Despite the record-breaking volatility in 2020, the new year looks set to increase its predecessor. For a little over two weeks, members of the WallStreetBets chat room on the social news site Reddit teamed up to tackle Wall Street hedge funds and investment banks.
This group of retail investors, which stood at 7.5 million strong on 31 January, focused on high-short-term stocks – in other words, companies where a large number of stocks are held by pessimists, who want the share price to move . lower. By pushing up the share price of heavily short-selling stocks, these retail investors have put a lot of pressure on.
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Until January, retailer of video games and accessories GameStop (NYSE: GME) a movie theater chain AMC Entertainment (NYSE: AMC), the stock children shares of this Reddit rally, increased by 1,625% and 525% respectively. But the reality is that the underlying business of none of the businesses closely matches the current valuation.
Without digging too far into the weeds, GameStop is closing physical stores to reduce its operating expenses while AMC Entertainment issues shares and debt in an effort to avoid bankruptcy. No scenario deserves a valuation of 1.625% or 525%, especially if GameStop and AMC will not be guaranteed in the long run.
Instead of chasing these Reddit darlings, can I suggest buying the next five stocks, all of which have a tenfold real potential this decade?
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Teladoc Health
Instead of worrying about whether your shares will exist in two or three years, you can buy shares of telehealth kingpin. Teladoc Health (NYSE: TDOC), which is offline’s one of the fastest growing healthcare capital with large capital.
Although the coronavirus disease (COVID-19) pandemic helped Teladoc’s virtual visit double more in the second and third quarters, it’s more than just a COVID-19 play. Telehealth is a victory for all involved. It is more comfortable for patients; it allows doctors to adjust more visits to their busy schedules, and can usually be charged at lower rates than office visits. This last point makes telemedicine a logical asset for healthcare providers.
Furthermore, in early November, Teladoc Health acquired the applied company for health signals Livongo Health. Livongo has consistently doubled or nearly doubled its number of subscribers to diabetes members, and the company has turned the tide to profitability, despite insuring just over 1% of U.S. diabetes patients.
As Livongo is expected to expand its services to hypertension and weight control, and Livongo / Teladoc is able to make cross-selling between their networks, the potential for the new Teladoc is huge. That’s a big reason why Teladoc is the stock I’m most excited about right now.
Image source: Square.
Square
You may be under the impression that payment company Square (NYSE: SQ) has come too far, too fast, especially with the U.S. economy still shaky. But I believe we will look back in nine or ten years and realize that Square is still just clearing its throat before the uplift.
Square’s sales ecosystem must continue to be a steady source of growth and gross profit. This industry segment mainly provides small business devices and analysis.
Prior to the unprecedented small business breakdown by COVID-19, gross payment volume on Square’s network grew at an annualized rate of 49% between 2012 and 2019. What’s worth looking at is the growing number of medium and large businesses that are suddenly using Square’s vendor ecosystem. As a segment driven by dealer fees, Square welcomes larger dealers.
Of course, the big buzz about Square is the peer-to-peer payment platform Cash App. Although Cash App allows the Square to collect merchant fees and bank transfer fees, the growth potential seems to be just investments and bitcoin exchanges. In less than three years, Cash App’s monthly active users have more than quadrupled to 30 million and the sales ecosystem will probably be the biggest driver for gross profit in 2021.
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Trupanion
If you want a real leg up, forget AMC and GameStop and buy a good growth story, like a pet health insurance provider. Trupanion (NASDAQ: TRUP).
The statistic that should excite investors about Trupanion is the total liable market. Only about 1% of pet owners in the US have health insurance on their dog or cat. In comparison, the insurance rates for companion animals abroad are significantly higher (for example 25% in the UK). If Trupanion can penetrate even 25% of the US market, it is a liable market of more than $ 32 billion in the current dollar. Due to this low penetration rate, Trupanion will have little trouble maintaining a double-digit growth rate during the decade.
In addition, Trupanion has built a valuable relationship with veterinarians on a clinical level. This is a business that has been around for two decades and is currently the only health benefit provider in the US with software that enables direct payments to veterinarians during checkout. This is an incentive for veterinarians to suggest Trupanion coverage options.
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OrganiGram Holdings
The next decade should also make marijuana stocks shine. While U.S. pot stocks have a much larger runway to succeed, one Canadian licensed producer offering potential investors with 10 dredgers is based in New Brunswick. OrganiGram Holdings (NASDAQ: OGI).
OrganiGram is an interesting case because it is the only major producer in Canada with a single cultivation facility (Moncton, New Brunswick). With a single facility, OrganiGram can adapt its production and expenses to current market conditions. You could argue that the supply chain of the company should also be much more efficient, with everything in one facility. As a final remark about the Moncton farm, OrganiGram uses a three-part growing system in licensed rooms, which will help maximize yields.
In addition to just efficiency, OrganiGram has dedicated a healthy portion of its product portfolio to derivatives. The company has purchased fully automated equipment that can produce up to 4 million kilograms of chocolate snacks annually, and the company has developed its own powder that can be added to the beverage to accelerate the timeline for the entry into force of cannabinoids. Derivatives offer much juicier margins than dried cannabis flowers, and this is the key to OrganiGram’s pursuit of repeat profitability.
Image source: Pinterest.
Last but not least, social media emerging Pinterest (NYSE: PINS) people will forget everything about AMC and GameStop.
Similar to Teladoc, Pinterest has largely benefited from the COVID-19 pandemic. While people got stuck in their homes, they spent more time online than ever. This has led to an increase in monthly active users (MAU) and an acceleration in the MAU growth of the previous three years.
In particular, Pinterest got the majority of its new MAUs from overseas markets. Although advertisers tend to pay much more to get their products ahead of U.S. MAUs, the rapid increase in international MAUs should enable the company to double its average revenue per user this decade.
Pinterest is also perfectly set to become a leading destination for e-commerce. Think about it … no other social platform allows users to willingly and easily share the products, places and services they are interested in. This makes the company’s MAUs the perfect, targeted base for small businesses to cater to. All Pinterest needs to do is keep its users busy and ensure that small businesses have the tools they need to turn browsers into buyers.
Forget the Reddit rally shares and focus on businesses with tangible potential.