Robinhood Markets‘ was the talk of Wall Street in 2021, creating tremendous buzz and fueling the meme stock trading frenzy that catapulted names like gamestop Y AMC Entertainment Holdings to the moon. Robinhood brought stock trading to everyday investors with its easy-to-use trading app and allows users to take a look at the most popular stocks among its traders.
While you don’t want to buy any old stocks on this list, it may give you an idea of what stocks retail traders are piling into. Combining this information with what millionaire money managers buy can reveal some attractive investment ideas. Two stocks that are gaining popularity among Robinhood and top money managers are PayPal Holdings (PYPL 1.48%) Y world coinbase (CURRENCY 2.08%).
In the second quarter, David Shaw of DE 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 was a big winner from the pandemic, driving more online shopping and ushering in a new era of widely available contactless payment methods. Over 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 on multiple occasions.
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 his first actions is to cut costs and reinvest those savings in his higher-conviction, high-margin opportunities. The company plans to cut $900 million in costs by the end of the year, with $1.3 billion in total savings for next year.
PayPal is one of the biggest players in the digital payment industry and is currently experiencing some growth woes. As a result, the stock is trading at a P/S ratio of just 4.3, its lowest valuation since going public, and now might be a great time to buy these growth stocks while they’re still for sale.
2. World Coinbase
In the second quarter, Jim Simons’ Renaissance Technologies added 3.2 million shares on Coinbase, while David Siegel at Two Sigma Advisers added nearly 3 million shares.
Coinbase is another falling growth stock that enjoyed success amid the pandemic as cryptocurrency prices exploded in value. This year has been a challenging one for the cryptocurrency exchange, with Bitcoin falling 54% since the start of the year as investor interest wanes. Trading on the Coinbase platform is down 34%, with the company going from $2.4 billion in net income in the first half of last year to a loss of $1.5 billion this year.
Coinbase has been a popular stock among short sellers, such as Jim Chanos. Chanos argues that trading fees in the cryptocurrency sector will likely decrease over time. These fees represent a significant portion of Coinbase’s total revenue. The company is looking to cut costs and shift toward service-related revenue, which could help soften the blow if business rates fall.
On a positive note, Coinbase announced a deal with black rock, the world’s largest asset manager, to provide its wealthy private and institutional clients with access to Coinbase’s cryptocurrency trading platform. This could be a huge win for Coinbase if institutional investors embrace crypto.
Coinbase has had a rough year, but with the stock down 80% since going public and a new deal with BlackRock, now might be a good time to build a small stake in the crypto exchange.
Courtney Carlsen has no position in any of the mentioned stocks. The Motley Fool has positions and recommends Coinbase Global, Inc. and PayPal Holdings. The Motley Fool has a disclosure policy.