For Wall Street and retail investors, this has been a challenging year like none before. Whether you’re a novice investor or someone who’s seen a fair amount of recessions, there’s simply nothing that could have prepared people for the disruption caused by the 2019 coronavirus disease pandemic (COVID-19).
In what can best be described as a story of two halves, the first quarter featured the fastest bear market decline in stock market history. Comparatively, the second quarter yielded the strongest quarterly earnings for the benchmark S&P 500 since 1998.
Although periods of panic and increased volatility can be naturally troubling, they are often good news for long-term investors. This is because it allows those with a long-term mindset to choose big deals at a discount.
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Of course, the best stocks to buy are not always those with the largest brand. Patient investors can often find the juiciest long-term gains by buying higher-growth, but higher-risk, small-cap stocks. If you have $ 2,000 in disposable cash that won’t be used to pay bills or cover emergencies, then you have more than enough capital to invest in the following three small-cap stocks, which I believe have what it takes to make them wealthy Investors .
Immune therapy
The first potential small-cap money generator is a specialized biotech company. Immune therapy (NASDAQ: TARGET).
Aimmune made history on January 31, 2020, when it obtained the first approval from the United States Food and Drug Administration for the treatment of peanut allergy in children and adolescents. The drug, Palforzia, works by desensitizing patients to allergies over time. Although it does not cure a peanut allergy, it can help prevent serious reactions. In late-stage trials, 67% of patients taking Palforzia completed the study, suggesting that they were able to tolerate increasing doses of peanut protein. In comparison, a meager 4% of those in the placebo group completed the study. In other words, the effectiveness of Aimmune’s main drug is not in doubt.
However, Aimmune has lost more than half of its value in 2020. This is mainly because COVID-19 stopped the launch of Palforzia. Since the initial dose must be administered in a clinical setting, and most hospitals are prohibited due to COVID-19, the initial absorption of the drug is harmful. That and a wholesale list price of $ 10,000 is nothing to scoff at.
But having a clear path to market share in an indication that has great potential for success is not negligible. Up to 6% of children in the United States have some form of peanut allergy. With some analysts asking for more than $ 1 billion in maximum annual sales, Palforzia could be Aimmune’s golden ticket for a much higher valuation.
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Cresco Laboratories
I get it: owning cannabis stocks has not been a fruitful undertaking in the past 15 months. Regulatory-based supply problems in Canada and high tax rates in the US market have allowed illicit channels to continue to thrive across North America. But this does not change the fact that as the marijuana industry matures, winners will emerge. Right now, Cresco Laboratories (OTC: CRLB.F) it has the characteristics of a long-term winner.
Cresco Labs is a US multi-state operator that controls the seed sales process. It has 18 operating dispensaries, with eight of them located in Illinois. Lincoln Land is particularly attractive to Cresco as it opened its doors to sales of weeds for adult use on January 1, 2020. By 2024, Illinois should generate more than $ 1 billion in marijuana sales per year. Market share is certainly at stake in this key market, and Cresco aims to grab the bull by the horns.
However, Cresco Labs’ biggest driver of growth could be its acquisition of Origin House in its entirety. The deal, which closed in January, gave Cresco access to Origin House’s California cannabis distribution license. There are only a handful of companies in the Golden State licensed to move marijuana from Point A to B, and Cresco is now one. What is particularly important about this is that it allows Cresco to take its products to nearly 600 dispensaries in the most valuable marijuana market in the US (and the world).
As a final note, Cresco Labs has had no qualms about relying on sale-lease agreements to increase its available cash, and was one of the few lucky moves to gain access to non-financial forms of financing. While money is a concern for some cannabis stocks, it shouldn’t be for Cresco.
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Shift4 payments
Last but not least, investors with $ 2,000 in available cash should consider investing in a recent IPO. Shift4 payments (NYSE: FOUR).
Shift4 is part of the exceptionally active fintech industry that focuses on keeping consumers and businesses away from cash. Despite being a name under the radar in the point of sale space, it is responsible for processing more than $ 200 billion in payment volume each year, which is actually double what SquareThe seller ecosystem did it in 2019 ($ 106.2 billion). Shift4’s point of sale solutions are probably best known in the hospitality industry, which includes restaurants and hotels. Considering that the US is a consumption-driven economy, generating revenue based on fees from payment solutions is usually a winning formula.
But make no mistake about it, Shift4 is more than just payments. It is also a technology solutions company. Shift4’s Skytab mobile payment solution offers consumers the ability to order or pay at their table in restaurants, and can integrate with Lighthouse 5, Shift4’s cloud-based business intelligence tool that provides businesses with analytics for actionable prices and expenses. In other words, Shift4’s business model is based on a set of products, and not just on its payment platform.
At the moment, Shift4 is not profitable, primarily because it is aggressively reinvesting in technology solutions. But it’s worth noting that subscription revenue, and revenue linked to its more than 7,000 software partners, is growing as a percentage of total sales. Wall Street loves double-digit sales growth with recurring revenue, and that’s what Shift4 investors will get.
