Top high-growth blockbuster stocks of tomorrow.
Peter Lynch, arguably the greatest mutual fund manager and growth investor ever, coined the term "10-bagger" in his 1989 investing classic, "One Up on Wall Street." It refers simply to any stock that will run 10 times higher than what you paid for it, and Lynch, who amassed annualized returns of 29.2% between 1977 and 1990 while helming Fidelity's Magellan Fund, had his share of experience with them. Such exorbitant returns require patience, time and a high tolerance for risk. But even in 2021's frothy market, there are sure to be many stocks that jump at least 900% over the span of a decade. Although the following names are risky stocks, each has the potential to post blockbuster returns in the coming years. Here are six potential 10-bagger stocks to buy and hold for the next decade.
Editas Medicine (ticker: EDIT)
CRISPR technology, a gene-editing technique, is arguably the single most exciting innovation the public can invest in today. In short, researchers have discovered a way to hack nature -- and not just nature, but human biology. CRISPR genome editing enables the precise customization of human DNA sequences, a breakthrough with the gargantuan potential to eliminate inherited disease as we know it. Editas is one of several first-movers in the field, alongside Crispr Therapeutics (CRSP) and Intellia Therapeutics (NTLA), although Editas ostensibly has the upper hand in intellectual property. With the holy grail of solving inherited disease at stake, any one of these companies could be worth hundreds of billions of dollars in the future. An agnostic and patient investor might take a stake in all three, but the $3 billion Editas, which is already in clinical trials for a gene-editing medicine targeting Leber congenital amaurosis 10 (LCA10), a leading cause of childhood blindness, is off to a good start.
Put an asterisk next to this next potential 10-bagger growth stock, which isn't technically public yet. That said, Gores Holdings VI (GHVI), a special purpose acquisition company, or SPAC, is set to take Matterport public in the second quarter through a reverse IPO. For the uninitiated, Matterport is a 3D-imaging company, with tech that allows users to scan building interiors and create a precise virtual replica of the real world. If you've browsed real estate online, odds are you've encountered a Matterport scan, as 3D tours on Redfin (RDFN) and other sites are almost exclusively done using Matterport. The applications in real estate, home remodeling, insurance and other industries are mind-boggling. Matterport's utility to users is also on the rise with the development of an app, and a subscription model for those wishing to retain 3D scans and data over time means margins are set to rise. The SPAC deal values Matterport at $2.9 billion, a hefty price for a company doing just $86 million in revenue last year, but the business enjoys an incredible growth runway.
Pinduoduo, at about $160 billion, is not your typical 10-bagger candidate. But it has been growing like a weed, with shares already up more than 400% since their U.S. trading debut less than three years ago. It's a Chinese mobile-based e-commerce company specifically focused on connecting agricultural producers to consumers. Pinduoduo is a way to bet on China, the fastest-growing major global economy in the world, the growing Chinese middle class, e-commerce and the ever-present demand for food and groceries in one play. Gross merchandise volume soared 66% in 2020 to $255.6 billion, and PDD just surpassed e-commerce behemoth Alibaba Group (BABA) in annual active users with 788 million. Ten years from now, trillion-dollar companies won't be the rarity they are today, and the fast-growing Pinduoduo could feasibly grow into a $1.7 trillion valuation in that time.
No valuation technique is perfect, but one rough way to gauge an up-and-coming company's growth potential is to look at competitors. SmileDirectClub has its mission in its company name, offering a direct-to-consumer solution to imperfect teeth. Borrowing from the successful offerings of larger companies like the $41 billion Align Technology (ALGN), the $4 billion SmileDirectClub provides clear aligners to customers. The aesthetic of see-through aligners is enticing in itself, but SDC takes it a step further by further streamlining the fitting process, which can be done in a 30-minute appointment at SDC's SmileShop locations. That imprint is sent to company labs, where dental professionals craft a bespoke treatment plan. The company claims its nighttime aligner treatment is up to 60% cheaper than braces. Although unprofitable at the moment, analysts expect the company to progress rapidly toward profitability in the coming years.
Fiverr International (FVRR)
If you're bullish on the gig economy, you'll like Fiverr's business. Fiverr offers an online marketplace where workers can hawk their skills and services, and where conversely employers can find freelance workers. The site spans a wide variety of occupations -- it's all about digital work, but that ranges across ever-growing categories like website development, coding, logo design, blog maintenance, dropshipping, ghostwriting and audio/digital work, among other disciplines. The company closed out 2020 with a quarter of accelerating revenue growth, clocking in at 89% in the fourth quarter. FVRR shares aren't cheap by any means at more than 40 times sales, but analysts do expect some serious profit growth in the coming years, with earnings per share rocketing from 34 cents to $2.01 between fiscal 2021 and fiscal 2023.
The last of the risky stocks that could end up 10-baggers over 10 years is Fisker, the $5 billion electric vehicle company that has one of the more binary futures on this list. In other words, the EV industry is increasingly crowded but also full of promise; FSR could be competed into oblivion or emerge as one of the EV brands of tomorrow. Although the company's first vehicle, the Fisker Ocean SUV, isn't expected to debut until late next year, the company does have one important qualitative advantage over upstart rivals: The Fisker brand has been around since 2005, with CEO Henrik Fisker having first lent his name to a hybrid car brand. The Fisker Ocean SUV, expected in November 2022, is expected to retail for a starting price of $37,499, and its goal is to produce the world's most sustainable vehicle. To that end, a photovoltaic solar roof is optional.
Potential 10-baggers over 10 years:
-- Editas Medicine (EDIT)
-- Pinduoduo (PDD)
-- SmileDirectClub (SDC)
-- Fiverr International (FVRR)
-- Fisker (FSR)