Robintrack Newsletter (6/8/2020)

A flood of investors to travel companies, a sign of things to come in music, a punishing week for weed and prospective coronavirus cures, and an ETF betting on sports gambling.

Jun 08, 2020

Good afternoon, it’s June 8, 2020. Welcome to the first edition of the Robintrack newsletter (better name pending). This is a cute lil’ newsletter that I have wanted to do for awhile, which aims to tackle trends and happenings in how millennials and Gen Zers are putting their money to work. In this weekly email, we’ll tackle 3 to 4 stories or topics that have to do with how investors are trading on stock trading platform Robinhood. If we’re feeling spicy, we might even cover how digital communities and platforms such as /r/wallstreetbets and /r/investing are weathering the current market conditions. Of course, with every story, we’ll try our best to link to some continued reading if you’re looking for that.

Flight of the airline stocks

If you had the foresight to pick up airline, car rental, cruise line, and other travel-related stocks during the big crash in February, last week might have been the start of your payoff. Some of the biggest gainers from last week were in the travel basket, a segment which was hammered after the coronavirus quarantine threatened to put the travel market into a stranglehold. Consequentially, a large number of investors decided to pick up equities in the category, which still trade at large discounts relative to their valuations pre-coronavirus.

66,568 new investors helped make American Airlines ($AAL) the second most-bought stock of last week on Robinhood. The pile of new investors came as the stock nearly doubled in the five days trailing June 5, largely due to optimism that American (among other airlines) would start flying a larger volume of flights sooner than anticipated.

Along with American, other airlines rallied on similar optimism. Among them were:

Delta ($DAL), which added 34.86% in the trading week and was the 7th most-bought stock on Robinhood last trading week. It added 33,853 new investors.

Spirit ($SAVE), which added 74.00% in the trading week and was the 10th most-bought stock on Robinhood last trading week. It added 28,684 new investors.

As a result of the upbeat outlook for the aviation industry, aircraft manufacturer Boeing ($BA) accompanied the rallying basket. Its rally came as nearly 22,739 new investors bought the stock, making it the 16th most-bought stock of the week. However, there are still legitimate concerns about the airliner’s new flagship plane, the 737 MAX, which has been grounded since two crashes led to a global halt in usage of the aircraft 15 months ago.

Alongside the prevalent airline rally were rallies of stocks in adjacent travel industries. Among them are cruise lines Carnival ($CCL) and Norwegian ($NCLH), which were the 6th and 11th most-bought stocks of the week respectively. Investors also picked up Hertz ($HTZ) during a rally, mostly centered on a risky bet that the struggling car rental company might be able to undergo a recovery. Hertz filed for bankruptcy two weeks ago. The stock rallied 825% over the past week.

It’s worth observing that many of these companies are rallying on the perception that, as quarantines ease in many markets, the companies will be able to resume revenue-producing activities. However, with legitimate concerns about a second wave of coronavirus in the making, travel stocks might be at risk of falling ill again.

A music giant enters the fold

Just two years ago, music streaming giant Spotify ($SPOT) direct listed to reasonable reception from investors. The stock struggled to find footing in the months after its IPO. However, the stock has found new life as it has rallied throughout the coronavirus pandemic. Since February, the stock has rallied nearly 25%.

On Tuesday, another big music industry player returned to public markets for the first time since 2011, the year that Spotify launched in the United States. Warner Music Group ($WMG) re-listed its stock, due largely in-part to the increasing margins and financial fruit yielded from music streaming and digital music. Since 2016, revenue from digital streaming has grown annually by 39%. Over the last decade, digital streaming revenues have become the lion’s share of revenue for major labels, enabling them to connect with fans and push content with less friction. This has consequentially enabled companies like Warner to flaunt hefty profit margins of more than 50%.

However, though Warner is first of the three major labels to list, its IPO is more an augury than a fundamentally groundbreaking event. The largest of the three major labels, Universal Music Group, is looking to enter the fold later this year. In December 2019, it sold a ten percent stake to Tencent Holdings at a price of $3 billion. At UMG’s new $33bn valuation, it is nearly twice as big as Warner.

Since IPO, 15,000 Robinhood users have decided to get in on the noise. However, whether retail investors or The Street more broadly will be attracted to the double-digit revenue growth in streaming is hard to predict at this point, especially given concerns about a possible ceiling.

Coronavirus and cannabis, take this L

This past week, thousands of investors decided to take the offramp from coronavirus cures and cannabis to less speculative spaces. The week’s biggest loser, Sorrento Therapeutics ($SRNE), had announced last month that one of its treatments could potentially inhibit the SARS-CoV-2 virus. Over 12,000 investors (out of a total of 86,394) bailed on the early-stage biotech by Friday at the close. Over the same period of time, Sorrento stock lost 17.23%. Sorrento plans to first conduct animal studies, then move to clinical studies on humans over the next few months. Similarly, other biotechs and pharmaceutical firms are at variable points along the pre-clinical and clinical track for testing and proving COVID-19 treatments. Companies in that vein such as Inovio ($INO) and Gilead Science ($GILD) were also largely offloaded over the last five days.

Similarly, investors in the cannabis space hit the brakes this week. The largely popular Aurora Cannabis ($ACB) and Canopy Growth ($CGC) both saw decreases in their popularity, ranking #3 and #5 in reduction for the week. This loss of interest is largely related to heightened concerns about the regulatory environment and demand for cannabis. The stocks have both sustained heavy losses in the last year, but an ardent base of investors remain dedicated to them. $MJ, the first pot-focused ETF, is down nearly 60% over 1 year — something which might speak to the fear & doubt in the marketplace pertaining to this saturated market.

An ETF placing its bets on sports gambling

This week, the $BETZ ETF launched on public markets. It’s one of the first publicly traded ETFs in the sports betting space. The passively-managed ETF is largely composed of companies which operate sportsbook services, but also includes technology, iGaming, and casino companies. In its first days of trading, over 11,000 investors have picked it up on Robinhood.

This ETF is the brainchild of niche ETF sponsor Roundhill Investments. The company launched its first ETF, an esports-centric product called $NERD, earlier this year. "Our goal at Roundhill is to create investment products that help investors express their vision of the future.” said Tim Maloney, co-founder and CIO of Roundhill Investments. “We're very excited about the opportunity around sports betting and the broader online gaming industry. We created $BETZ because it's a product we wanted for ourselves!"

That’s a wrap for this week! If you enjoyed the content of this newsletter, share it on whatever platform you feel so fit. We’d really appreciate it, as this is the first proper week that we’ve run the newsletter and we’d love to offer it weekly. As usual, this newsletter will serve the purpose of breaking down trends in how digital investors are approaching the market. In many cases, we’ll leave you to reach your own conclusions.

Take care — see you next Monday!

The Robintrack newsletter is a weekly digest produced for informational purposes only. It is not intended to serve as investment advice. The digest is produced with the intent to provide a data-centric analysis of how digital communities, millennials, and Gen Zers are trading stocks. Robintrack is not affiliated with Robinhood in any way, but all popularity data is sourced from Robinhood directly via a public API.

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