How the Robinhood effect is moving the stock market

A report from BCA Research published Monday finds Robinhood users are moving into speculative bets at an incredible rate, radically increasing holdings in three groups of stocks — airlines, cruise ships and mortgage REITs.

What's happening: "Retail investors have provided institutions with an opportunity to exit stocks in the three stressed groups," Doug Peta, BCA's chief U.S. investment strategist, writes in the note.

• "Stocks from the groups we highlighted all face daunting current predicaments. They might deliver sizable returns if they can emerge mostly unscathed, but that is a big if."
• "They have come to account for an outsized share of Robinhood customers’ holdings, especially relative to their market capitalizations."

By the numbers: The number of Robinhood accounts owning airlines, cruise ships and selected mortgage REITs has "exploded since late March," Peta says.

• The number of Robinhood accounts holding six large- and mid-cap airlines has risen by 48 times its Feb. 19 level, with component holdings of United and Spirit increasing at 87 and 81 times, respectively.
• The number of Robinhood accounts holding REITS like Invesco Mortgage Capital, MFA Financial and AG Mortgage Investment Trust — which BCA notes "all failed to meet margin calls from their repo lenders and have either suspended or cut dividends" — has risen 93-fold, on average, since the S&P 500 peaked in February.

By contrast, holdings of Apple and the iShares and Vanguard S&P 500 Index ETFs have only doubled since the February market peak.

Of note: The only thing all three groups have in common is that they have fallen significantly in price since the Feb. 19 high.

The big picture: Retail investors may be leading the charge, but the recent surges in many of the stocks BCA examined suggest that "algorithms, hedge-funds and other fast-money pools of capital may be amplifying the momentum that retail activity has set in motion."

Watch this space: Retail traders also could be making up for the lack of stock buybacks, Goldman Sachs strategists argue in a note to clients.

• While they expect net corporate demand to plunge 80% to $100 billion this year as companies slow down buybacks and ramp up stock sales to increase cash holdings, the decline is being partly offset by a roughly $270 billion increase in demand from households.

Go deeper: Expect lawyers to take aim at Robinhood