After stuffing your portfolio with safe, stable stocks, prudent investors should also allocate a small portion to higher-risk, ultra-speculative names. Why? Because while they’re risky, these stocks boast huge upside potential if things break right. I’m not advocating recklessness here, but rather calculated speculation. We all hope to one day pick the next Amazon (NASDAQ:AMZN) or Netflix (NASDAQ:NFLX) early, banking 1,000%+ gains. Allowing 5-10% of a portfolio to be focused on moonshot bets creates those home run opportunities, without jeopardizing one’s overall finances.
Now feels like an opportune time to go fishing for big scores. Yes, volatility persists, and markets remain choppy day-to-day. High inflation and interest rates absolutely warrant caution. However, I’m also seeing positive indicators that a soft landing is achievable, perhaps even in 2024. Robust U.S. GDP growth suggests underlying economic strength, while struggling Europe and China may “export” welcomed disinflationary pressure. Stocks still appear meaningfully discounted from 2021 peaks as well.
In my experience, the best windows to bet on beaten-down, high-risk turnaround candidates open when negativity peaks. I believe pessimism has peaked, and as the storm clouds part in coming quarters, speculative stocks should surge ahead violently. The Fed could start tapering its rate hikes and potentially pivoting to cuts in 2024, acting as rocket fuel for the markets.
Luminar Technologies (LAZR)
Luminar Technologies (NASDAQ:LAZR) has had a rough year, with the stock plunging as the EV sector turned icy cold. However, I believe the company’s long-term growth story remains compelling. Luminar specializes in lidar technology for autonomous vehicles. In my opinion, lidar adoption will scale immensely this decade as automakers increasingly implement advanced driver assistance systems (ADAS). Luminar’s proprietary lidar offers superior range, resolution, and field-of-view compared to cameras or radar. Major OEM partnerships with the likes of Volvo (OTCMKTS:VLVLY), Polestar (NASDAQ:PSNY), and Mercedes (OTCMKTS:MBGYY) demonstrate immense promise.
That said, near-term headwinds persist. Supply chain disruptions and parts shortages have delayed auto production. Meanwhile, the latest quarter saw Luminar’s rate of new contract wins slow. Management mostly attributed this to lumpiness in timing, but it warrants monitoring.
I believe Luminar boasts immense upside from today’s beaten-down levels. Its tech leadership in a key autonomy enabler positions it well to ride the autonomous vehicle wave. Luminar targets an order book of more than $60 billion by 2030. If successfully executed, the company’s current $1.3 billion valuation seems very compelling.
Terran Orbital Corporation (LLAP)
Small satellite manufacturer Terran Orbital (NYSE:LLAP) has also endured turbulence since going public. The stock crumbled more than 40% after Terran Orbital slashed full-year guidance. Revenue now falls shy of previous estimates due to delayed contract start dates.
However, Terran already sports a multi-billion dollar backlog that continues growing. This quarter, new awards created a backlog of over $2.6 billion, fueled by a deal for Lockheed’s (NYSE:LMT) Space Development Agency project. Terran also boasts a pipeline of 80 opportunities representing 2,800+ satellites worth $2.7 billion.
Admittedly, Terran’s checkered history with its guidance warrants caution. But I believe the company’s long-term growth outlook remains exciting. Terran Orbital expects over 80% of today’s backlog to convert to revenue through 2025.
Currently, LLAP stock is trading at just 7-times 2025 estimated earnings. That’s a company that appears significantly undervalued relative to upbeat long-range prospects.
Hive Blockchain Technologies (HIVE)
As a miner of Bitcoin (BTC-USD) and other altcoins, Hive (NASDAQ:HIVE) provides direct exposure to cryptocurrency price movements. Given Bitcoin’s (BTC-USD) history, its next halving event, expected around March/April 2024, should ignite Hive’s profitability.
A Bitcoin halving event refers to the coded supply emission change whereby mining rewards per block halve every four years. With supply growth cut in half, simple economics typically drive the Bitcoin price drastically higher in response. Previous halvings sparked enormous bull runs. Thus, if history repeats, miners like Hive stand to gain immensely.
Hive must navigate the crypto winter persisting through 2023 first. Bitcoin still lingers below last year’s peak. But at some point, the tide should turn. When it does, Hive sports one of the industry’s highest hash rates and most efficient operations. These factors provide impressive mining profitability during boom cycles.
On the date of publication, Omor Ibne Ehsan 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.
