Patience pays off when you own a stake in an innovative, high-growth company.
It has been one of the most challenging years for stocks Wall Street and investors in the past half century. Looking at peak-to-trough declines, the benchmark S&P 500 and the growth-oriented Nasdaq Composite lost 24% and 34%, respectively. Both indices are in a bear market.
While bear markets undoubtedly inspire fear and test investor resolve, they are also ripe opportunities to buy game-changing companies at discounted prices. As a reminder, every stock market correction and bear market in history was eventually wiped out by a bull market rally.
The current bear market is an especially good time to buy growth stocks that have been weighed down by short-term fears. The following three monster growth stocks have the potential to turn an initial investment of $200,000 into $1 million by 2030.
Nio
The first fast-growing company with the potential to quadruple investor funding over the next eight years is Chinese electric vehicle (EV) maker NIO (NIO -0.26%).
Over the next few quarters, there’s no doubt that auto stocks will face plenty of headwinds. Automakers are grappling with a shortage of semiconductor chips, provincial COVID-19 shutdowns in China that are causing parts shortages and historically high inflation that is eroding their operating margins. Nonetheless, NIO has proven its capability and innovation to become the leading EV maker in China, the world’s largest auto market.
Once supply chain issues are a thing of the past, NIO should have no trouble ramping up production. In two years, the company went from producing less than 4,000 electric vehicles in a quarter to more than 25,000. In fact, production in November and December 2021 suggests an annual run rate of nearly 130,000 EVs. With no supply constraints, I believe NIO can increase the annual EV run rate to more than 500,000 units in 12 months or less.
The key to NIO’s success is its continuous innovation. For example, NIO recently launched two sedans, the ET7 and ET5, that will compete directly with Tesla’s flagship sedans, the Model S and Model 3. With the upgrade of the top-of-the-line battery pack, NIO’s sedans offer superior range compared to Tesla’s sedans.
Nio’s battery-as-a-service (BaaS) subscriptions are another way to drive long-term growth. The BaaS program reduces the initial purchase price of Nio EVs and allows buyers to charge, replace and upgrade their batteries. In return, NIO charges a highly lucrative monthly fee and, most importantly, keeps early buyers loyal to the brand.
Another monster growth stock that could turn a $200,000 investment into $1 million by the end of the decade is pet insurer Trupanion (TRUP 3.54%).
The biggest blow to Trupanion is that it prioritizes user growth over short-term gains. Reinvesting in the platform has not come cheap, and it has taken major losses in recent years. But patience can pay off when investing in the pet care industry — especially when you have as many competitive advantages as Trupanion.
Perhaps the most important point about pets is that in any economic climate, owners open their wallets to four-legged, feathered, and scaly family members. More than a quarter of a century has passed since U.S. spending on pets fell year-over-year, according to the American Pet Products Association.
On a more specific company basis, Trupanion’s opportunity lies in its vast pool of potential “members.” To date, the company has only about 2 percent of the pet market in the U.S. and Canada. By comparison, pet insurance rates in the UK are 25%. If Trupanion can increase U.S. pet registrations to 25 percent, its addressable market value would be more than $38 billion. In other words, the pet insurance industry is still in its infancy.
Διαφημίσεις
Trupanion is also the only major pet insurance company to provide veterinary clinics with software to process payments at the time of service. That’s one of the many reasons why Trupanion’s relationship with the animal hospital is second to none.
Cresco Labs stocks
A third monster growth stock that could turn a $200,000 investment into $1 million by 2030 is Cresco Labs (CRLBF 2.50%). Cresco ended in March with 50 operating dispensaries in 10 states.
As of February 2021, few industries are as generally unpopular on Wall Street as cannabis. The expectation is that a Democratic-led Congress, coupled with the election of Democrat Joe Biden for president, will quickly lead to the passage of federal marijuana reform in the United States. But marijuana stocks have entered a 16-month downtrend without marijuana legalization or banking reforms becoming law.
While the cannabis industry has been a hot topic for more than a year, it also presents an interesting opportunity for patient investors to capitalize on rapid growth in legalized states. After all, three-quarters of states have given marijuana the green light in some way. This is music in the ears of the biggest MSOs like Cresco.
Cresco’s primary growth opportunity comes from its retail business. Cresco is targeting some states with limited licenses, including Illinois, Ohio and Massachusetts. Regulators intentionally limiting the number of dispensing licenses issued provide Cresco’s retail stores with a fair chance to build brand awareness and build a loyal following.
Cresco Labs is also working on a transformative deal that will acquire MSO Columbia Care (CCHWF -1.44%) in an all-stock transaction. Assuming the deal closes, Cresco Labs will have more than 130 retail locations in 18 markets. Columbia Care often uses acquisitions as a means of expansion. With the acquisition of Columbia Care, Cresco will turn things around and tap into multiple high-dollar markets at once.
After all, Cresco Labs stocks is the largest wholesaler of cannabis in the United States. Wall Street often dismisses wholesale marijuana because of its lower profit margins compared to retail. However, Cresco does hold a cannabis distribution license in California, the largest U.S. cannabis market. This enables it to place its proprietary products in more than 575 dispensaries in the Golden State. That volume advantage is more than enough to offset weaker profits associated with wholesale cannabis.
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