Retail investors have been putting their money to work on Wall Street alongside institutional investors for over a century. But we’ve never seen retail investors rock the proverbial boat like they did in 2021.
In particular, these relatively young and / or newbie investors have found a home with the Robinhood online investing app. Last year, around 3 million people signed up with Robinhood to take advantage of commission-free transactions and fractional investing.
Sadly, Robinhood investors have been known to hunt and influence penny stocks, meme stocks, and other horrible businesses. Many companies in Robinhood’s ranking for July should be avoided like the plague.
But that doesn’t mean all of Robinhood’s inventory is a problem. Among the sea of underperforming companies that fill the rankings are a trio of ultra-popular, unstoppable Robinhood stocks that investors can buy in July.
One of the dominant stocks that you’ll find in Robinhood’s top 10 fairly regularly is the e-commerce giant. Amazon (NASDAQ: AMZN). Although it recently hit a new all-time high, Amazon’s operating cash flow growth suggests it could triple by the middle of the decade.
As you’ve probably heard by now, Amazon is a heavyweight in the ecommerce space. It controls about $ 0.40 of every $ 1 spent online in the United States, which more than quintuple the nearest competitor in terms of share of online sales, Walmart, according to eMarketer. Being the go-to shopping destination also helps increase advertising revenue.
But in a general sense, the retail margins aren’t that impressive. To combat very thin margins, Amazon has pushed its Prime subscriptions. The signing of over 200 million people worldwide to Prime has given Amazon tens of billions of additional revenue that it can use to undermine traditional retailers and secure even more online sales share.
Of course, the key to Amazon’s share price potentially tripling to over $ 10,000 per share by 2025 is its cloud infrastructure service, Amazon Web Services (AWS). AWS accounted for nearly a third of global cloud infrastructure spending in the first quarter, per Canalys. Cloud infrastructure is also, arguably, still in the early stages of its growth.
For Amazon, AWS represents a path to significantly higher margins than retail or advertising revenue. Although it accounts for one-eighth of total sales, AWS regularly produces half or more of the company’s operating profit. As AWS becomes an integral part of Amazon’s growth, its operating cash flow will skyrocket.
Bank of America
Another high-quality Robinhood stock that should prove unstoppable in the long run is Bank of America (NYSE: BAC).
While most bank stocks posted solid growth in the second quarter, BofA displayed a bit of a stench that surprised Wall Street. In particular, the company blamed the decline in long-term yields on lower than expected net interest income. Among the big banks, BofA is the most sensitive to the interests of all.
While that might sound like bad news, it’s actually fantastic. Investors are getting a rebate on Bank of America following its earnings report, while all economic indicators suggest higher interest rates are inevitable. According to BofA, a 100 basis point parallel shift in the interest rate curve would add $ 8 billion in net interest income over the next 12 months. While this change is unlikely to happen in 12 months, the potential for future growth in BofA’s net interest income is tantalizing.
Another thing to note is that we have seen four consecutive quarters of declining net expenses, which have almost been halved from $ 1.15 billion to $ 595 million. Without digging too deep into the weeds, Bank of America’s credit and lending quality has improved several times from what it was a decade ago.
In addition, it has done a great job of controlling its operating expenses and pushing for digitization. In the quarter ended June, a record 40.5 million people were digital banking customers, with 44% of sales made digitally (via mobile or desktop). As more people change their online banking operations, Bank of America is free to consolidate some of its branches and reduce its non-interest charges.
BofA won’t offer breathtaking growth like Amazon, but it does have the look of a company that will line the pockets of its long-term investors.
An unstoppable third Robinhood title that could generate big gains in July and beyond is the Detroit auto giant General Motors (NYSE: GM).
Historically, auto stocks have been companies that trade at incredibly low price-to-earnings (P / E) ratios, given the cyclical nature of the industry and the heavy debt companies often carry. However, two major catalysts are poised to push GM significantly higher.
As some of you may have guessed, the push towards alternative energy vehicles is a decades-long growth opportunity for General Motors. The original plan was for GM to spend $ 20 billion on alternative energy technologies by 2025. But in November of last year, with the pandemic still raging, the company increased its commitment to spend $ 27 billion. dollars in electric vehicles (EVs) by 2025, with plans to launch 30 new electric vehicles globally during that time. With consumers and businesses trading in their vehicles for more environmentally friendly options, this could represent a decades-long replacement cycle.
The other big catalyst for General Motors – which is based on its desire to electrify its fleet – is China. The Society of Automotive Engineers of China expects half of all vehicles sold by 2035 in the world’s largest automotive market to be alternative energy. With China’s electric vehicle industry still emerging, a massive market share is up for grabs. During the second quarter, GM shipped north of 750,000 vehicles to China, showing that it already has a strong presence in the country.
With GM’s sales growth set to accelerate in the coming years, a forward P / E ratio of 8 is just too cheap for a business capable of generating a cargo of revenue.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.