Every day I like to check what the wildly popular Robinhood tracker shows clients are buying. It's always easy and it's always revelatory because it tells you what these 12 million-plus customers like to own and what they like to trade.
Now I don't like to make judgments about what kind of people are buying what stocks. The predilection is to own the hottest stocks when it comes to popularity changes -- yes, you can get that granular. On Monday people were piling into both Tesla (TSLA) (yes, presumably on the way up in its epic $200 run) but also into something called Everi Holdings (EVRI) , a $5 stock of a company that makes all things related to gaming, including customer relationship marketing technologies.
I am sure there's a good story with Everi. The fact that it is losing money and disappointed in both sales and lack of profits doesn't deter anyone. The idea that it fell from $15 to $5 with a stop at $1 back in March (would it have gone negative if it were like an oil future?) seems to make it more attractive, not less, because it's cheaper. I don't know if anyone has visited its website because it starts with a kind of modernistic home page that says "Love Wins" and then, in small letters, "Financial Technology Solutions." And it has an actual pedigree: it's the merger between Global Cash Access and Multimedia Games, the old MGAM.
I think Tesla, again the number-one stock for a change in popularity, and Everi, the number two, actually share the same characteristics: you can dream about them. Tesla could go to $10,000 if it has a battery that goes a million miles without a recharge. Maybe Everi becomes the de facto choice for all sports betting. Maybe it helps the battered casino industry recover. Maybe it gets gamblers to go to its clients and not others.
The fact is, like the old Dan Hartman song, you can dream about it. And I actually like it as a long shot as it might win some big contracts, or, perhaps more important, other buyers might come in and take you out of your position because they like a customer relationship management story that has financial technology going for it.
Yep, Tesla and Everi, good specs both.
My actual complaint isn't about what's hottest, as represented by the popularity change rubric on the Robintrack site, it's about what's on the leaderboard, the stalwarts that aren't changing. Right now it's Ford (F) , then General Electric (GE) and then American Airlines (AAL) .
These are what I have a beef with.
I think these stocks are being bought because they are low dollar stocks with good brand names and few who are buying them are looking at the side that matters: the credit side. They are correct that Ford, GE and American are storied. But they don't see how much debt each has and how challenged they are. Take Ford. Just because it has a new Bronco and an F-150, who cares? It has a monster amount of debt. GE? Fallen angel that's attached to aerospace, again, with a big pile of debt and an ongoing restructuring. American? The airlines are trying to stay afloat and this one is the most troubled. The main reason you want to buy American is if you think there's going to be a vaccine.
I want people who are buying these stocks to rethink their approach . I absolutely accept that these companies were once great. I think that GE could come back as early as 2021's second or third quarter.
But if you really are attracted to low dollar stocks, you should skip these and buy fractional shares of high-quality stocks that are too big a dollar value for your tastes.
I know it sounds weird that I like the popularity change stocks more than the stocks on the leaderboard, but I want people to make money and the best stocks happen to be large dollar amount stocks, which can be purchased fractionally.
So, go for the hot ones, or go for the fractionals, but do not go for stocks of companies with bad balance sheets. Those are most likely to lose far more than any others you might buy.