If market conditions are teaching investors anything this year, it’s the idea that risk can happen fast. Protecting capital and planning for every possible scenario is paramount given all of the complicated headlines investors need to process on a seemingly daily basis. Whether it’s the conflict in Ukraine, the Federal Reserve’s plans for raising interest rates, or inflation impacts, it’s safe to say that there are plenty of challenging factors to consider in today’s equity markets.
The first London Value Investor Conference was held in April 2012 and it has since grown to become the largest gathering of Value Investors in Europe, bringing together some of the best investors every year. At this year’s conference, held on May 19th, Simon Brewer, the former CIO of Morgan Stanley and Senior Adviser to Read More
Some investors are known to thrive in volatility, as they are able to maintain a clear state of mind and attack buying opportunities with confidence as certain areas of the market are sold off. It helps to remember that although adding new positions at this time can be intimidating, high-risk investing can also lead to big returns if you are ok with the possibility of near-term drawdowns.
That’s why we’ve put together the following list of 3 high-risk high-reward stocks to consider adding now. Each one of these stocks could pay off in a big way over the long term if you are able to stomach some volatility, so keep that in mind as we head deeper into the year.
PayPal Holdings (NASDAQ:PYPL)
One of the big issues with buying a stock that is in a clear downtrend like PayPal is the fact that there are lots of trapped buyers. That means the stock faces a lot of overhead resistance, as many of those buyers will look to unload shares anytime the stock moves higher. This adds to the overall risk with PayPal, yet it’s a stock that still might be worth a look as it’s a company operating in an innovative industry that is primed for massive growth over the long term.
PayPal is a technology platform that enables digital and mobile payments on behalf of consumers and merchants worldwide, which means the company plays a huge role in the digital economy. Shares are down over 41% year-to-date thanks to the fact that growth stocks have faced heavy selling pressure. The company has also delivered mixed earnings results over the last few quarters and provided weak 2022 guidance. With that said, PayPal shares are trading near the lowest valuation since the company went public and could be close to bottoming out. Keep in mind that PayPal did surpass $1 trillion in total payments volume for the first time last year and delivered FY’21 net revenues of $25.4 billion, up 18% year-over-year, which confirms the growth story is still intact here.
One could consider Netflix as a high-risk, high-reward opportunity at this time given all of the question marks about how the company is going to be able to fend off competition in the coming years. The streaming giant will have to continue producing standout original content and expand in international markets to maintain its market leadership status, as platforms like Disney+, Amazon Prime, HBOMax, and more are rapidly growing in popularity. With that said, Netflix shares are down over 43% from 52-week highs and could end up being a bargain at current levels if the company can deliver some good news in the coming quarters.
Although there are concerns about slowing subscriber growth, Netflix still has a lot of positives working in its favor. The company’s robust content library which includes both original and licensed content is still the largest out of all of the streaming platforms, which is certainly a strength. Netflix has also invested a lot in building out a very strong internal recommendation software that leverages machine learning and algorithms. This software not only helps to keep existing subscribers entertained but also provides plenty of priceless data that the company can use for developing new content.
The Trade Desk (NASDAQ:TTD)
Investors should view growth stocks as high-risk investments in any market environment, as they are known to be quite volatile and don’t pay any dividends, which means the only way to generate a return on them is to sell shares at a higher price than what you paid. Growth companies are even riskier when you have the prospect of higher interest rates on the horizon, which is why we’ve seen many of these stocks pull back so sharply. With that said, a company like The Trade Desk is still worth considering at this time.
It’s a company that operates a cloud-based platform allowing buyers to create, manage, and optimize data-driven digital advertising campaigns. We know that online advertising is here to stay, and any company that can help marketers to leverage data in their strategies has loads of growth potential. Just take a look at The Trade Desk’s 2021 revenue growth, which reached $1.2 billion, up 43% year-over-year, for confirmation that the company is thriving. With shares recently reclaiming all of the major moving averages, this could be a high-risk stock that pays off in a big way.
Before you consider Trade Desk, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Trade Desk wasn't on the list.
While Trade Desk currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
Article by Sean Sechler, MarketBeat