Most investors probably wouldn’t allow a random stranger to pick stocks for them. After all, you don’t know whether that stranger is suitable to make such a phone call!
However, what about a few million people? Would you have a group of investors make a list of potential choices? Surprisingly (or maybe not surprisingly) a large enough audience will find many quality stocks that could be at home in most people’s portfolios.
With that premise in place, here we take a look at three of the stocks most owned by customers of the free trading platform Robinhood Markets. Not only are these investors big fans of blue chips, it turns out, but they also have the collective talent for spotting some of the market’s most compelling growth stories. Check them out and see if they work for you and your portfolio.
1. Amazon
Amazon (NASDAQ: AMZN) is the fourth largest company in the world (measured by market capitalization) and has achieved its enormous size by becoming the king of e-commerce. Its reach isn’t as deep abroad, but it accounts for about 40% of the vast e-commerce market in the United States.
However, the company has become so much more than a place to buy or sell goods online. In fact, e-commerce isn’t the biggest money maker; it’s cloud computing, which accounted for more than 60% of company revenue last quarter, after growing its bottom line 29% year over year.
Given Mordor Intelligence’s annual growth forecast of more than 16% through 2028 for the global cloud computing market, cloud services should become an even more important profit center for Amazon.
That said, Amazon’s online shopping platform is also changing for the better. The business model no longer serves as a middleman or online retailer. It’s now an advertising platform that generated nearly $12.1 billion in ad revenue in the third quarter alone. That’s an improvement of 26% year over year.
And there is likely much more such growth to come. Market researcher Insider Intelligence expects that Amazon’s advertising business will be 50% larger by 2025 than it is today.
Connect the dots. There are a lot of different things going on at the company right now, and they’re all bullish.
2. Catalyst drugs
Catalyst pharmaceutical products (NASDAQ: CPRX) is not as popular among Robinhood’s brokerage customers as Amazon. It’s not even a household name. However, it is one of the most popular biopharma choices among Robinhood users, and for good reason.
Catalyst’s drug portfolio does not consist of blockbusters; drugs that generate annual sales of at least $1 billion. But that’s kind of the point. The company’s mission is to “improve the lives of people suffering from rare diseases, often without any therapeutic options.”
These markets may be relatively small, but they are also not very competitive. With the right scientific knowledge, Catalyst can be the big fish in a small pond.
And the strategy works. Sales are set to grow by more than 80% this year thanks to the company’s acquisition in early 2023 of commercial rights to sell the antiepileptic drug Fycompa.
Further boosting sales is the respectable growth of Firdapse, which is used to treat a neuromuscular autoimmune disease called Lambert-Eaton myasthenic syndrome (or LEMS). And just last week, Santhera Pharmaceutical products Agamree was approved by the Food and Drug Administration as a treatment for Duchenne muscular dystrophy. It is important for Catalyst shareholders because the biopharmaceutical industry now also has the rights to commercialize this drug.
None of these indications point to multi-billion dollar revenue opportunities. And Catalyst clearly does more in purchasing than in its own drug development; it is not the usual biopharmaceutical business model.
However, it is a lower risk, higher reward approach that works for the company and its shareholders. There is added value through its expertise and experience in the market for therapies for rare diseases that are underserved.
3.Adobe
Finally, add the technology name Adobe (NASDAQ: ADBE) add to your list of popular stocks among Robinhood customers that you might want to scoop up for yourself.
You probably know the company as the name behind digital imaging software Photoshop or PDF file management tools. Adobe still offers and updates both, but what has changed dramatically is the way it sells these solutions.
While this software is still a one-time purchase, most customers now opt for the subscription versions of these tools. This cloud-based software is not only portable, but always up to date with the latest features and solutions.
With this goal in mind, Adobe now generates $14.6 billion in annual recurring revenue. That’s roughly 80% of total annual sales now being collected like clockwork.
That said, it’s worth noting that Adobe is so much more than PDFs and Photoshop these days. It offers a robust suite of services that most businesses need.
For example, the Creative Cloud platform allows users to generate images from scratch using artificial intelligence, record audio, create animations, and access a large library of stock photos from a single suite.
The Experience Cloud focuses on a slightly different part of the business market. Businesses looking to build dynamic websites, collect digital customer information, manage marketing campaigns and more will find that Adobe has something to offer.
The subscription-based model’s recurring revenue typically grows at a relatively slow pace. However, it is rising at a consistent pace even under challenging conditions because access to these software suites is difficult to give up once employees start using them. That’s a big reason why Adobe stock has held up so well lately, while most other stocks haven’t.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Adobe and Amazon. The Motley Fool recommends the following options: long January 2024 $420 calls at Adobe and short January 2024 $430 calls at Adobe. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.