Robinhood MarketsThe trading app was the talk of Wall Street in 2021, generating huge buzz and fueling the meme stock trading frenzy that catapulted names like GameStop and AMC Entertainment Holdings towards the Moon. Robinhood has brought stock trading to everyday investors through its easy-to-use trading app and allows users to take a peek at the most popular stocks among its traders.
While you don’t want to buy old stocks from this list, it can provide some insight into stocks that retail traders are piling into. Combining this information with what millionaire fund managers buy can uncover attractive investment ideas. Two stocks are gaining popularity among Robinhood and the top fund managers are PayPal Credits (PYPL 1.48%) and Coinbase global (PIECE OF MONEY 2.08%).
In the second quarter, DE Shaw’s David Shaw bought 3.9 million shares of PayPal, nearly doubling the hedge fund’s position. Bridgewater Associates, the world’s largest hedge fund, added 1 million shares.
PayPal has been a big winner from the pandemic, which further pushed online shopping and heralded a new era of widely available contactless payment methods. In two years, PayPal added 122 million new accounts and increased revenue by 43%. Management realized that this rapid growth could not continue and lowered the company’s expected earnings for this year several times.
After a disappointing year for PayPal, activist investor Elliott Investment Management added a $2 billion stake in the fintech company to help turn things around. One of its first steps is to cut costs and reinvest those savings in its high-margin, high-conviction opportunities. The company expects to cut costs by $900 million by the end of the year, with total savings of $1.3 billion by next year.
PayPal is one of the largest players in the digital payment industry and is currently experiencing growing pains. As a result, the stock is trading at a price-to-sales ratio of just 4.3 – its lowest valuation since its IPO, and now could be the perfect time to grab this growth stock while it’s still on the rise. sale.
2. Coinbase Global
In the second quarter, Jim Simons’ Renaissance Technologies added 3.2 million shares in Coinbase, while Two Sigma Advisers’ David Siegel added nearly 3 million shares.
Coinbase is another fallen growth stock that found success amid the pandemic when cryptocurrency prices exploded in value. This has been a tough year for the cryptocurrency exchange, with Bitcoin down 54% since the start of the year as investor interest wanes. Trading on the Coinbase platform fell 34% and the company went from $2.4 billion in net profit in the first half of last year to a loss of $1.5 billion this year.
Coinbase has been a popular stock with short sellers, such as Jim Chanos. Chanos claims that trading fees in the crypto industry will likely decrease over time. These fees represent a significant portion of Coinbase’s total revenue. The firm is looking to cut costs and shift to service-related revenue, which could help soften the blow if trading fees drop.
On a positive note, Coinbase announced an agreement with black rock, the world’s largest asset manager, to provide its wealthy institutional and private clients with access to Coinbase’s crypto-trading platform. This could be a massive win for Coinbase if institutional investors embrace crypto.
Coinbase has had a tough year, but with the stock down 80% since its IPO and a new deal with BlackRock, now could be a good time to build a small stake in the crypto exchange.
Courtney Carlsen has no position in the stocks mentioned. The Motley Fool holds positions and recommends Coinbase Global, Inc. and PayPal Holdings. The Motley Fool has a disclosure policy.