What Is The Robinhood App and Who’s Using It?
For the case you aren’t familiar with the Robinhood App, some words about it. It is a famous investing application that introduced commission-free trades some years ago. People can invest per smartphone in stocks, ETFs, cryptocurrencies, and options. Also, with tiny amounts. It is very popular among young people, Z or Y generations (millennials). In December 2019, the application had approximately 10 million users. In spring 2020, in the coronavirus-crash, another 3 million registered.
Do you remember the 1,200 USD rescue checks of the US government? Many people bought stocks for it, not food. By a report of CNBC:
Tracking Millions of Small Robinhood Investors
But what are buying all these people in the Robinhood App? We have some information about it, the data is public. The site Robintrack.net is providing charts, you can search for the ticker codes.
Robintrack keeps track of how many Robinhood users hold a particular stock over time. It generates charts showing the relationship between price and popularity and compiles some lists using the data.
I found the results pretty interesting, in particular, the “leaderboard”. My assumption was young people are buying modern, high-tech companies in the first place. But the top list is led by industrial companies like Ford, General Electric. Flight industry titles like American Airlines and Delta Air Lines. Also, Disney is on the list, the entertainment company with a lot of bad news this year. (Like closed cinemas and theme parks.)
Is Robinhood a Bargain Hunter?
The charts show Robinhood investors are buying beaten-down stocks in plagued industries. They seem to be bargain hunters, shopping for items sold at cheap, discounted prices. The charts show that the further the price falls, the more people buy from the most popular stocks.
But the big question is whether these companies will go bankrupt. For example, if the virus crisis will last a long time. If new waves of the coronavirus-infection will come. “Don’t try to catch a falling knife” – the old phrase reminds us of that. A “falling knife” stock can quickly rebound, but the company may also lose all its value, go bankrupt.
Is Robinhood a Contrarian?
But we know Robinhood users aren’t the whole market. They may be a group with a large number but with a small capital strength. They also seem to be “contrarian investors”, because they are buying when other groups are selling.
But since most of them are reportedly young and novice, they may not act so consciously. Perhaps a contrarian strategy can be built on these Robinhood data. We will probably see this in a few months.