You might have noticed that the stock market is a tad wobbly these days. Your own portfolio might be significantly wobblier than the headline numbers suggest if you piled into some of the most popular stocks on social media, so I hope you didn’t.
A lot of those same stocks happen to be in the top 20 or top 100 on Robinhood which, for anybody who reads my book (out on February 1st), won’t come as a surprise. This herd-following behavior was in fact pretty profitable for a while. I wrote about the downside of that today.
A clever young man, Noah Weidner, kept track of an index of the most popular stocks owned by investors at the broker. More recently, even after the data feed was curtailed by the broker, he kept up a list of which stocks entered and exited the top 100. For the most part those rejected like energy ETFs, Berkshire Hathaway and Wells Fargo went on to do well. Meanwhile, most of those added have been among the biggest losers recently, including shares of Robinhood itself. I link to an academic study that does a nifty job of explaining why that happened.
Stay safe out there.