Robinhood took the retail investing world by storm in 2014 when they launched their mobile app allowing users to invest in stocks with zero fees. Since then, the business has grown significantly and delivered the ability to trade options and cryptocurrencies for free. This ease of use has attracted over 10 million users, many of whom are young investors looking to make bank on companies without being burdened by commissions every time they want to enter and/or exit a trade. This industry-changing offering has led to major brokerages eliminating nearly all fees, but it also has fueled a new generation of speculators in the stock market. This has led to some interesting data of what Robinhood users have been buying during the crash and subsequent assumption of a “v-shaped” recovery brought on by COVID-19.
Robintrack is a tool that compiles data to show how many Robinhood users are holding a stock at a given time. By overlaying the chart of user ownership with the price, investors can view the relationship between the two to understand how Robinhood users’ sentiment changes over time with fluctuations in stock prices. By taking a look at many of the most beaten down names from the sectors most severely impacted from COVID-19 and social distancing/economic shutdowns, it is clear to see that Robinhood’s predominantly millennial user base is living up to the BTFD (buy the f*cking dip) lifestyle.
Some of the most affected companies from COVID-19 include travel and leisure related businesses that require gathering in large, public groups, such as airlines, cruises and casinos. Last weekend during Berkshire Hathaway’s Annual Shareholder’s Meeting, Warren Buffett revealed that he had completely sold out of all his positions in US airlines. Buffett began accumulating shares of Delta, United Airlines, American Airlines and Southwest Airlines in 2016. Airlines were seeing record numbers in volume of shares traded over the last few weeks and now we know why. The question is: Who was buying all of Buffett’s shares? The answer: Robinhood users.
According to Robintrack, there are nearly 460,000 Robinhood users holding shares of Delta, the sixth highest held name on the app, as of May 7, 2020. As seen in the chart below, there is a strong correlation between the drop in Delta’s stock price and the amount of Robinhood users buying the stock.
For most of 2019, the number of users hovered around 15,000. However, once COVID-19 began to affect the stock market and as Delta’s share price fell, Robinhood users piled into the airline. The same went for American Airlines, the fifth most held name on Robinhood. The same time period of February 2020 to present saw the number of users holding rise from about 11,000 to nearly 500,000.
Carnival Cruise Lines
This trend of buying beaten down stocks is not exclusive to the airline industry. That being said, there is a clear “dash to buy trash.” The rate of which users added the likes of Carnival Cruise Line, Royal Caribbean and Exxon Mobil (companies whose businesses have been materially affected) far exceed those of Apple, Amazon and NVIDIA, whose stock prices took a beating but have since recovered quite nicely.
Take a look at Carnival Cruise Line below. In January of this year, about 3,000 users on Robinhood were holding, but as cruises around the world have been cancelled, there are currently 426,414 users holding $CCL. Just like Delta, even as the stock price has stabilized, the number of users holding continues to increase sharply, signaling investors are betting on the long-term recovery of these travel-related names.
In contrast, Amazon only added around 30,000 users holding since February, most of which notingly came once Amazon began to breakout to all-time highs as it became apparent how much the average family was relying on the company’s delivery services for both essentials and groceries.
United States Oil (ETF)
Two oil-related names have seen a drastic increase in the amount of Robinhood users holding over the past few months, but for far different reasons. The United States Oil Fund, or ticker USO, played out like a movie — dropping from $6 to nearly $2 in a matter of days as the May contract for West Texas Intermediate crude oil traded well into negative territory on April 20. Without going into too much detail, as oil futures can be quite complicated, Robinhood users poured into $USO as the price of oil was dropping, betting on oil to rebound. The thought process was that the fund perfectly tracks the price of oil, which it does NOT do.
Investment vehicles like this are best used for short-term trades. But as oil prices plummeted, and with it the stock price of $USO, Robinhood users holding it shot through the roof, from a mere 8,453 in early March to 220,905 on April 28, coincidentally the (current) bottom in the oil market. Since then, the fund has re-structured their holdings so they are not as leveraged to near-term contracts, and also did a reverse stock split to add to the mess. In short — know what you trade!
While $USO fell somewhat in stride with the price of oil, Nordic American Tankers did the opposite, going from $2.46 in March to a 52-week high of $9 in April. The rise in $NAT was due to oil producers needing a place to store the oil being extracted from the ground as demand dried up worldwide with economies shut down and vast amounts of people sheltering in place and working from home. So when companies needed a place to store their oil, tankers came into play. Jim Cramer deserves some credit here, as he explained this investment thesis to Barstool Sports’s Dave Portnoy, aka Davey Day Trader Global, in March while the stock was still under $3.
Nordic American Tankers
While we have covered a clear race from Robinhood users to buy beaten down names, it is worth noting that there is a general trend of most stocks seeing an increase in users holding since March’s crash. In early March as Robinhood was experiencing broad outages for two days, they attributed part of the issue being record volume and record account sign-ups. Simply put, the more users that sign up for Robinhood, the more users popular and trending stocks will have holding.
As the market continues to find its footing amidst crazy economic conditions, tools such as Robintrack can be very useful in determining the sentiment of retail investors, giving you the data to make your own conclusions and investment decisions. Will all of these new holders of airlines and cruise lines hold all the way through the industries’ recoveries over the next several months and years? Time (and Robintrack) will tell.