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Takeaway: Retail investors (Robinhood) may have taken the reins in driving some recent GLL stock price performance. CCL’s levels might be fleeting…

Below is a complimentary research note from our Gaming, Lodging, and Leisure (GLL) analysts Todd Jordan and Sean Jenkins. If you are an institutional investor interested in accessing our research email sales@hedgeye.com

GLL | Robbing The Institutional Hood - 6 10 2020 2 31 50 PM

HEDGEYE EDGE

A big 2nd derivative move from the US economy reopening has been a major driver of recent stock price performance for much of our coverage list, but in recent weeks we felt that some of the moves in GLL were tough to reconcile. 

Indeed, conversations with institutional subscribers around the US and overseas provided few answers as to why certain stocks moved significantly more than others despite sometimes fewer fundamental catalysts. 

There’s never just one factor moving a stock or a subsector, but in the case of the last few months of trading, there might be a new factor that we should all appreciate. 

Enter Robinhood, a commission free trading platform that tends to be geared towards younger, less experienced investors who apparently took a liking to beaten down stocks.  Based on our statistical analysis, the Robinhoodies (noun: Robinhood account holder) in aggregate have proven to be such a force that they’re actually moving stock prices. 

Airlines, biotech, cannabis, other highflyers and now GLL stocks find themselves atop the Robinhood leaderboard. For some of our tickers, Robinhood popularity has absolutely soared, with tickers like CCL (HE Best Idea Short), NCLH, and MGM now showing hundreds of thousands of account holders, and much of the growth has occurred in the last month alone.

Will the Robinhoodies ultimately prove to be weak hands if the stocks start to rollover? Tough to say for now, but we think so overall. After all, the dot.com rally didn’t end well for retail investors.

HOODIE DATA INSIGHTS

Love Them Cruiselines

Thanks to a publicly available API, robintrack.com, we have been able to isolate and monitor the number of accounts with GLL exposure. Some areas of GLL have received more love than others, but in aggregate, the number of account holders with GLL exposure has grown from 30K at this time last year to now eclipsing 1.6MM. 

GLL stocks are certainly all the rage with this younger demographic that makes up Robinhood’s 10MM+ users, especially the ones that were beaten up the most.  Top three on the list are all cruise lines – the sector with no near term reopening catalyst and likely the longest recovery period.  But hey, they were the most beaten down!

GLL | Robbing The Institutional Hood - ROBINHOOD CHART 1

Moving Markets

So, the retail investor base, as represented by RobinHood accounts in this model, seems to have grown demonstrably in size and scale but are they actually driving stock price performance?  So far, the answer is a pretty definitive yes. 

The data suggests a positive and strong statistical relationship between a stock’s recent performance and the underlying growth in Robinhood accounts that own the stocks.  Sure, there also is a positive relationship between recent stock performance and the magnitude of each stock’s drawdown i.e. what fell the most has also bounced the most.  

However, the R^2 between Robinhood account growth and stock appreciation is stronger than the aforementioned (0.69 vs 0.64), suggesting the Robinhoodies might actually be having a greater marginal impact. 

The Hoodies have loved the beaten down stocks and they’ve been right, although in part because it is somewhat self-fulfilling…How long will they be able to support these levels is a whole other question.

GLL | Robbing The Institutional Hood - ROBINHOOD CHART 2