Every portfolio should be heavy in solid, long-term buy-and-hold investments. We all know this. But what many investors don’t know — or know, and are too timid to really try — is that they should be hunting down a few high-risk stocks to buy, too, with a small portfolio allocation. After all, high-risk bets can produce big rewards, and that’s the kind of thing that turns market performance into market outperformance.
Today, I’m going to share a list of seven high-risk, high-reward stocks to buy now. Some of these are larger-cap growth or momentum stocks, but there are some small-cap opportunities to look at, too.
The conceit behind these seven picks is that I regard these stocks as having exceptionally high risk for a reason that’ll be noted, but for which a high reward is likely to attach to that risk.
In full disclosure: I’m typically more conservative in my approach, using a long-term diversified strategy — like the one I’ll be using in my forthcoming stock advisory newsletter, The Liberty Portfolio. But, every once in a while, you need to roll the dice.
In no particular order, here are seven high-risk stocks to buy now for big potential rewards.
High-Risk, High-Reward Stocks to Buy Now: Regeneron Pharmaceuticals (REGN)
Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is certainly less risky than other less-established biotech firms with just one or two drugs in their pipeline.
But it’s still biotech, which is among the riskiest of industries — and worse, it’s an industry whose fate is in flux as Wall Street tries to determine whether President Donald Trump and the GOP-controlled Congress will ultimately be good or bad for its members.
Biotech in general has high rewards, though, and REGN has that potential, especially since it is almost 40% off its all-time highs.
If dupilumab gets the green light, it could be a big earner. If rejected … watch out below.
High-Risk, High-Reward Stocks to Buy Now: Alibaba (BABA)
Alibaba Group Holding Ltd (NYSE:BABA) could move big in either direction.
What many investors forget is that Alibaba still is under SEC investigation over its accounting practices in a process that has been going on since May of last year.
Also, Chinese companies are notorious for not only being opaque, but being subject to equally opaque behavior by the government, which can do whatever it wants at the snap of a finger.
We have concerns over whether President Trump will slap tariffs on Chinese imports. China also manipulates its currency, so by devaluing the yuan, Alibaba revenues can be affected in a negative direction.
That’s a host of worries. But the flip side? All of these are things that very well might not end up affecting BABA stock at all. And considering Alibaba is on its way to becoming the world’s greatest online superstore, and simultaneously is growing a number of other businesses, BABA could make investors a fortune.
High-Risk, High-Reward Stocks to Buy Now: GoPro (GPRO)
GoPro Inc (NASDAQ:GPRO) is, to me, a sucker’s bet. Others disagree.
I see GPRO as a fad. Yes, the cameras are cool. Yes, they have their fans. However, as a mass-market consumer product, I do not see what problem that GPRO products solve. It is that lack of utility that, to me, undermines its long-term viability.
However, I’m always willing to admit the possibility that I’m wrong. GoPro very well may move into some new arena that leverages its experience and creates a whole new slate of products.
I have no plan to jump into GPRO, as I see a company burning cash with little cash left over that could go to zero.
However, others in the space see $9 as a low buy-in price for a speculative comeback. And with shares off more than 90% in just two years … there’s a lot of room for GPRO stock to run should the company turn sentiment around, even for a short while.
High-Risk, High-Reward Stocks to Buy Now: Safe Bulkers (SB)
Safe Bulkers, Inc. (NYSE:SB) is a Monaco-based drybulk shipping company. Like all of its peers, it has been hammered during a period of weak commodity pricing. Revenues are down, and SB last reported a nine-month loss of $62 million.
Worse, Safe Bulkers has $78 million in cash, yet $572 million in long-term debt. That’s why the stock is trading under $2.
One might say there is little downside risk in Safe Bulkers since it’s so close to zero. I say there is a high risk of bankruptcy. However, if SB is able to stay afloat, so to speak, long enough for commodities and the Baltic Dry Index to rebound, it could yield big returns.
High-Risk, High-Reward Stocks to Buy Now: Freeport-McMoRan (FCX)
Freeport-McMoRan Inc (NYSE:FCX) is in a similar boat, so to speak. FCX is trying to hold on as a natural resource explorer during these tough times for commodities.
Its operational results have been awful, trailing 12-month free cash flow came in at -$400 million, and Freeport has just $1.1 billion in cash versus$18 billion in debt.
However, news over the past few months have been digested well by investors, and shares are actually up nearly 200% over the past year.
At $15.50, FCX is well off its low of $4.60, and is at that critical juncture where it could drop back again. Or, it could continue to survive and claw its way back to the $40 level that it held as recently as 2014.
High-Risk, High-Reward Stocks to Buy Now: Chipotle (CMG)
Chipotle Mexican Grill, Inc. (NYSE:CMG) really has never truly shaken the E. coli curse.
It has been well more than a year since the original headlines started raining down on Chipotle, and CMG shares are still off more than 45% from their pre-outbreak highs.
However, while I didn’t care for how management handled the crisis, I actually don’t think the stink around the stock is due to that whole fiasco anymore. I think a lot of people got scared initially, hunted around and found new restaurants to try … and Chipotle just kind of fell off their radar.
Casual upscale like this has very fickle customers.
Chipotle could continue its major slide from here. However, optimists believe that management changes — including Steve Ells becoming the sole CEO — will eventually lead to a revival of the restaurant chain.
High-Risk, High-Reward Stocks to Buy Now: OneMain Holdings (OMF)
OneMain Holdings Inc (NYSE:OMF) plays in a space I love: consumer lending.
A company called Springleaf was flying high after it moved away from mortgages and into installment loans. Then Springleaf merged with another finance company — named OneMain Financial — and things have gone awry.
The company is facing some are underwriting and charge-off issues, which always makes me nervous, since charge-offs are what crater companies like this. Still, OMF has more than $13 billion in receivables, an amazing footprint in the U.S., and operates in a high-margin business.
Potential downside here could be significant if OneMain doesn’t pull it together. However, if it does, consumer credit remains big business, making OMF one of the best high-risk stocks to buy now. I think a doubler from here is not out of the question.
Lawrence Meyers is the CEO of PDL Capital, and manager of the forthcoming Liberty Portfolio stock newsletter. As of this writing, has no position in any stock mentioned. He has 22 years’ experience in the stock market, and has written more than 1,600 articles on investing. Lawrence Meyers can be reached at [email protected].