Despite the record volatility in 2020, the new year seems to have the intention of overcoming its predecessor. For just over two weeks, members of the WallStreetBets chat room on the social news-sharing site Reddit have been teaming up to face Wall Street hedge funds and investment banks.
This group of retail investors, which stood at 7.5 million on January 31, has been looking for shares with high interest overdraft – that is, companies where a large number of shares are held by pessimists who are anxious for the price of an action moves lower. By pushing up the price of shares sold heavily short, these retail investors created an abundance of short squeezes.
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Until January, retailer of video games and accessories GameStop (NYSE: GME) and cinema network AMC Entertainment (NYSE: AMC), the subsequent shares of this Reddit rally, rose 1,625% and 525%, respectively. But the reality is that none of the company’s underlying businesses come close to matching its current valuation.
Without digging too far into the bush, GameStop is busy closing physical stores to reduce its operating expenses, while AMC Entertainment is issuing stocks and debt in an effort to avoid bankruptcy. No scenario deserves a share price appreciation of 1,625% or 525%, especially when GameStop and AMC have no guarantee of long-term survival.
Rather than chasing these Reddit darlings, can I suggest buying the following five stocks, all with real potential for 10 bags this decade?
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Teladoc Health
Instead of worrying about whether your stock will be around for two or three years, you can buy stock from the telehealth boss Teladoc Health (NYSE: TDOC), which is on its way to being one of the fastest growing large-cap healthcare actions in this decade.
While the 2019 coronavirus pandemic (COVID-19) has helped Teladoc’s virtual visit count more than triple in the second and third quarters, it is more than just a COVID-19 move. Telehealth is a victory for everyone involved. It is more convenient for patients, allows doctors to include more visits in their busy schedules, and can generally be charged at lower rates than office visits. This last point makes telemedicine a logical option for health benefit providers.
In addition, Teladoc Health acquired Livongo Health, an applied health signs company, in early November. Livongo has consistently doubled or nearly doubled its diabetic subscriber count, and the company has turned the corner on profitability, despite securing just over 1% of the diabetes patient pool in the United States.
With the expectation that Livongo will expand its services to include hypertension and weight control, and Livongo / Teladoc capable of cross-selling between its networks, the potential for patient pooling for the new Teladoc is enormous. This is a big reason why Teladoc is the action I’m most excited about at the moment.
Image source: Square.
Square
You may have the impression that the payment company Square (NYSE: SQ) it went too far, too fast, especially with the United States economy still on shaky legs. But I believe that we will look back in nine or ten years and realize that Square was still clearing its throat before taking off.
Square’s vendor ecosystem is expected to remain a constant source of growth and gross profit. This operating segment provides point of sale and analysis devices, mainly for small companies.
Prior to COVID-19’s unprecedented outage for small businesses, the gross payment volume on Square’s network had grown at an annualized rate of 49% between 2012 and 2019. What is worth noting is the growing number of medium and large businesses that are suddenly using Square’s vendor ecosystem. As a segment based on merchant fees, Square would welcome larger merchants.
Of course, the big buzz about Square is the point-to-point payment platform Cash App. While the Cash App allows Square to collect merchant fees and bank transfer fees, the growth potential seems to revolve around investment and exchange bitcoins. In less than three years, we’ve seen the Cash App monthly active user count more than quadruple to 30 million and will likely surpass the vendor ecosystem in 2021 as the biggest driver of gross profit.
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Trupanion
If you want true paw potential, forget about AMC and GameStop and buy a wellness growth story as a health insurance provider for pets Trupanion (NASDAQ: TRUP).
The statistic that should make investors excited about Trupanion is the total addressable market. Only about 1% of pet owners in the United States have health insurance for their dogs or cats. In comparison, pet insurance rates are considerably higher abroad (for example, 25% in the UK). If Trupanion can penetrate up to 25% of the US market, it is an addressable market that is worth more than $ 32 billion in dollars today. Because of this low penetration rate, Trupanion should have little trouble sustaining a double-digit growth rate over the decade.
In addition, Trupanion has built an invaluable relationship with veterinarians at the clinical level. This is a company that has existed for two decades and is currently the only provider of pet health benefits in the USA with software that allows direct payments to veterinarians at checkout. This is a great incentive for veterinarians to suggest Trupanion coverage options.
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OrganiGram Holdings
The next decade is also expected to see marijuana stocks shine. While U.S. marijuana stocks have a much bigger track record of success, a licensed Canadian producer offering 10 baggers potential to patient investors is based in New Brunswick OrganiGram Holdings (NASDAQ: OGI).
OrganiGram is an interesting case, as it is the only major producer in Canada with a single cultivation facility (Moncton, New Brunswick). Having a single facility makes it much easier for OrganiGram to adjust its production and expenses to match prevailing market conditions. You can argue that the company’s supply chain must also be much more efficient, with everything located in a single facility. As a final note on the Moncton farm, OrganiGram is using a three-tier cultivation system in licensed rooms, which will help to maximize yield.
In addition to efficiency, OrganiGram has dedicated a good part of its product portfolio to derivatives. It purchased fully automated equipment, capable of producing up to 4 million kilograms of edible chocolate a year, and the company has developed a patented powder that can be added to drinks to speed up the timeline of when cannabinoids come into effect. Derivatives offer much juicier margins than dried cannabis flower, and they will be the key to OrganiGram’s drive for recurring profitability.
Image source: Pinterest.
Last but not least, new social media Pinterest (NYSE: PINS) will make people forget everything about AMC and GameStop.
Similar to Teladoc, Pinterest has benefited greatly from the COVID-19 pandemic. With people trapped in their homes, they spent more time than ever online. This led to an increase in the number of monthly active users (MAU) and an acceleration in the growth of the MAU over the previous three years.
In particular, Pinterest has obtained most of its new MAUs in foreign markets. While advertisers tend to pay a lot more to get their products on U.S. MAUs, the rapid increase in international MAUs should allow the company to double its average revenue per user several times in the decade.
Pinterest is also perfectly set up to become a leading e-commerce destination. Think about it … no other social platform allows users to easily and voluntarily share the products, places and services that interest them. This makes the company’s MAUs the perfect base for serving small businesses. All Pinterest needs to do is keep its users engaged and ensure that small businesses have the tools they need to turn browsers into buyers.
Forget Reddit-rally actions and focus on businesses with tangible potential.