26 JULY 2020

A few weeks ago we saw bankrupt companies like Hertz (HTZ) being bought up like mad.

I guessed that new retail investors, dubbed “Robinhood investors” were behind the buying. The truth is, I didn’t need to guess at all because I found a tool to see exactly what Robinhood investors are investing in.

Enter Robintrack!

Robintrack gathers data from the Robinhood API every hour to create graphs that track price and popularity over time.

It currently only tracks stocks listed on major US exchanges.

The best way to understand this tool is to play around with it, so I highly suggest visiting the sight and checking out the “leaderboards” and “popularity changes”.

Robintrack’s leaderboard

We are entering a new era of investing where more people have access to the stock market than ever before. Just 20 years ago, you could only find out how popular a stock was by its media presence and word of mouth. Now we have raw data perfectly formatted to be eye-pleasing so we can see exactly what everyone is buying.

In every bubble or overheated sector, certain asset classes get way more attention than they deserve. And in every depression, assets get way less attention than they deserve.

We value investors can take advantage of this “popularity gap” by buying the unseen and scaling out of the overseen.

By buying the unseen, you are positioning yourself early in a stock to take advantage of future bidders. By selling the overseen, you are cashing out at inflated prices and reducing your exposure to future crashes.

Robintrack makes the buying and selling decision making process easy because it tells us exactly how popular a stock is (at least on Robinhood). Take a look at the leaderboard.

Robintrack leaderboard

Top 20 most popular stocks on Robinhood

Does this mean we all should sell these stocks? Not really… Like most tools/formulas in investing, they are more “guides” than rules. We need to dig deeper into the fundamentals of each company to see which ones are “sells”, but at least Robintrack gives us a head start.

A lot of these stocks are popular simply because they are large American companies that are deeply entrenched in the lives of many Americans (most Robinhood users are American).

At first glance, I don’t think Disney (DIS), Apple (AAPL), Microsoft (MSFT), Amazon (AMZN) are fundamentally bad businesses. In fact, they are faring well through Coronavirus. But there’s no denying they’re likely overheated relative to other asset classes.

On the same token, Tesla (TSLA), GoPro (GPRO), Aurora Cannabis (ACB), Snapchat (SNAP) and Fitbit (FIT) are obviously overheated or worth selling, either because their valuations are sky high or because their businesses are plain garbage.

As you can see, Ronbintrack’s leaderboard serves as a decent blueprint to sniff out the over popular stocks.

Robintrack’s popularity changes

Robintrack’s popularity changes allow you to see the changes in popularity over a given period (lookback period). It also shows you the number of accounts at the start and end of the period.

Robintrack popular changes

Accounts with the largest changes in popularity (30 days)

With Tesla’s recent rise, it’s no surprise it’s at the top of the list. 210,555 more Robinhood accounts own Tesla compared to 30 days ago.

Sure, these investors helped bid Tesla to where it is now. But these aren’t strong hands. Do you really believe these 536,254 investors are stoic investors who can hold through bad news and volatility? I’m willing to bet these people aren’t diehard Tesla investors who are holding for the long-term. They’re likely people who FOMO invested after its initial run up to make a quick buck.

Going back to picking on Hertz, we can confirm that it was Robinhood investors causing the stock price volatility.

Robintrack Hertz price and popularity chart

Nobody bought this stock until it announced bankruptcy...

What’s become clear to me from looking at Robintracks’ charts is that Robinhood investors are buying flashy stories/news, not fundamentals. Stocks can go up (like Tesla) or announce bankruptcy (like Hertz) and become popular, but the only consistent thing is the increased media hype.

Eventually though, the market will return to normalcy. Overheated stocks will be sold off as people realize they aren’t worth the price and unloved stocks will be bought up so they reflect their real value. This is just how markets play out over the long run.

Thankfully, Robintrack helps us track how popular stocks are and hopefully I’ve added an extra tool to your toolbox. I will be writing about some unloved sectors soon, so stay tuned!

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