Speculative stocks can be tricky to manage. By definition, a speculative stock is risky and prone to volatility. The highs and lows can be extreme. This is because the underlying fundamentals of a speculative stock are weak, the company operates in an unproven market or it has a business model that may or may not be sustainable.
Investors who buy speculative stocks are betting that the current situation with a particular company will change, leading to a higher share price and big returns.
While most speculative stocks are too risky to put money into, there are some that could be worth a gamble. Stocks of companies that have a sound product, are market leaders or that are being held back by regulations that may eventually change are better bets than stocks of companies that are poorly run or trading for pennies per share.
Here are three speculative stocks worth rolling the dice on this August.
Speculative Stocks Worth a Dice Roll: Coinbase (COIN)
Cryptocurrencies remain the ultimate speculative play for investors. But there’s a way to gain exposure to the volatile sector without actually purchasing Bitcoin (CCC:BTC-USD), Ethereum (CCC:ETH-USD) or other digital coins. Investors could instead buy shares of Coinbase, the largest cryptocurrency exchange in the U.S.
The company went public via a direct listing on April 13 of this year, and while COIN stock has fallen since its first trade at $381 a share, Coinbase just announced blockbuster quarterly results that caught Wall Street’s attention.
For this year’s second quarter, Coinbase reported that its net profit rose 4,900% from a year earlier to $1.6 billion. That’s right, the company’s net profit increased by nearly 5,000%. Coinbase also reported revenue of $2.23 billion versus $1.78 billion that analysts expected for the second quarter. Earnings per share came in at $3.45 compared to $2.33 that was anticipated. The impressive results come after a volatile stretch of trading for cryptocurrencies, with Bitcoin’s price falling about 40% between April and June.
Monthly transacting users on Coinbase grew to 8.8 million, up 44% from the previous quarter, while trading volume rose 38% to $462 billion from the first quarter. The company also reported that its trading volume has diversified beyond Bitcoin. Approximately 24% of Coinbase’s total trading volume during the second quarter was concentrated in Bitcoin, down from 39% in the first quarter.
COIN stock is on an upswing, having risen nearly 10% since the beginning of July to its current share price of $264.00. The stock rose 8% immediately after its second quarter results were announced.
Virgin Galactic (SPCE)
Will space tourism takeoff? That’s the gamble investors are taking when they buy shares of Virgin Galactic. The company led by Sir Richard Branson is betting that regular folks will pay $450,000 to ride one of its commercial spacecraft into orbit above the Earth.
The company says it has booked about 600 reservations for tickets on future flights. But whether space tourism, which requires passengers to be healthy as well as wealthy, will become a viable long-term business remains to be seen.
The speculative nature of space tourism has been reflected in Virigin Galactic’s share price, which continues to be extremely volatile. SPCE stock rallied 260% after the Federal Aviation Administration (FAA) granted Virgin Galactic a license to fly passengers on future spaceflights, and as Richard Branson himself rode a test flight into orbit. But after peaking at $55.91 in late June, the share price has come down 53% and currently trades at $26.19. However, with the company planning to begin commercial service early next year, it may not be long before the stock rises again.
Speculative Stocks Worth a Dice Roll: ChargePoint Holdings (CHPT)
Electric vehicles still have a long way to go before they replace gas-powered cars, trucks and SUVs. However, automakers are moving aggressively to expand their fleets of electric vehicles, spurred on by governments around the world that are providing financial incentives and issuing regulations to accelerate the shift. And the recently passed $1 trillion U.S. infrastructure bill could help in another critical area, with the charging stations that’s needed to build out the electric vehicle infrastructure.
That’s good news for ChargePoint, which operates the largest network of both residential and commercial electric vehicle charging stations in the world. ChargePoint is also a relatively new stock, having gone public on March 1 of this year via a reverse merger executed through a special purpose acquisition company (SPAC).
CHPT stock has traded through several peaks and valleys. Since its first trade, the share price has declined 33% and is now sitting right around $25. A secondary share offering was responsible for a lot of the volatility.
And while ChargePoint and the electric vehicle market remain speculative, the company continues to make solid moves to grow and expand its network of charging stations. On July 20, ChargePoint announced that it had entered into a deal to acquire has·to·be, a European electronic mobility company that develops and operates electric vehicle charging software. The cash-and-stock deal is expected to close before the end of this year.
With infrastructure spending in the U.S. ramping up, ChargePoint could be a beneficiary.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.