Peter Lynch once said that one of the greatest advantages for individual investors over large institutional investors was that they could invest in smaller-cap companies that have yet to get on the larger firms' radar. It's these companies with long growth runways where investors can find some of their biggest winners if they're willing to hang on through the inevitable ups and downs of volatile stocks.
So in the spirit of Peter Lynch's philosophy, we asked three of our contributing investors to pick a stock that has yet to make it on Wall Street's radar and explain why individuals will want to take a look. Here's why they picked Tellurian (TELL 8.74%), Aurinia Pharmaceuticals Inc. (AUPH -0.68%), and Talend (TLND)
Same playbook, new company
Tyler Crowe (Tellurian): Stop me if you have heard this before. This company wants to be at the forefront of the North American boom in natural gas production by exporting it to other countries via liquefied natural gas. That description could easily describe Cheniere Energy, a company that recently completed construction of its Sabine Pass LNG terminal, but it also applies to a newcomer to the business: Tellurian.
Tellurian is trying to do the same thing. It currently has plans to build a 27 million ton per year LNG export facility in the U.S. Gulf Coast. What's even more interesting is that the leadership team looking to bring this facility to life is the same one that laid the groundwork for Cheniere's success. The executive chairman is Charif Souki, the founder and former CEO of Cheniere, and CEO Meg Gentile served in several roles at Cheniere, including CFO and executive vice president of marketing. Having a leadership team on board that has already done this job once before suggests they should be able to do it again -- and even improve upon the process.
The company is still very much in the early stages. It has applied for a permit to export natural gas to countries with which the U.S. does not have a free-trade agreement and is currently marketing production capacity contracts to potential customers similar to the ones Cheniere has in place. If it can indeed replicate the success Cheniere has had thus far, then getting in early on Tellurian's stock could pay off in a big way.
Finally on the list
Cory Renauer (Aurinia Pharmaceuticals Inc.): This clinical-stage biotech stock isn't too popular on Wall Street, but a recent addition to the popular iShares Nasdaq Biotechnology index and corresponding exchange-traded fund could change that.
Institutions might temporarily push up Aurinia's stock price as they acquire enough shares to represent its index weighting, but a rare-disease drug candidate in late-stage development could really send it soaring. The company's lead candidate, voclosporin, looks like a huge improvement for roughly half a million Americans living with lupus nephritis (LN), an autoimmune disease that can lead to fatal kidney damage.
There aren't any drugs specifically approved to treat LN Calcineurin inhibitors limit LN activity, but maintaining a blood concentration high enough to be effective but low enough to avoid harmful side effects is difficult. More effective with less side effects has always been a recipe for drugmaker success, and Aurinia's voclosporin appears to tick both boxes.
Most notably, voclosporin led to a higher rate of complete disease remission ever recorded during a midstage LN trial. That gives the drug $1-billion-plus peak annual sales potential, and makes Aurina a top stock to watch in 2018.
Get hooked into the big data movement
Dan Caplinger (Talend): Businesses have access to huge amounts of information about their customers, but only recently have they started to take full advantage of it by using tools to collect and analyze it. Now, there are so many competing offerings from tech companies seeking to facilitate data analytics that it can be difficult for enterprise customers to choose providers and integrate different tools into a comprehensive package. Talend aims to make that easier by providing an open-source software platform that its customers can use to bring together specialized offerings from third-party providers.
Talend's stock has done quite well in its short history as a publicly traded company, including gains of 80% in 2017 alone. Yet the data specialist could have further to climb. Talend has attracted customers from a wide range of backgrounds, including the media, finance, telecom, utility, and industrial sectors. By making smart acquisitions and rolling out new capabilities for its platform, Talend is looking to grow more quickly. Competition from other tech providers remains a threat, but bullish investors believe that Talend's open-source platform gives it a huge competitive advantage over rivals that offer only proprietary solutions that lock customers into a defined set of data-management tools. As data keeps getting more important, Talend has an opportunity to become a key player in a growing field.