$AHCO $BAND $BRP $CRON $EAR $EH $FSLY $FUBO
26 stocks under $10 billion market cap with huge growth potential (part 1)
The last time I did one of these lists was August 18th, 2020 and the companies on that list are down below. Next to the stock symbols are the performance numbers using the closing prices on August 18th and December 1st.
$API -11.0%
$APPS +67.6%
$CELH +50.6%
$CRNC +63.6%
$CYRX +57.9%
$EVER -6.2%
$FTCH +82.4%
$FVRR +69.8%
$GRWG +88.8%
$GWPH +28.2%
$IIPR +29.5%
$LRN -47.4%
$NLS +50.8%
$NVTA +52.4%
$OTRK -5.1%
$PGNY +22.4%
$RDFN +14.0%
$SDGR -1.2%
$TWOU -18%
$ZYXI -16.7%
My list: +28.6%
Dow: +7.3%
Nasdaq: +10.2%
S&P 500: +8.3%
Russell: +16.9%
I still like most of these companies for the next 12+ months and I currently own $CELH $FTCH $FVRR $GRWG in my portfolio. Until recently I also owned $APPS $CYRX $NLS $IIPR and $OTRK but sold these positions to lock in some profits.
Even though I’d still be buying most of these companies I decided not to reuse any of them in this next list because my goal is to bring 20+ new growth stocks to my newsletter subscribers at least once per quarter.
Disclaimer: The group of stocks below is not intended to be a list of buy recommendations. Some of the stocks mentioned have smaller market capitalizations and therefore can be very volatile. Some of the stocks mentioned have also had big moves in recent weeks and therefore could be overdue for a pullback. I encourage everyone to do their own research and due diligence before buying any stocks. Please manage your portfolio and position sizing in accordance with your own risk tolerance and investment objectives.
1. $AHCO - AdaptHealth Corp.
Current price = $35.52
Market cap = $2.3 billion
Headquarters = Plymouth Meeting, Pennsylvania
Website = https://www.adapthealth.com/
2020 revenue growth (est.) = +94%
2021 revenue growth (est.) = +92%
Chart: https://chrt.biz/AHCO/1907481tlaq/chart/
AdaptHealth is a network of full-service medical equipment companies that use tailored products and services to empower patients to live their best lives. With operations in 35 states the company offers clinically driven products and services designed to help patients adapt to life in the home including: sleep and respiratory therapy (CPAP, biPap, Oxygen and others), mobility products, wound care, non-invasive ventilation, and nutrition to patients with special dietary ailments such as diabetes. AdaptHealth serves over 800,000+ patients per year and has 800+ commercial insurance contracts. This week the company announced the acquisition of AeroCare which is not only accretive to earnings but helps the company expand into new markets including 47 of the 48 continental US states [click here].
My take: I had never heard of this company until a few weeks ago when I started doing more stock screeners and research for this list. Since then I’ve tried to spend a couple hours on every single company including $AHCO. To be honest there’s nothing super sexy about this company except for the fact that they’re becoming a dominant player with huge potential and they made a very smart, strategic acquisition in AeroCare which makes their story even more compelling for investors. I don’t have any position in this stock yet but it’s certainly on my watch list. Unfortunately the stock was up more than 15% on the news that it was buying $AHCO so I’d rather wait for a pullback before jumping in.
2. $BAND - Bandwidth
Current price = $157.49
Market cap = $3.8 billion
Headquarters = Raleigh, North Carolina
Website = https://www.bandwidth.com/
2020 revenue growth (est.) = +42%
2021 revenue growth (est.) = +39%
Chart: https://chrt.biz/BAND/1907481uiap/chart/
Bandwidth operates as a cloud-based software-powered communications platform-as-a-service (CPaaS). The company operates in two segments, CPaaS and Other. Its platform enables enterprises to create, scale, and operate voice or text communications services across mobile applications or connected devices. Bandwidth serves large enterprises, small and medium-sized businesses, technology companies, and other businesses. Their clients include Google, Microsoft, RingCentral, Zoom and many more [click here]. Recently the company acquired Voxbone to help accelerate their international growth plans [click here].
My take: I really like $BAND and did own the stock earlier this year. The stock has recently pulled back 20-25% from recently highs so if you’re looking for some exposure to the CPaaS market this might be a good time to jump in with $BAND. I put them in the same group with $TWLO and $API because they’re similar but personally I think $BAND has the more attractive valuation in terms of P/S of the three companies. Gross margins are low for both $BAND and $TWLO but growth is still decent. Personally I think every growth investor should consider owning either $BAND or $TWLO in their portfolio although with that said I’m not currently in either but will look to get back in on any bigger pullbacks. I could also argue that $BAND is more attractive because there’s always a chance they get acquired whereas it’s very unlikely anyone is going to buy $TWLO for $65+ billion.
3. $BRP - BRP Group dba Baldwin Risk Partners
Current price = $29.76
Market cap = $2.4 billion
Headquarters = Tampa, Florida
Website = https://baldwinriskpartners.com/
2020 revenue growth (est.) = +72%
2021 revenue growth (est.) = +76%
Chart: https://chrt.biz/BRP/1907481wrm8/chart/
BRP operates as a global insurance distribution company through four segments: Middle Market, Specialty, MainStreet, and Medicare. The Middle Market segment provides private risk management, commercial risk management, and employee benefits solutions for mid-to-large size businesses and high net worth individuals and families. The Specialty segment operates as a wholesale co-brokerage platform that delivers programs requiring underwriting and placement services. The MainStreet segment offers personal, commercial, and life and health solutions to individuals and businesses in their communities. The Medicare segment provides consultation for government assistance programs and solutions to seniors and individuals through a network of agents. BRP has more than 500,000 clients, a very strong management team and is routinely ranked as one of the top insurance firms in the country.
My take: I have never owned an insurance company and I’m not sure I ever will however if I was going to $BRP would be at the top of my list. It’s hard for me to get excited about insurance and it’s traditionally not an industry with big competitive advantages or barriers to entry but it’s still a massive TAM and clearly $BRP is finding plenty of growth opportunities. If your investment thesis is to find smaller companies leveraging technology to disrupt big boring legacy industries then $BRP might be a perfect fit for your portfolio.
4. $CRON - Cronos Group
Current price = $8.55
Market cap = $2.9 billion
Headquarters = Toronto, Canada
Website = https://www.thecronosgroup.com/brands.php
2020 revenue growth (est.) = +62%
2021 revenue growth (est.) = +118%
Chart: https://chrt.biz/CRON/1907481xco4/chart/
Cronos operates as a cannabinoid company in the US and internationally. It manufactures, markets, and distributes hemp-derived supplements and cosmetic products through ecommerce, retail, and hospitality partner channels. The company is also involved in the cultivation, manufacture, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets. Its brand portfolio includes Peace Naturals, a global wellness platform; adult-use brands comprise Cove and Spinach; and hemp-derived CBD brands consist of Lord Jones and Peace
My take: I’m still no expert on the cannabis industry and I’m late to the party but it feels like there’s 10x more public weed/cannabis companies now than just a few years ago so it’s hard to know where to start and how to compare them. To be honest my favorite way to invest in this sector is with $GRWG which is a top 15 position in my portfolio (the classic “picks & shovels” investment strategy). However if you want to own one of the growers, brands and/or manufacturers then $CRON is probably a decent place to start but there are plenty of others to choose from. I chose $CRON because I recognized a couple of their brand names but also because they pop up in my growth screeners which made me want to dive a little deeper. It appears they are also working on some brand partnerships with celebrities which is always a good way to build awareness. Maybe $CRON will be the Nike of weed (haha). Taking the bigger picture view I do think that cannabis is going to be a booming industry for the next decade and if you don’t want to pick any individual names (more risk & more reward) then there’s several weed/cannabis ETFs you can choose from including $YOLO $MJJ $THCX $POTX and $MSOS
5. $EAR - Eargo
Current price = $47.36
Market cap = $1.8 billion
Headquarters = San Jose, CA
Website = http://Eargo.com
2020 revenue growth (est.) = +97%
2021 revenue growth (est.) = +38%
Chart: https://chrt.biz/EAR/1907481xx17/chart/
Eargo develops medical-grade hearing aids and sells them directly to consumers (DTC) off their website. Hearing loss is the third most common medical condition in the U.S., more prevalent than diabetes or cancer. Eargo estimates that the underserved market of people with hearing loss is 43 million adults in the U.S. and more than 465 million adults globally. Eargo hearing aids are nearly invisible, rechargeable, and completely in the canal.
Eargo hearing aids aren’t cheap. Its most basic hearing aid, the Eargo Max costs $1,850, while the Eargo NEO sells for $2,350. The Eargo NEO HiFi, its newest product and the one Gormsen was wearing, goes for $2,950. The company, however, offers a one-time replacement for each device that is lost or damaged. As of recently some Medicare Advantage, Medicaid and commercial insurance programs, as well as some U.S. federal government programs, may cover the whole cost or a portion.
Eargo also provides 0% financing for their hearing aids with payments as low as $103/month. A few years ago my father paid more than $6,000 for his hearing aids so there’s alot of reasons why this DTC model is scalable.
My take: Several weeks ago my Mom mentioned to me how much my Dad’s hearing aids cost, my jaw dropped when she said $6,000+ especially since I knew that these DTC companies existed and were gaining traction. 6 years ago I interviewed the founder of a different DTC hearing aid company on my podcast so I understood the industry and where the challenges were. The biggest problem is the audiologists that make a ton of money by recommending the super high priced hearing aids. Unfortunately hearing loss is a major problem in this country especially as the population ages so as people become more comfortable with the process of buying a hearing aid online then it bodes well for companies like $EAR. I actually started a small position in this company earlier this week so I’m watching it closely for now and will likely add at some point.
6. $EH - Ehang Holdings
Current price = $13.24
Market cap = $750 million
Headquarters = Guangzhou, China
Website = https://www.ehang.com
2020 revenue growth (est.) = +225%
2021 revenue growth (est.) = +300%
Chart: https://chrt.biz/EH/1907481ygq7/chart/
EHang operates as an autonomous aerial vehicle (AAV) technology platform company. It designs, develops, manufactures, sells, and operates AAVs, as well as their supporting systems and infrastructure for a range of industries and applications, including passenger transportation, logistics, smart city management, and aerial media solutions.
My take: Of all the companies on this list I think $EH must be the riskiest and craziest but also the coolest and most exciting depending on whether you appreciate innovative technologies. Whether you like it or not drones and aerial vehicles will be part of the future with regards to deliveries, logistics and transportation. To be honest I’m still digging into this company and don’t have any position yet but it looks like they might be on the cusp of some massive growth so I wanted to put them on your radar. It’s very likely we don’t see these technologies for commercial use in the US for another 3-4 years but China is more than happy to chart the path as they’ve done with other cutting edge technologies over the years.
7. $FSLY - Fastly
Current price = $80.39
Market cap = $9.1 billion
Headquarters = San Francisco, California
2020 revenue growth (est.) = +45%
2021 revenue growth (est.) = +42%
Chart: https://chrt.biz/FSLY/1907481z356/chart/
Fastly operates an edge cloud platform for processing, serving, and securing its customer’s applications. The edge cloud is a category of Infrastructure as a Service that enables developers to build, secure, and deliver digital experiences at the edge of the Internet. It is a programmable platform designed for web and application delivery. It serves customers operating in e-commerce, social media, digital publishing, media, entertainment, technology, travel, hospitality, financial services and many more. Below is a list of their bigger enterprise customers.
In the past month Fastly launched their Compute@Edge platform which will help the companies serve their customers and users better with a faster and more secure experience. Those companies can build applications and execute code at the edge — without having to manage the underlying infrastructure.
My take: Anyone that follows me on Twitter knows that I love $FSLY and have been a huge bull for the past 6+ months as the stock rallied from the low $30s into the mid $130s. However back in October the stock dropped 50% on the news that TikTok was leaving them because of the threats made from the Trump administration. This was soul crushing news because TikTok was Fastly’s biggest customer however they left for political reasons, it had nothing to do with Fastly’s best in class products and solutions. In my opinion there’s still a chance that TikTok brings back some or all of their business to $FSLY which would probably give a 20% bump to the stock price. In this space I like $FSLY and $NET the most which both seem to be the leaders in edge computing and network security although I do prefer $FSLY because of their enterprise customer list. I also included $FSLY on this list because $NET’s market cap is over $10 billion. Another reason I’m very bullish on $FSLY for the next few years is because of their recent acquisition of Signal Sciences. This company improves Fastly’s security offerings via Secure@Edge which should be a huge hit with their enterprise customers. I expect both sales teams to have a lot of success cross-selling their services to each other’s enterprise customers. The analysts are a little more conservative on 2021 numbers but I think $FSLY has a good shot at $440-450 million which would be a 50% increase over this year. Even with TikTok gone (for now) there’s not enough attention being paid to Fastly’s customers in the travel and hospitality industry so as they see a rebound in demand it means Fastly and their usage based pricing model will also benefit.
8. $FUBO - Facebank Group dba Fubo TV
Current price = $27.40
Market cap = $1.8 billion
Headquarters = New York, New York
Website = https://www.fubo.tv/welcome/channels?irgwc=1
2020 revenue growth (est.) = +80%
2021 revenue growth (est.) = +90%
Chart: https://chrt.biz/FUBO/1907481zxmw/chart/
Fubo 2020 Q3 earnings [click here]
Fubo is a streaming TV platform that focuses on live sports, news, food, travel, home and design, and entertainment. FuboTV still calls itself sports-first but they have expanded their channel lineup in an effort to target the “cord cutters” offering a selection of major cable channels that can be streamed through smart TVs, mobile devices and tablets. Recently the company expanded their plan options starting at $59.99 per month and including networks like ABC, ESPN, Disney and dozens of others. Fubo is available on all many streaming platforms and smart TV services like Roku, Chromecast, Amazon FireStick, Xbox One and more.
My take: When I first heard about the recent $FUBO IPO and looked into the financials I was quickly turned off by the low gross margins however after digging more into the company, talking to some friends in the media industry and thinking about my own investment thesis I quickly warmed up to the company and even started a small position this week. If we believe that “cord cutting” will continue which means homeowners get rid of their cable provider and switch to streaming services like Fubu, YouTube, Netflix, Hulu, etc and watch them across their smart TVs or use services like $ROKU then $FUBO has a great opportunity over the next few years to be a big winner alongside the others I just mentioned. The stock has had a nice run recently so you might not want to chase or do what I did which is start a small position and hope for a pullback to add more.