6 Risky Stocks That Could Be ’10-Baggers’ in 10 Years

This is not your grandma’s investment strategy.

Blue-chip stocks and dividend aristocrats can serve as keystones of a well-balanced portfolio, and they often play an important role in the holdings of long-term, buy-and-hold investors. But high-risk, high-reward stocks have their place too — just not, perhaps, in the accounts of retirement investors diligently holding blue-chip stocks and collecting dividends. More risk-tolerant investors may want to shoot for the moon and tolerate a greater degree of volatility by searching for the type of investment that can go up tenfold — also known as a “10-bagger.” Anyone can find these stocks, but at the stock market’s average compound annual growth rate of 10%, it would take 24 years for a typical stock to become a 10-bagger. Want to do it in a decade? You’ll need to post gains of 26% per year to do that. Here are six risky stocks with the potential to become 10-baggers in 10 years.

EHang Holdings Ltd. (ticker: EH)

EHang is a speculative stock in one of the most quintessentially futuristic industries you can imagine: flying cars. Technically, this China-based company makes “electric vertical takeoff and landing,” or eVTOL, aircraft. EHang focuses on autonomous aerial vehicles, and its two-passenger EH216 model is already in limited production, with a payload of 485 pounds, a max speed of 81 miles per hour and a range of 22 miles at full capacity. While this may not sound like much, eVTOL technology should have practical applications in dense urban environments in the years to come, and early models of the EH216 have already been released for purposes like high-rise aerial firefighting. At a market capitalization of roughly $230 million, even a tenfold advance barely gets EH’s valuation to mid-cap territory. Its minuscule $9 million revenue base has plenty of room to grow, with analysts expecting 70% growth in 2023.

Dutch Bros Inc. (BROS)

Dutch Bros is a Grant Pass, Oregon-based operator of a rapidly growing chain of drive-thru coffee stores. Founded in 1992, the company has 641 locations in 14 states as of the end of the third quarter. Aggressively increasing its footprint, Dutch Bros’ 103 new stores in the last year represent location growth of 19.2%, which is extraordinary for any retailer but especially one expanding at scale. Largely a regional operator at present, BROS locations are highly concentrated in the West and Southwest, but it aims to grow nationwide, envisioning a U.S. footprint of at least 4,000 locations, more than six times its current number. Unlike many rapidly growing companies, Dutch Bros is already profitable, and it is sacrificing short-term profit maximization for long-term market share and growth. The smaller retail footprint of each store, plus its drive-thru feature, allows for both operating efficiency and cheap expansion. The company is worth about $6 billion today.

Neogen Corp. (NEOG)

Neogen is a solid, stable business in a relatively boring industry — food safety and diagnostics — that’s been hammered this year following an ill-timed and poorly understood merger. Profitable and boasting a corporate track record going back more than 40 years, NEOG stock has split seven times in the last 19 years, leaving investors with more than 11 shares for each single share they owned at the end of 2003. A “steady Eddie,” NEOG has clocked revenue growth in 121 of the last 127 quarters. Insider trading activity throughout 2022 sends unabashedly bullish signals, with 10 insider buys and just one sale — following the exercise of an options package — back in January. A bounce back off of its current oversold level — shares are down 65.3% in 2022 as of market close on Nov. 10 — and a return to its days of compounding would be an opportunity to 10x from current levels over the next decade.

StoneCo Ltd. (STNE)

Next up is StoneCo, a fast-growing Brazilian financial technology company. StoneCo aspires to be the Block Inc. (SQ) — the fintech company formerly known as Square — of Brazil. The country’s economy is three times larger than any other South American nation, with a gross domestic product that exceeds Mexico’s, so the market opportunity is large for the $3.4 billion StoneCo. By comparison, Block’s market cap is about $42 billion. Revenue has exploded in recent years, and 2021 earnings were about 11 times higher than in 2016. A surge in selling, along with general and administrative expenses, plunged the company into the red last year, but analysts expect earnings per share to more than triple between 2022 and 2024 alone. Warren Buffett’s Berkshire Hathaway Inc. (BRK.A, BRK.B) is also a big believer in the stock, owning about 3.5% of all outstanding shares.

Meta Platforms Inc. (META)

Yes, even mega-cap companies like Facebook parent company Meta Platforms can become 10-baggers. Down about 67% this year as of market close on Nov. 10, Meta need only return to where it was to begin this year to triple from current levels. The social media giant, which has 3.71 billion monthly active people across its family of apps, is taking it on the chin in 2022 as it throws money at its metaverse aspirations, an endeavor that it pumped $10.8 billion into in the first nine months of the year and $36 billion into since 2019. The company is in an investment phase through 2023, but then will pace metaverse investments more meaningfully; the market has already forced META to lay off 11,000 employees, showing cost discipline may be returning. If the metaverse materializes as a phenomenon in the next 10 years, Meta should be the best-suited to reap the rewards — and if it doesn’t, the advertising and e-commerce opportunities for its 3.71 billion users are still attractive.

Matterport Inc. (MTTR)

Mattterport is a 3D imaging company headquartered in Sunnyvale, California. The self-proclaimed leader of the digital transformation of the built world, Matterport’s technology can be used to create “digital twins” of real-life spaces that can be used to showcase real estate, virtually stage a building, design buildings and factories, and virtually tour real-life retail locations. A prime example of the deflationary impact of technology, Matterport’s clients can improve operational efficiencies and reduce their carbon footprints by eliminating the need for certain site visits and travel. Twenty-three percent of Fortune 1000 companies are Matterport clients, and the firm is coming off a great third quarter in which it beat on top- and bottom-line figures and grew revenue 38%. Still a small-cap stock worth about $1.1 billion, continued penetration of this growing industry over the next decade could easily see Matterport 10x from here. In fact, merely getting back to 52-week highs would make it a 10-bagger.

6 stocks that could be 10-baggers in 10 years:

— EHang Holdings Ltd. (EH)

— Dutch Bros Inc. (BROS)

— Neogen Corp. (NEOG)

— StoneCo Ltd. (STNE)

— Meta Platforms Inc. (META)

— Matterport Inc. (MTTR)

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6 Risky Stocks That Could Be ’10-Baggers’ in 10 Years originally appeared on usnews.com

Update 11/11/22: This story was published at an earlier date and has been updated with new information.

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