Robinhood’s “100 Most Popular” is a great dumb money consensus

I hate to break the news but most Robinhood users are inexperienced and not logically driven traders. The nature of user base, young and technically oriented, combined with the nature of placing quick trades analogous to impulse buys, further supports this notion. Many people are likely swayed to pick stocks simply because they are popular. Considering the names that are willing to pay Robinhood for their trade flow, I suspect I am not the first one to identify this.

Since Robinhood displays the volume of users instead of volume of shares makes this data point on consensus more revealing. Since they do not support retirement accounts, this also signals this money is more speculative. You will find a long list of names that are both widely used services and amazing performers over the last cycle. All the bait needed to attract novice heat chasers.

The application also focuses on very near term performance and earnings, light on data and analysis. Again more indicative to a focus on recent momentum, as well as news/buzz on the services and ticker. This, assuming off app analysis is being dismissed, at least means fundamentals are largely thrown to the wind.

You will also find names close to their user base in the valley. The group think that brought massive amounts of users attracts them to the stocks they know. This compounding group think makes it easy to dismiss, thanks to human nature’s disdain, thinking about catastrophic downside risk for this sector. Thus identifying companies, tickers, with irrationally fanatic followers are hiding in plain sight.