Ford's place at the top of this list is likely related to its low stock price, which makes it easier for investors with smaller portfolios to buy more shares. But stock price alone is not a good reason to invest in a company, particularly now that Robinhood and other brokerages allow investors to buy fractional shares. Ford is progressing with its turnaround plan, but there are better stocks for you to buy.
General Electric (NYSE: GE) is another low-price stock that draws attention from value-hunters. Perhaps they should look elsewhere. Other than its relatively low price-to-cash-flow metrics, General Electric doesn't have much going for it. The coronavirus pandemic is wreaking havoc on its aviation business. Yet even before the crisis began, the struggles of several of GE's other divisions largely offset growth in its aviation and healthcare segments. Like Ford, GE is in the midst of a turnaround plan, the results of which remain uncertain.
3. American Airlines
Robinhood investors seem to love beaten-down industries. But not every stock that loses a significant amount of its value recovers. On the contrary, many see their share prices continue to stagnate, and some even descend toward $0 as their businesses struggle and ultimately fail.
American Airlines (NASDAQ: AAL) certainly fits the description of a beaten-down stock. Its shares have lost more than 60% of their value in 2020 after COVID-19 devastated the airline industry. While government assistance may have helped to keep the airlines in business, it might take years before they fully recover. In the meantime, American Airlines' stock could continue to languish.
Unlike the first three stocks on this list, Apple (NASDAQ: AAPL) just delivered blockbuster financial results. Its third-quarter revenue rose 11% to a staggering $59.7 billion, while its earnings per share jumped an impressive 18% to $2.58. Apple is enjoying solid growth across all of its major products and services, as the work-from-home trend fuels demand for its iPhones, Macs, and iPads.
Better still, Apple stands as a financial titan, with more than $193 billion in cash and investments on its fortress-like balance sheet and $60 billion in operating cash flow over its first three quarters of 2020. Robinhood users no doubt also appreciate Apple's upcoming 4-for-1 stock split, which will help to make its shares more affordable for more investors.
Disney's (NYSE: DIS) unrivaled entertainment empire includes Marvel, Pixar, Lucasfilm, and ESPN. It thus owns the rights to many of the most valuable franchises in the industry, such as Frozen, The Avengers, Toy Story, Star Wars, and SportsCenter. Disney excels at monetizing these assets via its collection of theme parks, cruise ships, movie studios, cable networks, and global licensing operations.
COVID-19 has thrown a wrench into this typically well-oiled machine, but the stay-at-home trend has also bolstered some areas of Disney's business, most notably Disney+, its fast-growing streaming service. In turn, Disney should be able to weather the coronavirus pandemic better than many of its less-diversified competitors.
6. Delta Air Lines
Everything mentioned above in regard to American Airlines also applies to Delta Air Lines (NYSE: DAL). Like American, Delta Air Lines' shares are down sharply in 2020 (currently about 57%). And like its rival, Delta has seen its business decimated by COVID-19. Delta may have a stronger balance sheet than American, but it's still likely to struggle until airline traffic levels recover.
Like Apple, Microsoft (NASDAQ: MSFT) stands as a pinnacle of financial fortitude. With more than $136 billion in cash reserves and $60 billion in annual operating cash flow, Microsoft has the firepower it needs to develop and acquire cutting-edge new technologies, even as it rewards its shareholders with stock buybacks and a rapidly growing dividend. Robinhood users also appreciate the value of Microsoft's Office, Azure, Windows, and Xbox platforms -- all of which should allow the tech giant to continue to crank out cash in the years ahead.
Tesla (NASDAQ: TSLA) is the prototypical battleground stock. Bulls say Elon Musk and his team are blazing a path for electronic vehicles and clean energy -- two potentially massive industries -- and changing the world in the process. Bears argue Tesla wouldn't be profitable without government subsidies, and, therefore, its stock price is ludicrous. The company is currently valued at roughly $270 billion, or about what Ford, GM, Toyota, and Honda are worth combined. In turn, the bulls believe Tesla's stock will surge many times in value, while the bears predict it will come crashing back down. Tesla's future likely lies somewhere between these two extremes.
Like the airlines, the cruise industry has been pummeled by COVID-19. Carnival's (NYSE: CCL) ships are stuck at port due in part to sailing restrictions imposed by health officials. With little revenue coming in, Carnival is bleeding cash, to the tune of $650 million per month. To stay afloat, Carnival has been forced to take on large amounts of high-interest debt, which will make it difficult for it to return to pre-COVID profitability levels even after sailing restrictions are lifted.
Like Carnival, GoPro (NASDAQ: GPRO) is doing what it can to survive the coronavirus pandemic. The struggling camera maker was forced to lay off over 20% of its workforce in April, and it's transitioning to a direct-to-consumer model as retail sales shift online. While GoPro has experienced some early success in this regard, competition is intensifying, and the company remains on shaky ground. Investors can do better.
Which of these stocks are the best investments today?
Ultimately, that's for you to decide. But for me, the choice is clear: Apple and Microsoft stand head and shoulders above the rest of the pack. Their superior financial strength will help to lessen your risk. At the same time, their valuable collections of high-quality products and services -- many of which enjoy intriguing growth opportunities -- give you multiple ways to profit.
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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Joe Tenebruso owns shares of Walt Disney. The Motley Fool owns shares of and recommends Apple, Microsoft, Tesla, and Walt Disney. The Motley Fool recommends Carnival and Delta Air Lines and recommends the following options: long January 2021 $60 calls on Walt Disney, long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, and short October 2020 $125 calls on Walt Disney. The Motley Fool has a disclosure policy.
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