Risk is a constant part of the investing game; whilst low risk often means good and high risk means bad, there can be some real opportunities in the latter. With many of today’s most popular companies making it back from mid-March lows, risky investments can sometimes provide maximum gains. Look at the likes of Amazon (NASDAQ: AMZN): in 2001 trading at only $5.51 per share, the likes of Apple (NASDAQ: AAPL) before the return of Steve Jobs in the ’90s and Starbucks (NASDAQ: SBUX) in 2008 suffering from too much success and over expanding the franchise.
Anyone who held on to these companies during their respective troubles will likely be a lot wealthier today. Slow and steady wins the race for a strong portfolio, but often a risky investment can payout with a little patience. Here are three investments worth considering if you don’t mind the risk.
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1. Aurora Cannabis
Aurora Cannabis (NYSE: ACB) might not strike a potential investor as a particularly promising company in a particularly strong sector. Despite being heralded as the next big market coming out of 2018’s ‘high’, the come-down proved to be rather hard-hitting — especially for Aurora, Tilray (NASDAQ: TLRY) and Canopy Growth (NYSE: CGC) to name a few.
By the beginning of 2020 Aurora’s market cap went from $13 billion to just $3 billion, fast forward to the end of June and it is currently at $2 billion with a stock price loss of 50% — and this is after it has started to recover. Yet, the company just posted better than expected third-quarter earnings with revenue jumping 18%. The production of a popular new product certainly helped this upturn whilst a more forward-thinking plan could sort out the kinks.
Having paid for some costly spending and a stupid mistake involving german permits, Aurora is now looking to continue growing international sales whilst cutting its operating costs. The company aims to have a positive net income by Q1 2021. This would be the perfect time for a discounted price, high risk, but a potential high gain investment.
iRobot (NASDAQ: IRBT) is essentially competing in an overcrowded market with big, domineering players such as Dyson, Riccar, and all-rounder SharkNinja. iRobot occupies a niche corner of the vacuum market, producing the disk-like robot vacuum cleaner that also doubles as a cat-entertainment device — #CatOnRoomba.
Despite having sold over 30 million units since its founding, iRobot faced difficulties last year when the heightened pressure of competition forced the company to slash its prices. Increased tariffs on Chinese-imported products then reduced profits further. If only to add to iRobots stress, this niche corner of vacuum tech is expanding as companies such as SharkNinja have now begun producing their own versions of robot vacuums.
iRobot’s stock has recently started on a bullish trend, increasing around 140% since mid-March. As sales have increased it could indicate a new trend towards appliances that allow people to spend more time on leisure activities and childcare — an attitude that has become more prominent due to COVID-19.
3. Virgin Galactic
Any investment into Virgin Galactic (NYSE: SPCE) at this time cannot be categorized as similar to a buy of Netflix (NASDAQ: NFLX) or Apple. Virgin Galactic does not yet have a working product to sell, thus any investment is an investment in potential — but isn’t that what investing is all about?
This company is leaking money though, losing around $60 million in Q1 alone. Virgin Galactic is not yet a profitable company despite raising revenue through engineering services. However, the news of Virgin Galactic signing the Space Act shows that NASA and this space travel company will collaborate together to build a strong commercial economy in space flight tourism.
A patient investor might find the risk to be minimal in comparison to the excitement of taking a trip to the ISS. Interest in the product is high with Justin Bieber and Leonardo DiCaprio both purchasing tickets for the first flight. The only question is ‘when will it happen?’ as the estimates from Virgin Galactic have been continuously delayed for the last 10 years.
However, with estimates expecting the space tourism industry to value around $800 billion within the next decade, it seems a potentially profitable risk.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.
Contributing Writer at MyWallSt
Poppy likes companies that go the extra mile. Her favorite stock is Amazon because she is fond of its innovation, variety, and creative solutions to sustainability.