It’s always a good idea to have some risk capital socked away. It doesn’t mean you have to deploy it all, but when the time is right, it’s good know it’s there. High-risk stocks shouldn’t be at the core of your portfolio, but they do have their place.
Generally, these types of stocks aren’t just quick trades. They’re stocks that could actually make a big impact over time given the right circumstances.
Some investors think loading up on high-risk stocks is the best way to build a portfolio, especially those with long time horizons who can afford more risk. But sometimes investors with short time horizons see these types of stocks as a way to help “catch up” on years when they weren’t invested.
Here are 8 high-risk stocks to buy that are worth taking a chance on:
- eXp World Holdings (NASDAQ:EXPI)
- Fulgent Genetics (NASDAQ:FLGT)
- Futu Holdings (NASDAQ:FUTU)
- Silvergate Capital (NYSE:SI)
- SunPower (NASDAQ:SPWR)
- Michaels (NYSE:MIK)
- Amyris (NASDAQ:AMRS)
- DCP Midstream (NYSE:DCP)
Smart investors know that slow and steady wins the race. Quality growth stocks in good sectors with smart management are your best bets for success and they should be the core of every portfolio. The high-risk stocks I profile below should complement that smart, patient portfolio, not dominate it. And it’s a good time to get in.
eXp World Holdings (EXPI)
When the real estate market blows up, new trends become visible quickly. And as we’ve seen in other market sectors, going digital has been a key theme of the novel coronavirus pandemic.
Low interest rates have boosted demand, but sellers aren’t too excited about opening their houses in a pandemic. That has meant an explosion in virtual shopping and buying.
One company that saw the opportunity in virtual real estate a dozen years ago was EXPI. Last year this high-risk stock took off. Its 52-week range is $3.45 — $90.00. Today it trades around $45.
EXPI doesn’t have any brick and mortar offices. And interest in the company has meant enough capital to take the operation global. Also, unlike most of the SPACs out there, EXPI is doing very brisk business.
Fulgent Genetics (FLGT)
As one of the leading genetic testing companies out there, it’s no surprise that FLGT has had a good year.
There are two ways to test for the coronavirus — antigen testing and PCR testing. Antigen testing is faster, but it’s less accurate. PCR testing is more accurate but has taken longer historically.
FLGT has two COVID-19 PCR tests that produce results in 24 hours. It also tests for 5,400 other conditions.
Granted this field is full of competitors, but if testing remains a part of our lives, FLGT will either thrive on its own or get acquired by a bigger player at a big premium. Either way, its status as a high-risk stock will transform.
While FLGT has backed off its recent highs, it’s still up 93% year to date and has established itself as a leading player in the genetic testing sector.
Futu Holdings (FUTU)
U.S.-China relations aren’t exactly warm right now, though they have been frosty for many years. That means Chinese firms have limited access to U.S. markets and U.S. firms have limited access to Chinese markets.
Given that China is the second-largest economy in the world now and is on a trajectory to overtake the U.S. in the next decade, access to its investment markets has been a key desire for U.S. financial institutions. China has allowed some access, but it’s tightly controlled.
FUTU is a Chinese online brokerage, headquartered in Hong Kong. Its platform is very mobile-friendly and its U.S. listing means U.S. investors can gain indirect access to a hot fintech in the Chinese investment sector.
The stock is on fire, up more than 1,400% in the past 12 months and 236% year to date.
Silvergate Capital (SI)
What are two of the hottest financial trends out there? Fintech and cryptocurrencies (so, digital currencies).
What does SI do? It’s a fintech challenger bank that operates accounts with digital currencies.
This is the next step for digital currencies. They need to operate in commercial and retail markets for regular transactions and have a predictable flow and immediacy about them.
This is an exciting proposition. But it’s still a volatile sector, since digital currencies remain so volatile. Imagine if your dollar-based account swung as wildly as Bitcoin does. A cheeseburger could cost $50 one day and $5 the next.
Crypto remains a world of high-risk stocks, but it’s hot and the market is evolving. SI may well help it grow.
You can’t write an article about high-risk stocks with potential without namedropping a solar company.
We have a new administration with very clear goals on renewable energy on the heels of a massive shift in Wall Street institutional investors (about 80% of the market) to focus on ESG (environmental, social, and governance) investing.
SPWR has been the country’s top commercial solar power company since 2017 and has been around since 1985. That means it’s a creative and well-managed survivor.
The stock has sold off in recent months along with other high-fliers from last year but it’s still up 936% in the past 12 months, 30% year to date, yet trades at a P/E of 14. SPWR will likely remain volatile, but it’s a leading solar player both now and for the future.
Just outside of Dallas, in Irving, Texas, Michael Dupey started an arts and crafts store in 1973. Today, there are 1,250 Michaels stores in 49 states and Canada.
Obviously, the pandemic has been a huge boost for these stores, since there’s only so much streaming and home improvements people can do before they go crazy or broke. Michaels is a happy medium that’s also family-friendly.
The stock is sitting at all-time highs after a 1,315% run in the past 12 months. But it was close to these highs in 2018, so it’s not in uncharted waters. And between then and now, some of its biggest competitors have dropped out of the competition, giving MIK more room to expand.
It may seem like an odd business to be in with these other high-risk stocks, but it’s a bumpy business. The stock is up 68% year to date, but only trades at a P/E of 12.
This is an odd bird that isn’t quite a biotech, since it doesn’t make drugs, but it’s also more than a conventional food company. Amyris’s proprietary technology allows it to rapidly engineer microbes and use them as catalysts to metabolize renewable, plant-sourced sugars into large volume, high-value ingredients.
It’s certainly a unique niche, since many companies that are looking for fragrance, flavoring or health products usually develop them in-house. But given the opportunities of new health, beauty and food companies to pop on e-commerce sites, the market is growing for AMRS.
But its niche certainly puts it in class with other high-risk stocks. AMRS is up 713% in the past year, and a whopping 214% year to date. It also has a $5 billion market cap, which means plenty of cash on hand to expand its empire.
DCP Midstream (DCP)
While DCP calls itself a midstream natural gas company, it does a fair amount of downstream work as well.
Midstream companies usually focus on pipelines and storage. DCP also deals with NGLs (non-gas liquids) that are broken down, or “fractionated,” from natural gas for their own individual properties. DCP markets these products as well as the natural gas.
The energy patch is certainly in the high-risk stocks category, but DCP focuses on natural gas, which is both very abundant and far cleaner than oil-based fuels. Additionally, natural gas and NGL prices usually rise when the economy expands, so this is a good time to get in while it’s still considered just another energy pipeline company.
The stock is up 386% in the past 12 months, but only 20% year to date. And it has a 7% dividend.
Disclosure: On the date of publication, Louis Navellier has positions in EXPI, FLGT, and FUTU in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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