Market conditions are not always the same. During bear markets, the objective of investors should be to preserve capital and ensure returns that beat inflation. However, when market sentiments are positive, the focus should be on maximizing returns.
Of course, this does not imply that the portfolio should be entirely focused on growth stocks. However, it makes sense to allocate 50% of portfolio funds towards relatively high-beta stocks when the market is in an uptrend. Among the various strategies, one idea is to focus on low-price stocks. This article talks about three stocks under $10 with potential to deliver multibagger returns in quick time.
While low-price stocks have been associated with purely speculative activity in the past, it’s not always true. There are fundamentally strong stocks under $10 with potential to create value. These stocks represent companies with a sound business model and robust growth outlook.
Transocean (RIG)
With Brent oil trading above $80, it’s a good time to accumulate stocks from the oil and gas sector. Transocean (NYSE:RIG) is attractive among offshore contract drilling services business stocks. RIG stock has surged by 134% in the last 12 months. However, considering the order backlog and the likelihood of accelerated order intake, the upside potential remains intact.
As of July, Transocean reported an order backlog of $9.2 billion. With a front-end loaded backlog, there is clear revenue and cash flow visibility. Further, I believe the backlog will continue to swell, with the market outlook remaining positive.
With robust cash flows, there are two points to note. First, Transocean is targeting debt reduction of $3 billion in the next few years. As credit metrics improve, the stock is likely to trend higher. Further, the company’s financial flexibility has been improving, providing scope for fleet expansion.
Overall, I believe RIG is among the best stocks under $10 with potential to deliver multibagger returns in the next 24 months.
ChargePoint Holdings (CHPT)
ChargePoint Holdings (NYSE:CHPT) stock has corrected by almost 50% in the last 12 months. Given the potential for growth in the industry, I believe that CHPT stock is undervalued.
To put things into perspective, Wood Mackenzie expects the number of EV charging ports in the U.S. to increase four-fold by 2027. Even for Europe, there is significant potential for penetration through the decade. Therefore, even amidst intense competition, ChargePoint is positioned to benefit.
It’s worth noting that ChargePoint is on a high growth trajectory. For Q1 2024, the company reported 59% year-on-year growth in revenue to $130 million. The company plans to reduce adjusted EBITDA losses by approximately two-thirds by Q4 2024 compared to the current quarter.
It’s important to note that the company has a strong presence in the United States. Additionally, ChargePoint is present in 16 European countries. With a big addressable market, sustained revenue growth will translate into operating leverage. Further, as subscription revenue swells, the margin will likely be positively impacted. With these positives, CHPT stock seems poised for a sharp reversal rally.
Tilray Brands (TLRY)
As I write, Tilray Brands (NASDAQ:TLRY) stock is higher by 15% in the pre-market session. The reason is that the company has agreed to acquire eight beer and beverage brands from Anheuser-Busch (NYSE:BUD).
The acquisition provides two benefits to the company. First, it would further boost Tilray’s U.S. beverage and alcohol business. Furthermore, with a presence in the United States through multiple brands, the company has set up a strong strategic infrastructure. If cannabis becomes legal on the federal level, the company is likely to leverage this infrastructure to boost growth.
Besides the recent news, Tilray has already provided encouraging guidance for the financial year 2024. The company expects to achieve an adjusted EBITDA in the range of $68 to $78 million. Further, positive free cash flow is likely.
For a company growing through acquisitions and having a presence in the medicinal and recreational cannabis business, the valuations look mouthwatering.
On the date of publication, Faisal Humayun did not hold (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.
