3 must-have growth stocks for Robinhood investors
Investing in 2020 has been quite an adventure – and there are still 2 1/2 months until the end of the year. So far we’ve seen a record-breaking 34% drop in price S&P500 that lasted less than five weeks, as well as the fastest rebound in history from a bear market bottom to new highs.
While this volatility has been a boon to long-term investors, it has also proven quite enticing to short-term traders.
Online investing app Robinhood, known for offering new members commission-free trading, fractional stock investments, and free shares of random stocks, has been particularly adept at attracting these short-sighted traders, many of whom are young or inexperienced investors.
On the one hand, it’s good news that young people are putting their money to work in the stock market. After all, over the long run, there hasn’t been a better wealth creator than stocks. However, Robinhood has failed to provide these newer investors with the knowledge and tools they need to be successful over the long term. As a result, far too many of its members chase so-called growth stocks that turn out to be growth stocks terrible company.
stacking growth stocks is a fantastic strategy for younger investors as long as they intend to hold it for the long term. With millennials having time on their side, buying into innovative, high-growth companies gives them their best chance of generating game-changing investment returns.
With that in mind, here are three growth stocks that I consider must-owns for Robinhood investors.
fintech stock square (SQ 7.07% ) is maybe the most exciting stock in the entire market now, and it’s not a company you have to twist your arms at to encourage young investors to buy. That’s because Square’s peer-to-peer payments platform Cash App is initially targeting a younger audience.
square The bread-and-butter business segment is the seller ecosystem. The company has provided point-of-sale devices, credit, and analytics to businesses for nearly a decade. Between 2012 and 2019, gross payment volume (GPV) on its platform grew from just $6.5 billion to $106.2 billion. Since Square’s seller ecosystem is primarily powered by merchant fees, growing GPV and increased usage by medium-sized and large businesses could really drive up fee collection.
But it’s the Cash App that will be Square’s knight in shining armor for the long haul. We saw a push toward digital payments well before the 2019 coronavirus disease (COVID-19) pandemic. Since cash is not only considered obsolete today, but also a harbinger of germs, the desire for digitization is even greater.
Cash App monthly active users over a 30-month period from the end of 2017 to June 2020 more than quadrupled to 30 million. Additionally, 7 million users are now using Cash Card – a traditional debit card linked to users’ Cash App balance. With the Cash App, Square can collect merchant fees via Cash Card. Square also uses it to collect transfer fees to and from Cash App and traditional bank accounts, as well as Bitcoin-related investment/exchange fees.
Square could be the fastest-growing financial stock this decade, making it a must-have for young investors.
Within Healthcare Robinhood Investors would be wise to create stocks of the medical device manufacturer DexCom (DXCM 8.61% ).
Although medical device manufacturers constantly struggle with commercialization and competition, these are not major concerns for DexCom, a world leader in continuous glucose monitoring (CGM) systems. DexCom’s CGM devices allow diabetics to continuously monitor their blood glucose levels without having to prick their fingers. These devices help patients better control their blood sugar levels and work hand-in-hand with an insulin pump.
Why DexCom? While I do not wish ill health on anyone, there are 34.2 million diabetics in the US alone (that’s more than 10% of the US population), with an additional 88 million people ages 18 and older showing signs of prediabetes. The number of people with diabetes is increasing, not decreasing, suggesting that DexCom’s devices will find a growing audience in the coming years.
Best of all, DexCom is set up as a monthly subscription service. Subscription earnings are very transparent and predictable; It’s responsible for keeping DexCom’s gross margin well above the 60% mark.
Investors should expect DexCom’s innovations and high-margin revenue streams to grow its revenue by nearly 20% annually for the foreseeable future. That is Growth appreciated by young investors.
One final must-have growth stock for Robinhood investors is the cloud-native cybersecurity company CrowdStrike Holdings (CRWD 13.01% ).
Cybersecurity companies offer what has become a basic service. Hackers and robots don’t take vacation days, and they don’t care if the global economy goes into recession. The coronavirus pandemic has pushed more businesses into an online/cloud environment than ever before, and they will rely more than ever on cybersecurity solution providers like CrowdStrike to protect their data and that of their customers.
CrowdStrike’s cloud-based Falcon platform has helped set it apart. falcon is powered by artificial intelligenceand gets smarter with every new CrowdStrike customer. Being cloud-native also enables seamless threat response at a generally lower cost than cloud protection in the office.
Signing up new customers is great, and CrowdStrike hasn’t had any issues with it for the past four years. What’s most impressive, however, is the growth in spending from existing customers. In the first quarter of fiscal 2018, only 9% of customers had at least four cloud module subscriptions. Beginning in the second quarter of fiscal year 2021 57% of its customers Had at least four cloud module subscriptions. CrowdStrike grows with its customers, with CrowdStrike’s margins getting their biggest boost from existing customer add-ons.
Between fiscal 2020 and fiscal 2023, Wall Street expects the company to do so around three times the turnovermaking it the perfect innovative technology stock for young and inexperienced investors.
This article represents the opinion of the author, who may disagree with the “official” endorsement position of a Motley Fool premium advisory service. We are colourful! Challenging an investing thesis — including one of our own — helps us all think critically about investing and make decisions that help us be smarter, happier, and wealthier.