5 Unique Actions That Can Generate Transformational Wealth
Even if you hate to hear it, stock market corrections and bear markets are a perfect part of the investment cycle. Including the current bear market decline as the benchmark S&P500 and technology driven Nasdaq Compound creeping in, the broader market has fallen by double-digit percentages, on average, every 1.85 years since the early 1950s.
But there is another side to this coin. Although corrections are commonplace, the time Wall Street spends in a bull market far exceeds periods of pessimism. In other words, stock market corrections and bear market lows are the perfect opportunity for patient investors to pounce.
After peak declines of 24% in the S&P 500 and 34% in the Nasdaq from their respective all-time highs, there are plenty of incredible deals to be had. The following five unique and highly innovative stocks all have the potential to generate transformational wealth for investors willing to give them the time to do so.
First, specialized biotech stocks Novavax (NVAX -0.27%), which is one of the few companies to have developed a COVID-19 vaccine. Despite Wall Street’s skepticism of the company’s entry into developed markets after established players like Modern and Pfizer/BioNTechNovavax’s future looks exceptionally bright.
Novavax has conducted three large-scale clinical trials for NVX-CoV2373, with two studies in adults yielding vaccine efficacies (VE) of 89.7% and 90.4%, respectively. Meanwhile, a study of teenagers, published earlier this year, generated an VE of 80%. As one of only three COVID-19 vaccine producers to reach the elusive 90% VE mark, Novavax has the opportunity to be a leader in booster shots and/or vaccine campaigns. initial inoculation in developed and emerging markets.
What’s even more important to recognize is that Novavax’s drug development platform is a success. This is a company that can beat competitors to market with a combination flu/COVID-19 vaccine, or perhaps other vaccines targeting airborne viruses.
If you need one more reason to be excited about the future of this business, keep in mind that Novavax ended March with $1.57 billion in cash and cash equivalents. He is swimming with capital to finance his future research.
A second unique stock that is quite capable of helping long-term investors build transformational wealth is the furniture company. Lovebag (TO LIKE 7.37%). Although retail stocks are universally looked down upon at the moment, Lovesac offers real differentiation in an industry poised for disruption.
This differentiation begins with the company’s furniture. While it was once known for selling “bags,” the company’s ottoman-style chairs, Lovesac’s best-selling (87.6% of net sales in fiscal 2022) is now its ” sactional”. A sactional is a modular sofa that looks like a sectional sofa. However, it can be rearranged dozens of ways to fit virtually any living space.
To add to this point, sactionals come with a host of options that traditional sofas do not offer. Buyers can choose from over 200 different covers to match the color or theme of their home, and the yarn in these covers is made entirely from recycled plastic water bottles. Sactionals can also be upgraded to include surround sound or wireless charging systems.
But arguably the best aspect of Lovesac’s operating model is its agility. The company’s omnichannel sales platform allowed it to shift to online sales during the pandemic. When paired with in-store and online brand partnerships, as well as pop-up showrooms, Lovesac’s overhead is significantly lower than its primarily brick-and-mortar based peers.
Social Media Stock pinterest (PINS 7.89%) is another unique company that has the ability to generate life-changing wealth for patient investors. Even though advertising-focused companies like Pinterest are clearly out of favor with the growing likelihood of a recession, this is one company that offers clear and enduring competitive advantages.
The most telling aspect of Pinterest’s success has been its ability to monetize its users. Despite a drop of 45 million monthly active users (MAUs) in the first quarter, Pinterest’s average revenue per user (ARPU) grew 28% globally, including 40% in Europe and 164% in its “Rest of the world “. What this growth in ARPU illustrates is that advertisers are willing to pay a premium to get their message in front of Pinterest’s 433 million MAUs.
To capitalize on this point, the recent decline of Pinterest’s MAU seems benign. This coincides with rising COVID-19 vaccination rates and people returning to some semblance of normality. When the focus is expanded, Pinterest’s five-year MAU growth has steadily increased.
Plus, Pinterest’s entire business model is built on the principle that users voluntarily share the things, places, and services that interest them. This makes it incredibly easy for the company to help marketers target users.
A fourth unique stock with transformational wealth potential – and perhaps the one with the highest risk-vs-return potential on this list – is the technology-driven insurance stock. Root (ROOT -7.53%). If Root can weather large short-term losses, its new way of pricing insurance policies could change a heavy industry.
For decades, auto insurance companies have priced their policies using broad metrics, such as marital status or a person’s credit score. Unfortunately, none of these statistics provide insight into what really matters, which is a person’s safety while driving.
What Root does is rely on telematics to price its policies. By using sensors in smartphones, Root can gain an accurate understanding of a person’s driving habits. Combined with other dynamic factors, the company can offer drivers a tailor-made pricing policy. Note that this approach to policy pricing can also be introduced in other insurance verticals.
So far, Root’s operating approach has shown promise, as demonstrated by its quarterly accident period gross loss ratios of less than 100%. A loss-to-premium ratio of less than 100% means a policy underwritten profitably. While there is still work to be done to refine its dynamic pricing model, Root has the potential to completely transform the auto insurance industry.
Last, but not least, conglomerate Berkshire Hathaway (BRK.A 3.75%)(BRK.B 4.02%) can help long-term investors generate transformational wealth. Although Warren Buffett’s company recently hit a 52-week low, the Oracle of Omaha’s track record speaks for itself.
Since becoming CEO in 1965, Warren Buffett has created more than $590 billion in shareholder value and overseen a 20.1% average annual return for the company’s Class A shares (BRK.A) , until December 31, 2021. In total, this equates to an increase of 3,641,613%! Even if Buffett is unable to generate an average annual return of 20.1% in the future, he has proven capable of outperforming the S&P 500 over long periods.
One of the keys to Berkshire Hathaway’s success is its dividend-friendly investment portfolio. While Berkshire is not paying a dividend to its shareholders, Buffett’s company is on track to collect more than $6 billion in passive income over the next 12 months, including preferred dividends. Companies that pay a dividend are generally profitable and proven. They have also easily outperformed their multi-decade non-dividend paying peers.
Warren Buffett has also filled Berkshire’s investment portfolio with cyclical companies. Although recessions are inevitable, the Oracle of Omaha is well aware that periods of expansion last much longer. With more than 90% of Berkshire Hathaway’s invested assets tied to four cyclically oriented sectors, Buffett has positioned his company to take advantage of the natural expansion of the U.S. and global economy.