8. Robinhood Markets, Inc. (NASDAQ:HOOD)
Number of Hedge Fund Holders as of Q4: 79
Headquartered in Menlo Park, California, Robinhood Markets, Inc. (NASDAQ:HOOD) is a financial services company popular for its electronic trading platform that is used as a cryptocurrency wallet. Mark Cuban, former owner of the Dallas Mavericks, previously allowed fans to purchase team merchandise using Dogecoin, one of the digital assets available for trading on Robinhood’s platform. In 2021, he also disclosed that he personally owned nearly $500 worth of the cryptocurrency himself.
By the close of Q4 2023, hedge fund interest in Robinhood Markets, Inc. (NASDAQ:HOOD) had grown significantly, with 79 hedge funds holding positions valued at $4.62 billion, according to Insider Monkey’s Q4 2024 database. This marked a substantial increase from the prior quarter, where 36 hedge funds had investments totaling $2.19 billion. This rising institutional confidence set the stage for the company’s continued expansion and strong financial performance in the following year.
In Q4 2024, Robinhood Markets, Inc. (NASDAQ:HOOD) reported revenue surpassing $1 billion, bringing its full-year total to over $3 billion—marking a 58% increase from 2023. This impressive growth was largely fueled by the introduction of new offerings, including the Robinhood Gold Card, Robinhood Legend, and its expanding derivatives business, all of which cater to the company’s active trader base. These developments reflect Robinhood’s strategic focus on diversifying its product lineup and enhancing user engagement, which has translated into significant financial gains.
Robinhood Legend, one of its latest products, is already generating $50 million in annualized trading revenue. Customer deposits also hit a record high of $50 billion, reflecting a nearly 50% increase. Additionally, the number of subscribers to Robinhood’s premium Gold service surged by 80%, with approximately 10% of all users enrolled. Notably, over 30% of new customers in Q4 2024 opted for Gold, signaling strong demand for the platform’s premium features.
Baron FinTech Fund stated the following regarding Robinhood Markets, Inc. (NASDAQ:HOOD) in its Q4 2024 investor letter:
“We also initiated a position in Robinhood Markets, Inc. (NASDAQ:HOOD) during the quarter. Robinhood is an online brokerage that offers free trading across stocks, options, and cryptocurrencies. Baron Capital has long invested in successful brokerage companies such as Charles Schwab, Interactive Brokers, and LPL Financial. We first met Robinhood in 2021 during their IPO process. Customers were using Robinhood because of its low-cost offering and simple user interface that makes trading easy and accessible. While we were impressed with management’s success in building a modern brokerage with a large user base and strong product-market fit, we were hesitant to invest at a cyclical peak in trading activity and fintech valuations during the middle of the COVID-era meme-stock craze. Following the IPO, trading activity soon normalized and the share price fell significantly.
After revisiting the company this past year, we believe Robinhood is a much-improved business today. Departing from its early reputation as a gamified enabler of retail speculation in meme stocks, Robinhood has been professionalized and transformed into a more durable company that can reliably gain market share and grow earnings over the long term. Some examples of the company’s maturation include: 1) providing retirement accounts that should create larger and longer-lasting client relationships; 2) launching the Gold subscription service that delivers additional value to Robinhood’s best customers; 3) introducing the web-based Legend platform that offers more advanced features for active traders; and 4) exercising expense discipline to right-size the cost base and deliver profitability alongside growth. These efforts have delivered strong financial results, with Robinhood generating annualized net new asset growth of 29%, custodied asset growth of 76%, and an adjusted EBITDA margin of 42% in the most recent quarter. Average revenue per user has also increased significantly from $60 in 2022 to $107 in the first nine months of 2024 across more than 24 million funded accounts. The customer retention rate is a very strong 95%, up from 80% three years ago…” (Click here to read the full text)
