There’s a lot of risk in the markets right now. While that’s probably always true, and there are always risky stocks, the past year has been especially wild with the volatility introduced by the pandemic.
It seems that the markets are fixated on the newest potential bubble almost monthly: EVs, tech, Chinese stocks, r/WallStreetBets. And the list goes on. The point is, market participants are well aware that risk is currently quite high.
The laws of finance dictate that risk is balanced by reward which means that the stocks listed below may indeed takeoff.
Each of these stocks has catalysts and a narrative underpinning a potential investment therein. But remember, future events and predictions can and do diverge. In any case, let’s get into the seven risky stocks that could take off.
- Nio (NYSE:NIO)
- Palantir Technologies (NYSE:PLTR)
- Alibaba (NYSE:BABA)
- XPeng (NYSE:XPEV)
- Barrick Gold (NYSE:GOLD)
- VanEck Vectors Gold Miners ETF (NYSEARCA:GDX)
- Nvidia (NASDAQ:NVDA)
Risky Stocks: Nio (NIO)
Nio sits at the confluence of several factors that have conspired to bring its price down in recent months. There was a broad sell off in EV stocks which did the company no favors. There’s been a sell-off in growth stocks as interest rates have risen. And there’s also rising competition within the Chinese markets, both from domestic and external players.
As a consequence of all of these factors, NIO stock is arguably in a great buy-the-dip position. Nio is still the leader in the Chinese EV market despite XPeng’s tremendous delivery growth numbers.
Ultimately, investors should flock back into NIO stock at some point. That’s because the delivery numbers continue to astound. The company delivered 7,257 vehicles in March, a 373% increase year over year. In the first three months of 2021, Nio delivered 20,060 vehicles, a 423% increase YoY.
Sure, Nio is a high-growth stock and when interest rates rise, some capital will flee to safer investments. Further, XPeng and Tesla (NASDAQ:TSLA) are becoming increasingly competitive in the burgeoning Chinese EV space. But Nio remains a strong company and at $40 per share, I can’t imagine investors won’t return soon.
Palantir Technologies (PLTR)
If you look at Wall Street’s current analyst ratings of Palantir, you will indeed understand that it is risky: two buys, four holds, and three sells ratings underpin their collective opinion of its shares. Those shares have risen from $9.50 on the closing day of their IPO back in September, to nearly $40 in February. Unfortunately for PLTR stock holders, the price since then dropped to roughly $23.
The good news is that those same analysts’ average stock price target is a few dollars above current prices, at $25.43. That of course indicates that there is money to be made if their predictions are correct. Those predictions also range to a high of $40, which would represent a 71% appreciation in price if they materialize.
Palantir is often billed as a right-wing, government-entrenched, anti-left warmonger’s dream stock. The truth is the company’s software has a broad range of applications. It simply wanted to distance itself from Silicon Valley and some of its fundamental tenets which Palantir found disagreeable. The company may have marketed itself in a way that over leveraged those ideas.
That aside, I believe the bear argument against Palantir currently is flawed. I wrote in depth about the numbers and logic underpinning my bull thesis for Palantir a few weeks ago. Interested readers can find it here.
Alibaba is the poster child for the Chinese government’s crackdown on its tech champions and fintech regulatory push. In short, Alibaba got punished, and punished hard.
Back on April 9, the Chinese government smacked the company with a record $2.8 billion fine for its anti-monopolistic behavior. Alibaba had previously prevented merchants from listing on its platform and those of its competitors, bringing the fine.
But the company faced other trouble following comments by Jack Ma. Its financial arm, Ant Group, drew regulatory scrutiny, kicking off a larger push by the Chinese government to get ahead of loosely regulated fintech companies within its borders.
All of these factors lead to strong downward pressure on Chinese stocks in general. BABA stock was among the most affected in that cohort.
Now that the record fine has been levied, there’s a fair argument that now is indeed a great time to get back on board with Alibaba. In the days following the fine nearly three dozen of China’s largest tech firms vowed to comply with anti-monopoly laws.
No matter your opinion of Beijing’s rule, Alibaba was anti-monopolistic in its former behavior. And now that darker days are behind, BABA stock makes a lot of sense.
The argument in favor of buying into XPeng is similar to that for buying into Nio — the company is proving that it can deliver vehicles to the massive Chinese EV market. Readers should note that China will have the largest EV market in the world. It is already the largest automotive market in the world, and EVs are a major component thereof.
In 2020, the Chinese market represented 41% of all EV sales globally. Only the European market accounted for more, at 42%.
A report by Canalys predicts that China’s EV sales will rocket upward by 51% in 2021 to 1.9 million EVs. That growth will benefit major Chinese players, XPeng among them.
With overarching catalysts like that there’s a great argument for XPEV stock, especially considering its strong vehicle deliveries of late. It delivered 5,102 vehicles in March, 384% more YoY and 130% more than the previous month. It also delivered 13,340 vehicles in Q1, up 487%.
So while there may be a solid argument that XPEV stock had no business reaching $70 in November, I think at $32 there’s a good counter argument.
Barrick Gold (GOLD)
Economists and investors alike are seriously worried about inflation. One of the primary reasons is the rate at which the Fed has printed money in the last year. More and more consumers are becoming wise to the idea that we can’t simply print dollars indefinitely. Sooner or later, the effects will reverberate in very negative ways. Comparisons with the Weimar Republic and Zimbabwe are likely extreme.
However, greater inflation concerns are causing investors to seek alternative stores of value. Bitcoin (CCC:BTC-USD) and gold chief among them. But with the recent flash crash in Bitcoin prices, gold may have the upper hand.
The reasons that Barrick is particularly attractive are its financial strength and mining assets. The company carries no debt on its balance sheet. In terms of assets, Barrick has a real advantage. There are 13 gold mines in the world with projected annual production of 500,000 ounces and below average operational costs. Barrick owns or has interest in six of them.
So, if inflationary concerns drive capital back into gold as a store of value, Barrick is a strong bet.
VanEck Vectors Gold Miners ETF (GDX)
The same investment thesis that underpins Barrick applies to VanEck Vectors Gold Miners ETF. Exchange-traded funds aren’t inherently risky, but gold is quite volatile. This ETF provides a broader exposure which theoretically should lower risk related to gold. Its top two holdings are shares of the aforementioned Newmont and Barrick.
The ETF is a pure play with global presence and at least 50% of total revenues come from gold mining. The weighting is heavily Canada, U.S., and Australia dominated. However, that’s simply a consequence of U.S.-based Newmont and Canada-based Barrick having a large influence over its holdings.
The ETF is down 19% since August when gold prices were higher, and now may be a great time to establish a position.
NVDA stock is close to three-year highs right now so some readers might be asking themselves, what makes Nvidia shares risky, and why buy in now?
First of all, Nvidia is indeed doing well. The company’s businesses include gaming, data center, visualization and automotive. Amidst the ongoing chip shortage Nvidia is faring well.
CFO Colette Kress recently said the company is seeing broad-based strength, with all market platforms driving upside to management’s initial outlook. “While our fiscal 2022 first quarter is not yet complete, Q1 total revenue is tracking above the $5.30 billion outlook provided during our fiscal year-end earnings call,” she said.
However, there’s a big chance that Nvidia’s deal to buy ARM may not go through on antitrust grounds. U.K. regulators recently announced a national security review of the deal. The rumors have sent prices down. Citi analyst Atif Malik believes the chances of the deal going through have dropped to 10%.
So the risky bet here is that it actually does go through, beating the odds. In that case, prices shoot up well beyond current highs. If the deal doesn’t go through investors have a strong stock in Nvidia, but one that’s near 3-year highs in price.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.