You've no doubt heard the investing adage to “buy the dip.” But what if the dip is a really bad one? Sometimes buying stocks that fall significantly isn't such a great idea.
On the other hand, there are other cases where scooping up shares when they've retreated a lot can pay off in a big way over the long run. Here are three stocks more than 25% off their 2021 highs that could still make you rich.
1. Editas Medicine
Editas Medicine (NASDAQ:EDIT) delivered a sizzling gain of 137% last year. However, that sizzle has definitely fizzled in recent months. The biotech stock has plunged 55% from its high set in early January.
You can blame musical chairs in Editas' executive ranks for much of its decline. In January, Chief Scientific Officer Charles Albright left the company. Less than a month later, board Chairman Jim Mullen replaced Cynthia Collins as CEO.
Don't count Editas out, though. The company expects to report results from its early-stage clinical study evaluating EDIT-101 in treating rare genetic eye disease Leber congenital amaurosis 10 later this year. It recently kicked off a phase 1/2 study of EDIT-301 in treating sickle cell disease. Editas plans to file for U.S. Food and Drug Administration (FDA) approval by the end of 2021 to advance EDIT-301 into clinical testing targeting another rare genetic blood disorder, beta-thalassemia.
If either of its lead candidates proves to be successful in clinical studies, Editas could easily regain and overtake its previous highs. Over the long run, the company's CRISPR gene editing technology could be used to treat many other genetic diseases as well as cancer. Editas is a risky stock, but one that could still be a massive winner.
[Wall Street Insider: Why April 30th Could Spark The Greatest “MegaTrend” of The Decade]
2. Brookfield Renewable
I really expected that Brookfield Renewable (NYSE:BEPC) would take off in 2021. The Biden administration has made clean energy a top priority. Brookfield Renewable is a leader in renewable energy. However, the stock has fallen 27% from its high earlier this year.
What happened? The company's parent, Brookfield Asset Management, sold 15 million shares of Brookfield Renewable in a secondary public offering. This action sparked the renewable-energy stock's decline.
Brookfield Renewable's prospects remain as bright as ever, though. The company expects that a whopping $100 trillion will be spent on reducing carbon emissions over the next three decades. That should translate to strong growth for renewable power.
The company's current capacity stands at 19 gigawatts. Brookfield Renewable's development pipeline could add another 23 gigawatts of capacity. I still think this stock will take off in a major way in the not-too-distant future.
[Trend Alert: Three of the World’s Richest Billionaires Are Quietly Piling Into THIS]
3. Trupanion
Trupanion's (NASDAQ:TRUP) shares more than tripled last year. The story for the pet medical insurance provider hasn't been so great in 2020 so far, though, with its shares tumbling 39% from the peak in February.
The primary culprit behind Trupanion's dismal performance was its Q4 update. The company posted a net loss of $0.09 per share, which was much worse than the consensus analysts estimate of a net loss of $0.03 per share.
However, Trupanion should deliver strong growth. It expects total revenue in 2021 to jump 32% year over year, with subscription revenue increasing by 25%. The company's bottom line might not improve as much, but it's because Trupanion plans to increase investments in new products and international expansion. This higher spending should pay off over the long term.
Trupanion's partnership with Aflac should also begin to reap returns beginning in 2022. The big supplement insurance company plans to offer Trupanion's pet insurance to its large and medium-sized businesses first. In 2023, the two companies hope to expand their focus to the small-business market.
The opportunities for growth in pet medical insurance are huge, with a market penetration rate in the U.S. of around 1%. I don't think Trupanion's slump will last for too much longer. The current pullback looks like a great time to buy this stock and hold it to obtain tremendous returns over the next few years.
[Exclusive: Democrat’s Closed Door Meeting is Set to Ignite Stock Market Boom]
Keith Speights owns shares of Brookfield Renewable Corporation, Editas Medicine, and Trupanion. The Motley Fool owns shares of and recommends Brookfield Asset Management, Editas Medicine, and Trupanion. The Motley Fool recommends Aflac and BROOKFIELD ASSET MANAGEMENT INC. CL.A LV. The Motley Fool has a disclosure policy.
Leave a Reply