While large rewards are reserved for those who take big risks, it's not a given that one will always follow the other. You can lose your shirt investing blindly. That's why smart investors will seek out such rewards only after first understanding the risks.
Below are three companies that offer different kinds of risk for the wary investor. Knowing ahead of time what the potential pitfalls are will ensure that you can make an educated investment decision and possibly reap the windfall if their game plans pay off.
Curaleaf: A U.S. based marijuana play
Marijuana stocks are still a dicey proposition in the U.S., despite the growing number of states legalizing pot. Curaleaf (CURLF -2.65%), though, is one of only a handful of pot stocks with a billion-dollar market valuation, and at $2.8 billion it is the largest U.S.-based one. It also enjoys rising sales with the potential to see them scale dramatically higher over the next year.
Curaleaf is the biggest multistate operator (MSO), with 50 locations across 19 states, and it is targeting a number of other states that could offer up to $1 billion in sales. Analysts are looking for the marijuana producer to generate sales of $900 million next year. And if it successfully adds on a few more licenses, as it expects, Curaleaf could produce as much as $1.25 billion in revenue in 2020.
Its sales fell a little shy of Wall Street's expectations last quarter, but net losses were slightly narrower than expected. Curaleaf is a play U.S. market only continues to improve conditions for marijuana companies and that it maintains its leading position. Its stock is up 27% year to date, but down by more than 45% from its highs. An investment here is based on the idea that it will earn the market's trust and regain those heights once more.
Stratasys: Growth potential in 3D
Analysts still predict 3D printing technology has stratospheric growth potential, with some even projecting additive manufacturing could become more than a $35 billion industry in the next five years. So you could be forgiven for thinking that the better world promised by the technology has largely bypassed Stratasys (SSYS -1.26%).
The 3D printing specialist hasn't been much of a force to be reckoned with for several years now, despite the printing speed improvements and the broader availability of materials. Yet Stratasys recently reported adjusted profits were up 9% in the third quarter to $0.12 per share, and margins widened. It has nearly $350 million in cash on hand, and though it used cash from operations in the quarter, that was in preparation for new product introductions next year.
Admittedly, it is guiding to a full-year loss, and it revised its sales outlook downward some. But the industry's potential, which has always seemed so elusive and just out of Stratasys' grasp, remains intact. Also, the company's Americas business remains relatively strong; it was Europe and Asia softness that caused it to break down.
If the market for 3D printing realizes its full capabilities, or finally shows it is on the march toward it, Stratasys would also become a good buyout candidate. An early pioneer with a strong research and development program that's still investing in new technologies would be an attractive asset to another company that might be able to better realize its potential.
Tellurian: A business model that's lighter than air
The U.S. is a global leader in liquified natural gas, a significant achievement considering its presence was largely negligible just a few years ago. While the nation's prominence was helped by Cheniere Energy building an export plant in Louisiana that opened up the world to U.S. natural gas, others have also taken up the mantle.
It was with an eye toward emulating the success of Cheniere that global oil giant Total (TTE 0.62%) took a sizable stake in upstart Tellurian (TELL), a position that stands at 19% today. While the natural gas company hasn't actually produced anything yet, but rather has plans to build the Driftwood export terminal and Driftwood pipelines to support it, in April the Federal Energy Regulatory Commission issued an order granting Tellurian authorization for the projects.
The projects are still in the early stages of development, but it's where many see the ultimate realization of Tellurian's potential. In September, India's Petronet signed a memorandum of understanding with the LNG hopeful that will see it import up to 5 million metric tons of LNG annually, while it also took an equity stake in the project.
Making a wager on a company without any actual products or services is usually a big gamble, but Tellurian may be one of those rare instances where the bet pays off big.