Millennial day-traders are putting Wall Street to shame as investors bank on a V-shaped recovery

Hello everyone! Welcome to this weekly roundup of Investing stories from deputy editor Joe Ciolli. Please subscribe here to get this newsletter in your inbox every Tuesday.

Dear Readers,

A strange dynamic is afoot in the stock market.

The institutional heavyweights on Wall Street are being beaten at their own game by upstart day-traders and retail investors — and it's not been particularly close. The latter group has reaped a massive 61% return since the market bottom on March 23, easily outpacing hedge funds (45%) and mutual funds (36%).

Goldman Sachs tracks these companies in a "Retail Trading Favorites" basket, which we unpacked here, including the stocks that have soared the most since late March.

Needless to say, this outperformance has not been an easy pill to swallow for the old guard. CNBC host Jim Cramer said last week that markets are in for a "real bruising" because "everyone thinks they're smarter than Warren Buffett."

He was referring to the spiking interest — and subsequent gains — in beaten-down airline stocks from millennial investors using platforms like Robinhood. Buffett, of course, famously dumped all his holdings in the Big 4 airlines at the peak of coronavirus. Cramer's argument matches that of many bewildered experts, who think this type of unabashed risk-taking can only end in disaster.

If you aren't yet a subscriber to Investing Insider, you can sign up here.

Peter Cecchini, the former global chief market strategist at Cantor Fitzgerald, also recently weighed in on the retail-investor phenomenon. He warned that the market could be approaching the self-coined "Portnoy top" — referring to the irreverent day-trading exploits of Barstool Sports' infamous founder Dave Portnoy.

"His attention-getting, wild style is emblematic of just how emotional and extreme equity markets are now," Cecchini said in a LinkedIn post on Friday. "It's both impulsive and compulsive. His behavior really just explains everything."

And then there's what many market watchers consider to be the foremost example of irresponsible speculation: the torrid gains seen in Hertz, a bankrupt company that's quickly skyrocketed to the top of Robinhood's most-traded charts.

What does it all mean, and what other market trends should you be watching? As always, the Investing team at Business Insider has you covered. See below for our best stories of the week, including a wide array of recommendations, strategies, and tips for navigating uncertainty.

Thanks for reading!

-- Joe

Exclusive video discussion with 3 top Wall Street stock strategists

Akin Oyedele, Business Insider's investing editor and correspondent, spoke to three titans of Wall Street strategy in a live discussion. Participants included:

• Lori Calvasina, managing director and head of US Equity Strategy for RBC Capital Markets
• Thomas Lee, managing partner and head of research for Fundstrat Global Advisors, LLC
• Jeff Kleintop, chief global investment strategist for Charles Schwab.

They touched upon the following topics, and much more:

• Recent stock-market turbulence stirred up by the prospect of a second wave of coronavirus cases
• Why last week's major sell-off was actually "healthy" for the market
• The ongoing disconnect between a buoyant stock market and the rapid economic deterioration seen in the wake of coronavirus
• The retail-investor revolution and what it means that so many inexperienced traders are trying their hands at the market
• Specific outlooks and recommendations from each expert

Watch the full webinar here.

The next page of the recession-investing playbook

Morgan Stanley has updated its recession-investing playbook to reflect the unfolding recovery in economic activity. According to Morgan Stanley's chief US equity strategist, so-called cyclical stocks that benefit during the early stages of recovery are poised to continue gaining ground.

He shared three sector recommendations and many more stock picks that would help investors position for this shift.

Read the full stories here:

MORGAN STANLEY: The stock market is entering a new phase of a playbook that's thrived in past recessions. Here's how to tweak your portfolio to take advantage.

An interview with short-seller extraordinaire Andrew Left

Andrew Left is one of the many investing denizens troubled by the seemingly reckless behavior on display from retail investors. And he's someone worth paying attention to. Having made his name calling foul on Valeant Pharmaceuticals — which plunged 90% in the months following his first report — Left has shown the ability to move a stock with a single tweet or public mention.

If you know Left at all, you won't be surprised to learn that he's positioned himself to profit from a coming collapse in these stocks. That includes Hertz and Tesla competitor Nikola, both of which have captured the eyes of millennial traders.

Read the full stories here:

Famed short seller Andrew Left lays out his methodology for finding the stock market's weakest links — and says he's terrified of newbie day traders that think they can outsmart Carl Icahn and Warren Buffett

Famed short-seller Andrew Left breaks down why he's betting against these 4 companies — including Hertz and Tesla competitor Nikola

4 themes to bet on, and 4 to short

Mitch Rubin runs a mutual fund that's used a combination of long and short positions to post a 26% gain so far this year.

Rubin told Business Insider about the key themes contributing to the gains in the long part of his portfolio and the kinds of stocks he's successfully bet against. Even though markets have staged a historic rally, Rubin said he was shorting fewer stocks than usual because there is still a lot of room for them to rise as the economy improves.

Read the full stories here:

A fund manager crushing 98% of his peers over the past half-decade told us 4 themes he's betting on and 4 he's betting against — and why the latest market rally still has room to run

Strategy from a 21-year-old real estate investing phenom

Kyle Marcotte, an entrepreneur and successful real-estate investor, got started in the arena to free up his most valuable asset: time. After he came to a crossroads in his life, Marcotte dropped out of college to pursue his venture.

Marcotte employs an investment strategy that requires heavy lifting upfront and then a passive approach after the property is purchased. He now has 119 units under his belt and a contract with 90 more units.

Read the full story here:

College dropout Kyle Marcotte became financially free at 21 years old after making just 2 real-estate investments. Here's the strategy he used to accumulate 119 units.

Stock pick central

Seeking experts who are willing to name names? Look no further:

• Renowned strategist Tom Lee nailed the market's 40% surge from its worst-ever crash. Here are 17 clobbered stocks he recommends for superior returns as the recovery gains steam.
• GOLDMAN SACHS: Buy these 9 dirt-cheap stocks now before their share prices catch up to their strong earnings upside
• We spoke to 3 financial experts, who broke down why you should buy these 13 ETFs to maximize stock-market returns right now
• Bernstein says buy these 7 stocks that are unfairly beaten-down and built for explosive gains in the future
• Main Street traders have been crushing Wall Street in recent months. Goldman Sachs breaks down what retail investors should buy to keep winning — and lists the 12 stocks leading the charge.

Chart of the week

The light blue line above reflects the outright dominance of retail traders versus their institutional counterparts. Put simply, Main Street is putting Wall Street to shame since late March.

As confused market experts wring their hands over the millennial-driven rally off multiyear lows, Goldman Sachs pinpoints areas of the market poised for continued outperformance — and lists 12 stocks that have led the way higher.

Click here for more details — and specific recommendations.

Quote of the week

"His attention-getting, wild style is emblematic of just how emotional and extreme equity markets are now. It's both impulsive and compulsive. His behavior really just explains everything."

— Peter Cecchini, former global chief market strategist at Cantor Fitzgerald, commenting on Barstool Sports founder Dave Portnoy's irreverent day-trading exploits