If you’re able to buy shares of a small growth stock — say, a company with a market capitalizationof less than $20 billion — before the rest of the market catches on to the story, it can be a life-changing investment.
Consider, for instance, the 1997 investment that Motley Fool co-founder David Gardner made in — at the time — a tiny company called Amazon. With a split-adjusted purchase price of just $3.19, a simple $10,000 investment back then is now worth $4.5 million.
But what is a growth stock? There’s no hard-and-fast definition. Perhaps it’s best to define this type of investing in the context of a few other types of investing.
- Growth stocks: Stocks you buy because you believe the stock’s price could increase substantially — usually an uncapped amount with enormous upside potential. Revenue often increases dramatically. This tends to be a high-risk/high-reward type of investing.
- Income stocks: Stocks you buy because you want to receive regular dividends. Revenue growth need not be much higher than inflation. These companies tend to be larger and more stable and offer a lower-risk/lower-reward profile.
- Value stocks: Stocks you buy because — like growth stocks — you believe the stock’s price will go up. Unlike growth stocks, however, this is because you believe the stock to be currently undervalued.
There’s no way to know if the five growth stocks I’m introducing today will have Amazon-like returns. However, they all share a few key traits I consider to be important for growth investors:
- A market capitalization of less than $20 billion.
- Revenue growth of at least 20% over the past three years.
- An "antifragile" balance sheet that will allow it to grow stronger in the face of economic crises.
- Founder-led companies where insiders own lots of stock
- An identifiable moat protecting the company from its competition.
We’ll cover each of those below for these growth stocks.
Top 10 Low Price Stocks For 2019: Mastercard Incorporated(MA)
Let’s do a double for this one: Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA). Both companies are huge beneficiaries of the same trend, as global consumers continue moving to credit and debit from cash and check. Further, growing e-commerce sales bode well for V and MA too, for obvious reasons.
The credit card business is attractive for many reasons, as V and MA serve as simple “toll booth” businesses. They don’t lend consumers money and they don’t take on big risks. Instead, when a consumer purchases goods or services from a merchant and pays via credit card, the merchant pays a fee that goes to V and MA.
While the pair of stocks may look expensive on a sales basis at first glance, the earnings-based valuation isn’t all that bad. Especially considering their double-digit earnings and revenue growth.
Throw in the fact that Visa has profit margins of almost 40% while MA has margins of 32% and we can see that these two are earning money hand over fist.
Both stocks tend to trade with a high correlation. They’ve been in a steady uptrend since early 2017 and I hate that I’ve taken some off the table since I first initiated a position almost six years ago.
As V and MA both bump up against resistance, they look like they’ll soon push through to new highs, short of another market-wide selloff.
Top 10 Low Price Stocks For 2019: HIVE Blockchain Technologies Ltd.(HVBTF)
Now, if you want as much cryptocurrency mining exposure as possible without actually running your own mining operation, there’s the over-the-counter exchange-listed HIVE Blockchain Technologies (NASDAQOTH:HVBTF). This publicly traded cryptocurrency mining firm is currently in the process of ramping up its operations in Sweden and Iceland, and envisions generating approximately $150 million in annual revenue from its operations. Sweden and Iceland offer commercial kilowatt-per-hour electricity prices that are well below the European average. Plus, these are relatively temperate nation’s, which may aid in keeping mining equipment cool.
Now here’s where things really get interesting. Despite being a crypto mining start-up, HIVE Blockchain already turned a profit in its most recently reported quarter. Sure, the $149,724 in profit was negligible and resulted in $0.00 in earnings per share, but that profit was derived from just over $3 million in quarterly sales. Presumably, HIVE could generate more than 10 times this each quarter when fully ramped up.
The wildcard here is what’ll happen to cryptocurrency prices. You see, HIVE Blockchain isn’t necessarily selling all of the Ethereum, Ethereum Classic, and ZCash tokens that it’s mining. It hangs on to some of these coins in the hope that they’ll appreciate in value. Thus, investing in a company like HIVE gives an investor direct access to crypto mining margins, as well as the movement in a handful of popular digital currencies.
Like the other companies above, there are also plenty of risks. Given that its business is entirely devoted to crypto mining and lacks sales diversity, investors would need to understand that if virtual currency prices fall considerably, their investment in HIVE could dive. Furthermore, in order to raise capital, it wouldn’t be surprising if HIVE Blockchain diluted existing investors with bought-deal offerings. These are the risks that stock investors would have to endure if they wanted direct access to a publicly traded cryptocurrency mining stock.
Top 10 Low Price Stocks For 2019: Baidu Inc.(BIDU)
Chinese internet powerhouse also cruised past earnings estimates recently, reporting adjusted earnings per share of $2.60 that comfortably outpaced our consensus estimate of $1.73. The company saw revenue figures of $3.33 billion, also topping our consensus estimate of $3.26 billion. Total revenue was up 31% from the prior-year quarter.
Baidu also posted strong guidance. For the second quarter of 2018, Baidu expects revenues to be between $3.97 billion and $4.17 billion. Before the report, our latest consensus estimate was calling for revenue of $3.91 billion.
Top 10 Low Price Stocks For 2019: China Life Insurance Company Limited(LFC)
China Life Insurance is the leading life insurance company in China. Analyst outlook for the company is improving, with our consensus projection for its full-year 2018 earnings improving by three cents over the past two months—earning the stock a Zacks Rank #1 (Strong Buy). LFC is now expected to witness EPS growth of 14% this year. The stock is also trading with an “A” grade for Value, underscored by its attractive P/E of 13.3 and better-than-industry-average PEG of 0.5. Investors are getting a great price for the company’s earnings outlook and growth.
Top 10 Low Price Stocks For 2019: Cannabis Science, Inc. (CBIS)
As I’m sure you’re all aware, the cannabis industry receives a bad rap from society at large. Countless movies, music videos, and television shows celebrate the idea of getting completely baked. It’s easy to forget the fundamental reason why marijuana is so popular — its medicinal properties, of course!
Okay, maybe that’s a little bit of a stretch, but nevertheless, cannabis does have promising therapeutic and medicinal potential. Cannabis Science Inc (OTCMKTS:CBIS) is one of the few names among marijuana penny stocks that’s completely devoted to medicinal marijuana. According to their profile, CBIS is actively seeking “to treat the world’s most deadly illnesses,” including cancer. In the future, CBIS aims to help patients with increasingly common conditions, such as attention deficit disorder, and post-traumatic stress.
With recent clinical studies demonstrating marijuana’s potential, Cannabis Science also enjoys the possibility of a strong move in the markets. That being said, the company’s financials are very similar to a speculative biotech firm. I don’t necessarily mean this in a good way: CBIS stock will be feast or famine.
So far, long-term shareholders have been going without. CBIS is down more than 33% YTD, which is typical for marijuana stocks in its class. Still, with a small investment, Cannabis Science can pay off bigly!