For more than two months, retail investors have ruled the roost on Wall Street.
Beginning in mid-January, retail investors on Reddit's WallStreetBets chat room began buying into heavily short-sold stocks via shares and out-of-the-money call options. Short-sellers are investors who want to see the share price of a company fall. The thing with short-selling is that it's primarily done by institutional investors (i.e., the so-called "big money"), and losses are unlimited.
By banding together, these Reddit-based investors were able to effect short squeezes on dozens of companies, including video game and accessories retailer GameStop, which started the frenzy.
Smart investors are closing the curtain on AMC
Nowadays, it's movie theater operator AMC Entertainment Holdings (NYSE:AMC) that has arguably risen to the top of the list for many of Reddit's retail investors. With nearly all of AMC's movie theaters open or reopening as of March 26, retail investors are counting on consumers to rush back to the theater.
But long-term investors would be wise not to buy into the recent hype surrounding AMC. Though it might be up nearly 400% on a year-to-date basis, the company narrowly avoided filing for bankruptcy in January. It stepped back from the bankruptcy ledge only after offering close to 165 million new shares of stock and issuing over $400 million in additional debt. It's unclear if AMC has enough capital to survive the next two years, or if it'll even be able to service its growing debt load.
To make matters worse, AMC's operating model has been compromised. With theaters closed, select streaming operators -- AT&T's WarnerMedia on HBO Max and Walt Disney on Disney+ -- are releasing some or all of their films on their streaming platforms in 2021 the same day they're slated to hit theaters. Whatever film exclusivity that operators like AMC had has effectively been tossed out the window.
These are true millionaire-maker stocks
Instead of putting your hard-earned money to work in a company that's clearly flawed, consider investing in the following trio of high-growth stocks, all of which have the tools needed to make you a millionaire.
The first company that can run absolute circles around AMC is Teladoc Health (NYSE:TDOC), a provider of virtual health services.
As you would imagine, Teladoc crushed it in 2020, due in large part to the pandemic. Virtual visits more than doubled to almost 10.6 million, up from a little over 4.1 million in the prior-year period. With physicians wanting to keep potentially infected and at-risk people in their homes, they turned in greater numbers to telehealth services.
But something to keep in mind about Teladoc is that this growth was firmly in place before the pandemic hit. Sales growth averaged 75% annually between 2013 and 2019.
The reason the ceiling is so high for Teladoc has to do with the universal benefits provided by virtual visits. They're considerably more convenient for the patient, and telehealth allows physicians to keep better tabs on chronically ill patients. For insurers, telemedicine can provide improved patient outcomes (i.e., less costly long-term care), and virtual visits are usually billed cheaper than office visits. It's a win-win proposition up and down the healthcare system.
Teladoc also closed on its acquisition of applied health signals company Livongo Health in early November. Livongo gathers copious amounts of patient data, and with the help of artificial intelligence (AI) sends tips and nudges to its members to help them lead healthier lives. Livongo has already enrolled over 500,000 diabetics in the U.S. and will be looking to expand into hypertension and weight management. In other words, Livongo's services could be applicable to a large swath of adults in the U.S.
Teladoc projects as one of the decade's most exciting healthcare companies.
If high-growth small-cap stocks are more your thing, cast aside AMC Entertainment and say hello to EverQuote (NASDAQ:EVER).
EverQuote operates an online insurance marketplace. While the insurance industry spends an estimated $146 billion annually on ads and distribution, only $5.6 billion is spent on digital ads, which are EverQuote's specialty. But here's the catch: Digital spending is expected to grow by 16% annually through 2024, whereas overall ad and distribution spending is increasing by a pedestrian 3% per annum.
Similar to how Teladoc's platform is changing the face of healthcare, EverQuote's online insurance marketplace is making life easier for consumers and its clients (the insurance companies). Consumers are able to quickly and efficiently compare prices. As for insurers, EverQuote's marketplace is bringing them motivated buyers, which means they're spending their ad dollars with high efficiency. According to the company, about 1 in 5 shoppers who requests a price quote will make a policy purchase on the platform.
Although EverQuote generates most of its revenue from auto insurers, it's been expanding into new verticals via acquisition in recent years. In addition to auto coverage, it now offers consumers the ability to price out home, rental, life, and health insurance on its platform. These new verticals are growing at a much faster pace than auto and should help EverQuote maintain a double-digit growth rate.
With the company gobbling up online insurance ad share and nearing a turn to recurring profitability, it has all the catalysts necessary to make its investors millionaires.
On a macro basis, there may not be a more compelling story this decade than cybersecurity. With more businesses than ever moving their presence online or into the cloud, the responsibility of protecting enterprise and consumer data will increasingly fall on nimble third-party providers like CrowdStrike. Once optional, cybersecurity has evolved into a basic-need service.
What separates CrowdStrike is its superior cloud-native platform known as Falcon. This platform oversees more than 5 trillion signals per week, and relies on AI to grow smarter at identifying potential threats before they become a problem. Furthermore, Falcon is quicker than on-premises security solutions at responding to threats, and in many cases can do so for a lower cost.
If that sounds like a heap of praise, just take a gander at CrowdStrike's operating results for evidence of its effectiveness. The company touts a 98% customer retention rate, and has delivered 12 consecutive quarters with dollar-based retention rates of at least 123% -- meaning that existing clients are spending at least 23% more, on average, than they did in the year-ago quarter. What's more, 63% of customers now have at least four cloud module subscriptions, which is up from just 9% less than four years ago.
The point is this: CrowdStrike's clients are growing quickly, and the cybersecurity specialist is having little issue scaling to meet their needs. CrowdStrike is capable of double-digit growth for a long time to come.