Millennial investors are using daily stock market records to trade some of the riskiest equities around that also happen to be household brand names.
Guess this buy what you know investing cohort hasn’t read Ben Graham’s classic “Intelligent Investor.”
Millennials with TD Ameritrade accounts favored buying Tesla (TSLA), Canopy Growth (CGC), Beyond Meat (BYND), Uber (UBER) and Nvidia (NVDA) in June, according to new research from the brokerage platform. What’s interesting — and perhaps alarming to the hardcore over 40-year-old investor — is that all of these companies except for Nvidia are solidly unprofitable. Moreover, it’s wildly unclear when the likes of Tesla, Canopy Growth, Beyond Meat and Uber will turn sustainably profitable.
Combined first quarter losses for Tesla, Canopy Growth, Beyond Meat and Uber: a staggering $1.85 billion. All four companies are also expected to be unprofitable for the second quarter, according to Yahoo Finance data.
Want a sign the market has gotten too hot for its britches? Or, that investors are simply riding the Federal Reserve-induced market momentum with little attention being paid to fundamentals? Well, here you have it — compliments of the trading patterns of the youthful millennial crowd.
“They are buying what they know — but they should research these companies,” JJ Kinahan, chief market strategist at TD Ameritrade, said on Yahoo Finance’s ‘The First Trade.’
On the other hand, more experienced retail investors with TD Ameritrade accounts took a cautious stance on markets in June. That’s despite the Dow Jones Industrial Average and S&P 500 each gaining about 7% in the month.
TD Ameritrade’s Investor Movement Index fell 6% in June versus May, indicating more cautiousness as the market rally intensified.
“Investor cautiousness continued, even as markets rallied in June, reaching all-time highs by mid-month,” said Kinahan. “Yet, it’s important to look at one of the primary factors behind the rally – in this case, it is the anticipation of Fed rate cuts – which is often motivated by deeper insecurities about the economy.”