Do you trust other investors enough to trade on their collective wisdom? If you don't, it's understandable. After all, crowds have a knack for getting overly excited and then suddenly swinging in the other direction without warning. You're often better off doing your own thing.
Still, sometimes the masses do get it right.
That's what makes the current list of the positions most commonly held by clients of brokerage firm Robinhood Markets (NASDAQ: HOOD) at least worth a look. Here's a rundown of four of the most familiar names the broker's customers have been buying of late.
For years, investors have been on the hunt for the "next Tesla" now that Tesla has mainstreamed the idea of electric vehicles. China's Nio (NYSE: NIO) may well be the one.
Nio has a lot of work to do before catching up with Elon Musk's iconic endeavor. The company delivered 24,439 battery-powered vehicles in the three-month period ending in September, a small fraction of the 241,300 automobiles Tesla delivered during the same quarter.
Look at the growth trajectory, though. Despite many global supply-chain challenges, Nio's third-quarter deliveries doubled on a year-over-year basis. Given the combination of this growth and ever-increasing support for electric vehicles, it's no wonder the speculative crowd that uses Robinhood's trading platform is falling in love with the company.
2. Sundial Growers
Sundial Growers (NASDAQ: SNDL) isn't exactly a household name, but for fans of cannabis stocks (and believers in cannabis' future), Sundial is familiar. The company grows and sells cannabis in a variety of marketable forms. It also offers financing options to related companies, and when the opportunity is right, it makes related investments.
The stock has been an especially poor performer recently. Shares of Sundial now sit 95% below their 2019 IPO price, having fallen 40% from last month's high made by another now-failed rebound effort. The stock is also just a few cents and a few bad days away from reaching new 52-week lows as well. However, none of that is deterring some speculators, who remain convinced the cannabis industry's future is a bright and underestimated one. If they are right, Sundial could enjoy a fantastic rebound from today's beaten-down share prices.
Video: Webull CEO on how his trading platform differs from Robinhood (CNBC)
Sundial Growers may not be a familiar name, but Ford Motor Company (NYSE: F) certainly is. Despite its centennial history and old-school industry, the bargain-hunting crowd at Robinhood can't get enough of the struggling carmaker.
Of course, these calculated bets on Ford aren't completely crazy. While it's a victim of the chip shortage and undeniably behind on the electric vehicle (EV) front, the deep-pocketed company is quickly positioning itself for the battery-powered future. The company says it will double its current annual EV production pace to 600,000 units by 2023, moving toward what looks like an eventual end to the manufacture of combustion-powered vehicles sometime in the 2030s. The company is supporting this paradigm shift by operating North America's largest public charging network, which also continues to expand.
While Ford's business evolution is arguably the biggest reason so many active investors are scooping up the stock, the stock's valuation of less than 10 times next year's projected earnings bolsters the bullish argument. Ford is a safe bet at these modest prices.
4. Robinhood Markets
Finally, though most of Robinhood's clients use the app's trading platform for no-cost stock trading, Robinhood Markets itself is proving one of its customers' most popular picks.
The world is changing, and stock brokerages are no exception. Investors are losing interest in paying a person to steer their portfolio and are also unwilling to pay any trading commission when they don't have to. The fact that Robinhood makes its no-cost trading possible via a simple-to-use smartphone app only further meets people where they are, both figuratively and literally -- phone-in-hand and in a hurry. Last quarter's revenue grew 35% year over year, buoyed by a 76% increase in the number of users accessing the app at least once per month. Total assets in its custody improved 115% year over year.
The company isn't profitable yet and is unlikely to work its way out of the red anytime soon. Investors love the trajectory it's on, though, and that's enough for now.
Keep it in perspective
Take this list of popular investments among Robinhood's customers with a grain of salt. Given the nature of the company's approach to providing brokerage services, it's not a stretch to suggest Robinhood appeals to a more speculative crowd. It's also a magnet for newer and smaller investors who may be prone to overly aggressive stock-picking. Just because they're interested in a particular stock doesn't mean it's a wise pick or the right pick for you.
Still, there's nothing wrong with at least taking a closer look at some of the names these traders have collectively chosen as their top prospects. Sometimes the crowd employs a great deal of collective wisdom, even if its individual members don't realize it.
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