We all have stocks that we regret not buying, or perhaps buying and selling too soon. For many investors looking back over the past few years, NVIDIA (NASDAQ:NVDA) is one of those stocks.
Shares of the graphics-chip specialist have skyrocketed more than 1,500% over the last five years alone, including a 116% gain since this time in 2017. For that, investors can thank the seemingly endless applications for NVIDIA's flagship GPU technology that have helped to sustain its incredible growth, from gaming to data centers, cryptocurrency mining, supercomputing, AI-powered cities, and self-driving vehicles, to name only a few.
Of course, NVIDIA could continue to rise from here. But that also raises the question: Are there any stocks on the market today that could put NVIDIA's returns to shame?
Take advantage of this pullback while you can
Steve Symington (CalAmp): Shares of CalAmp just plummeted nearly 15% on Friday after the machine-to-machine communications specialist delivered its latest quarterly results -- but that doesn't mean those results were bad.
To the contrary, this small-cap tech stock's revenue and earnings were in line with expectations, with reasonably strong growth from both its MRM telematics and software and subscription services segments. Keeping in mind that Caterpillar is currently its single largest customer, CalAmp also began to ramp up shipments to a second unnamed global heavy-equipment OEM this quarter, proving it can translate its success in telematics to other large businesses.
The company also secured significant new partnerships this quarter with companies including TransUnion, which will help monetize a large number of dormant LoJack vehicle-recovery devices, and European fleet-management leader ALD Automotive Italia (LoJack Italy is now their primary supplier of telematics solutions).
So why the decline? CalAmp provided revenue and earnings guidance for the current quarter that fell slightly below Wall Street's expectations. So the stock -- which was up around 30% over the past year as of Thursday's close -- got punished in response.
But as I pointed out in my post-earnings take yesterday, CalAmp management subsequently reminded investors that the company should be poised for accelerated growth later this year as it deploys newer large program wins, expands its LoJack monetization efforts, and builds on its momentum with software and subscription services.
For investors willing to buy before that progress becomes evident, I think CalAmp's pullback will prove to be a fanstastic opportunity.
Red Hat is red hot
Anders Bylund (Red Hat): Let's take the overvalued bull by the horns. I think it will be easy to beat NVIDIA's returns over the next few years because its stock price has become wildly overinflated thanks to the cryptocurrency bonanza of 2017. That event now is firmly in the rearview mirror, and we're likely to see NVIDIA's graphics-card sales slowing down considerably in 2018.
I'm far more comfortable investing in another high-growth company whose recent success was more organic and sustainable. Red Hat's crazy gains are here to stay.
The open-source software veteran is proving that free products can support a fantastic business model. All you need is a high-quality support program that's worth paying a premium for. Based on this idea, Red Hat's sales are growing at an annual clip of 23% while bottom-line earnings are expanding by roughly 50% a year.
And here's the thing -- unlike NVIDIA's faddish reliance on cryptocurrency mining, Red Hat's business model is built to last. The company doesn't have to come up with groundbreaking new products every other year because its existing portfolio has a vast landscape of untapped growth left to explore. Analyst firm Nomura recently pegged Red Hat's addressable market at $66 billion in annual sales, and the company's slice of that enterprise-software market only amounts to 4.4% of that global opportunity today.
Red Hat just needs to stay the course, continue to innovate and evolve its core products as appropriate, make smart acquisitions when it can, and evangelize its open-source ideas around the world. There's a ton of growth down that simple road, and I expect the growth story to continue for many years.
Another pioneer in a game-changing technology
Keith Speights (Editas Medicine): Like NVIDIA, Editas Medicine is a pioneer in a game-changing technology. The biotech is one of a handful of companies developing treatments using CRISPR gene editing. I think CRISPR holds the potential for explosive growth.
It still is really early for CRISPR-based therapies, though. In fact, Editas doesn't even have a drug in clinical-stage studies yet. However, the biotech might not be too far off from reaching that milestone. Editas plans to file for approval within the next few months to begin human testing of its lead candidate in treating Leber Congenital Amaurosis type 10 (LCA-10), a genetic eye disease that leads to blindness in children.
Treating LCA-10 should just be a start for Editas. The company hopes to leverage its approach to target other genetic eye diseases, as well. Editas also is working with Juno Therapeutics, which was acquired by Celgene earlier this year, on the use of gene editing in treating cancer.
In addition to its own gene-editing development program, there's another reason to like Editas' long-term prospects. The company exclusively licensed key CRISPR patents for use in eukaryotic cells (cells that have a nucleus, which includes all human cells). Those patents have already been upheld once in the U.S. As it stands right now, Editas would be due royalties on any CRISPR-based therapy used in treating humans.
Editas is definitely a stock only suited for investors with a really long-term perspective. But I suspect it will be a big winner down the road.
The bottom line
We obviously can't guarantee that these three promising businesses will exceed NVIDIA's returns going forward. But between CalAmp's recent pullback, Red Hat's enduring business and long runway for growth, and the massive potential for Editas' groundbreaking gene-editing treatments, we like their chances of doing just that. And we think anyone looking to put their money to work in stocks would do well to invest accordingly.
Anders Bylund owns shares of Red Hat. Keith Speights owns shares of Celgene, Editas Medicine, and Nvidia. Steve Symington owns shares of Nvidia. The Motley Fool owns shares of and recommends Celgene and Nvidia. The Motley Fool recommends CalAmp and Editas Medicine. The Motley Fool has a disclosure policy.