In this article, we will discuss the 10 best Robinhood stocks to buy according to hedge funds. If you want to skip our discussion on the macroeconomic environment, go directly to the 5 Best Robinhood Stocks to Buy According To Hedge Funds.
It has been a challenging year for investors as rising inflation and increasing benchmark interest rates have caused stocks to underperform. The S&P 500 Index and the tech-heavy NASDAQ Composite Index are down 16.1% and 29.1%, respectively, for the year. However, there is a widespread belief that the holiday season would turn out to be favorable for investors and would aid in erasing losses for the year. Jim Cramer, the renowned host of CNBC’s Mad Money, thinks that the bears have started to retreat from the market as they have begun to show signs of exhaustion, and this can be a positive development for investors who have faced heavy losses in 2022.
One of the significant upcoming developments is the December meeting of the Federal Reserve’s members to determine the way forward. Experts believe that the Federal Reserve would move away from the 75 basis points (bps) interest rate hike that has been implemented for the past four consecutive times. Instead, the institution would taper down the increase to 50 bps. It would be the seventh interest rate hike for the year if approved. Such a cycle was observed in the early 1980s when the US economy was trying to combat the impact of rising global crude oil prices. While increasing benchmark interest rates aids the Federal Reserve in controlling inflation, it increases unemployment, which also falls under the purview of the Federal Reserve. Experts believe that the Federal Reserve should stay on the path even if unemployment rises because out-of-control inflation for an extended period is not suitable for the economy.
In these circumstances, individuals are actively looking for ways to protect their purchasing power and diversify their investments. Robinhood, the Menlo Park, California-based trading platform, has gained widespread prominence in the past two years and has more than 20 million funded accounts as of 2022. The platform provides commission-free trades to investors and also has a young demographic, as the median age of traders on the Robinhood platform is 32 years. Some of the popular stocks on Robinhood include Apple, Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN).
Photo by Joshua Mayo on Unsplash
Our Methodology
For this article, we first shortlisted the most notable stocks currently popular on the Robinhood platform. We then picked the top 10 of these stocks based on hedge fund popularity using Insider Monkey’s database of 920 hedge funds. These stocks are thus popular among both retail and institutional investors.
Best Robinhood Stocks to Buy According To Hedge Funds
10. NIO Inc. (NYSE:NIO)
Number of Hedge Fund Holders: 26
NIO Inc. (NYSE:NIO) is a Shanghai, China-based manufacturer of electric vehicles and charging solutions with a global footprint.
In a research note issued to investors on November 17, Jiong Shao at Barclays gave NIO Inc. (NYSE:NIO) stock a target price of $18 and maintained an Overweight rating. The analyst believes that the company is performing well in expanding its current product portfolio and upgrading its manufacturing capabilities. NIO Inc. (NYSE:NIO) delivered 31,607 vehicles during Q3 2022, which reflected a new quarterly high and a YoY increase of 29% from the same quarter last year. The company anticipates strong revenue in Q4 2022 as well due to the high consumer interest in the newly launched ET5 sedan. NIO Inc. (NYSE:NIO) is also working on lowering waiting times for customers by ramping up production. The company intends to deliver 43,000 to 48,000 vehicles during Q4 2022.
Horos Asset Management discussed its outlook on NIO Inc. (NYSE:NIO) in its Q1 2022 investor letter. Here’s what the firm said:
“At the beginning of April the CSRC (China Securities Regulatory Commission) announced possible changes in its regulation that would allow this inspection by foreign auditors, provided that the companies previously communicate to this body the state secrets that would be exposed, as well as the sensitive information that they might have to hand over, and the subsequent audit is carried out in a framework of collaboration with the CSRC. In short, a move in the direction desired by the SEC, although still far from the optimal result, that is, unrestricted access to information. While these negotiations between the two regulatory bodies are progressing, Chinese companies have to decide how best to preserve their interests. Other entities, such as the electric vehicle manufacturer Nio, have just started trading on this stock market.”
9. Carnival Corporation & plc (NYSE:CCL)
Number of Hedge Fund Holders: 30
Carnival Corporation & plc (NYSE:CCL) is a Miami, Florida-based cruise company with a fleet of 92 ships that cover 700 ports globally. The company intends to add eight more ships to its fleet by 2025.
Carnival Corporation & plc (NYSE:CCL) hosts 13 million guests annually and accounts for nearly 50% of the global cruise market as of 2022. On November 14, Robin Farley at UBS increased the target price for Carnival Corporation & plc (NYSE:CCL) from $8 to 16 and maintained a Buy rating. The target price reflects a potential upside of over 68% from the closing price as of November 25. The analyst thinks that the booking volume has been significantly high after all the COVID-19-related restrictions were removed in the last eight weeks. Experts believe that Carnival Corporation & plc (NYSE:CCL) stock offers a turnaround story for prospective investors as the company is expected to post strong returns in 2023, making it one of the best Robinhood stocks to buy.
Miller Value Partners shared its stance on Carnival Corporation & plc (NYSE:CCL) in its Q1 2022 investor letter. Here’s what the firm said:
“Amazingly, some companies like Carnival Corporation & plc (NYSE:CCL) (CCL, which we don’t own) made it back to its March 2020 lows when business was shut down with no sign of return. Carnival already resumed positive operating cash flow generation and disclosed stronger than historical bookings for 2023 at higher prices. The market focused on fear of recession and refinancing risk posed by higher rates.”
8. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 47
Ford Motor Company (NYSE:F) is a Dearborn, Michigan-based manufacturer of automobiles. The stock is at the eighth position on our list of the ten best Robinhood stocks to buy, according to hedge funds.
The company is making an aggressive transition towards producing electric vehicles. Ford CEO Jim Farley thinks EV manufacturing requires 40% fewer workers compared to conventional gasoline-powered vehicles. This will provide Ford Motor Company (NYSE:F) the opportunity to build numerous parts in-house instead of procuring from outside with the same labor force. EV sales are gaining traction in the US, as 6,261 units were sold in the US in October 2022, reflecting a YoY increase of 119.8%. Experts believe that more than 50% of the cars sold in the US will be electric by the end of this decade. The US government has encouraged auto manufacturers to aggressively pursue this target through the Inflation Reduction Act (IRA) of 2022.
Here’s what Leaven Partners said about Ford Motor Company (NYSE:F) in its Q3 2022 investor letter:
“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Ford (NYSE:F), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”
Fisher Asset Management raised its stake in Ford Motor Company (NYSE:F) by over 4000% during the third quarter of the year.
7. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 69
Costco Wholesale Corporation (NASDAQ:COST) is a Washington-based membership-only big-box retailer. The company is the third biggest retailer in the world through its presence in 46 states of the US and across four continents. Costco Wholesale Corporation (NASDAQ:COST) has not increased its membership price for the past five years.
Costco Wholesale Corporation (NASDAQ:COST) stock has lost only 7.7% of its value since the start of this year, as opposed to the double-digit losses for the broader market. Experts believe that Costco Wholesale Corporation (NASDAQ:COST) could be an ideal candidate for a stock split as the nominal value of its shares has surpassed the $500 level. Given the growth outlook of the company, it could even surpass the four-digit mark within a short period. If Costco Wholesale Corporation’s (NASDAQ:COST) stock crosses the $1,000 level, it could lose its position in the Dow 30 Index as it is a price-weighted index.
In its Q3 2022 investor letter, Cooper Investors shared its bullish outlook on Costco Wholesale Corporation (NASDAQ:COST). Here’s what the firm said:
“The US economy continues to run hot – the labour market is extremely tight and a number of executives we spoke to described their challenges in retaining staff and preventing competitors from poaching talent. Industrial companies in particular continue to see record backlogs, with the easing of logistics and supply chain constraints only just starting to have an impact on deliveries and lead times.
In terms of inflationary pressures, the vast majority of our holdings have been able to leverage strong market positions and stakeholder relationships to push pricing through in 2022 such that minimal impact to earnings has occurred. Clearly this is not a lever than can be pulled indefinitely but the more experienced management teams have kept some of their powder dry. Our meeting with management at Costco in Seattle was memorable for several reasons but one was their latent ability to increase member pricing which they have not done in over 5 years (and thus likely to do in 2023)…
…To conclude we’ll return to our meeting with Costco mentioned earlier. The business quality is no secret after decades of incredible execution, but the meeting gave us renewed conviction around Value Latencies in terms of the runway for growth, the focus on enhancing customer value, Costco’s vast buying power (it purchases 30% of the world’s jumbo cashews as one example) and management’s feral focus on the business model and cost discipline.”
6. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 88
Tesla, Inc. (NASDAQ:TSLA) is an Austin, Texas-based company involved in the manufacturing of electric vehicles.
Since August 2022, Tesla, Inc. (NASDAQ:TSLA) stock has lost 30% of its value, and experts believe that it provides an attractive entry position for potential investors. Adam Jonas at Morgan Stanley thinks that the bearish sentiment on Tesla, Inc. (NASDAQ:TSLA) could test the bear case of $150, and at this price point, the stock would be trading at a 2025 price-to-earnings multiple of 25x only. This would be a great multiple to go long on a company that is self-funded and provides an attractive top-line growth opportunity of 20% to 30% due to the rising demand for EVs globally. On November 23, Mr. Jonas gave Tesla, Inc. (NASDAQ:TSLA) an Overweight rating and a target price of $330.
Here’s what Baron Funds said about Tesla, Inc. (NASDAQ:TSLA) in its Q3 2022 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) makes fully electric vehicles (EVs), related software offerings, solar and energy storage products, and battery cells. After a tough second quarter that included a prolonged shutdown of one of Tesla’s key manufacturing facilities in Shanghai, the company demonstrated a significant 40% sequential increase in production volumes resulting in another quarterly record of production and deliveries. Despite the second quarter complexities, inflationary pressures, and production ramp-up of two new facilities (Berlin and Austin), the company exceeded Wall Street expectations in the second quarter. It maintained healthy 26% normalized gross margins, achieved industry-leading 18% adjusted operating income margins, and has generated over $14 billion of cash from operations over the past year. Moreover, due to Tesla’s high level of vertical integration and U.S. manufacturing capacity, the company is expected to be one of the key beneficiaries of the Inflation Reduction Act, qualifying for significant manufacturing and consumer-related incentives. We believe these incentives can add up to tens of billions of dollars over the coming decade, while also enhancing Tesla’s competitive advantage versus other automakers. The company also held its second artificial intelligence day, which presented continued advancements in its vehicle self-driving program and showcased its rapidly evolving humanoid robot developments (check out the Optimus videos on YouTube). We continue to believe Tesla is well-positioned to benefit from complementary tectonic shifts in the automotive industry, including electrification, autonomous driving, and shared mobility. And, yes, Tesla is still effectively debt free, with over $18 billion of cash on its balance sheet, and investors are even speculating about a stock buyback, a far cry from worries of bankruptcy just a few years ago.”
In addition to Tesla, Inc. (NASDAQ:TSLA), stocks such as Apple, Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN) are also on our list of the 10 best Robinhood stocks to buy.
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Disclose. None. 10 Best Robinhood Stocks to Buy According To Hedge Funds is originally published on Insider Monkey.
