Every investor knows that if you want to find stocks with big growth ahead, you have to start small. Small-cap stocks, generally defined as companies valued at between $300 million and $2 billion, often have the greatest potential to deliver monster returns. These companies are big enough to have proven their legitimacy, but also still small enough that they could grow by ten times or more.
We asked a panel of Motley Fool contributors for suggestions on how to take advantage of these appealing growth opportunities. Here’s why…
Guardant Health (NASDAQ:GH), CannTrust Holdings (NYSE:CTST), and Redfin (NASDAQ:RDFN) all fit the bill.
Targeting a huge healthcare opportunity
Todd Campbell (Guardant Health): If you have advanced cancer, your doctor’s likely to order a tissue biopsy so labs can determine if there are genetic markers that can improve your treatment. Traditional biopsies are invasive and costly, though, and in advanced cases they may not provide enough material to completely analyze your cancer for every possible genetic marker.
Solving this problem is critical to improving outcomes for millions of cancer patients, and it represents a massive opportunity for Guardant Health. Founded by ex-Illumina execs, Guardant Health markets tests that can provide more genetic insight than traditional biopsies via a simple blood sample, or “liquid biopsy.”
Guardant Health believes that displacing traditional biopsies with liquid biopsies in metastatic cancer could be worth $2 billion annually, but an even bigger market exists for detecting cancer in its earliest stages, when it’s easiest to treat.The market for evaluating cancer recurrence could be worth $15 billion per year, and screening patients for cancer represents an $18 billion-per-year opportunity.
If the company’s analysis is anywhere close to correct, then the rewards could be big for shareholders. Relatively limited use of its liquid biopsies in advanced cancer and drug development translated into sales of $37 million in Q1, up 120% year over year. Given its current sales growth and the billions of dollars that are associated with possible new markets, Guardant Health certainly has “big-cap” potential.
A budding stock that could aim for large-cap status
Sean Williams (CannTrust Holdings): It’s not easy for a company to grow from sub-$2 billion to over $10 billion in market value, but if there’s a fast-paced company that could put the puzzle pieces together and make everything click, it’s marijuana stock CannTrust Holdings.
CannTrust has struggled a bit of late, as the result of higher expenses tied to capacity expansion projects, a six-month delay in permitting for its flagship Niagara facility, and a return to losses after being consistently profitable (with the aid of fair-value adjustments) for a number of quarters. But none…
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