Many investors believe that stocks will revert to the mean: What goes up will come down, and what goes down will come up. This belief is profoundly untrue. Stocks that have dropped often continue to drop after you buy them. Buying a stock that has lost a great deal of money for its investors is highly risky. I've tried to do it multiple times and I've only succeeded once. That's why you should not rush in to buy the 10 worst stocks of 2019. 

You might, however, want to buy stocks that were terrific winners last year. While writing an article about the top 10 stocks of 2019, I found some really interesting growth stocks, and my family bought shares of two of them: EverQuote (EVER 7.99%) and Axsome Therapeutics (AXSM 1.20%). EverQuote jumped a wild 725% in 2019. And that was nothing compared to the insane 3,578% return of Axsome Therapeutics. Here's why I think these amazing growth stories are just beginning.

arrow going up in a piggy bank

Image source: Getty Images.

EverQuote continues to outperform

My family bought shares of EverQuote in January, so we missed that incredible eight-bagger the stock had in 2019. Nonetheless, we're up 92% on our investment so far in 2020. EverQuote is a platform that offers consumers a new way to buy insurance online. You fill out a simple form on its website detailing your insurance needs, and then multiple vendors compete for your money. 

It's a free service for consumers, who like it because it simplifies the process of shopping for insurance. You only have to fill out one form, not multiple forms, and you no longer have the arduous task of comparison shopping. EverQuote's variety of insurance options lets you easily find the best policy tailored to your needs. EverQuote estimates that its customers have saved an average of $610 buying insurance through its internet portal.

Right now the company is largely focused on auto insurance, but it has new offerings in home and renters' insurance, life and health insurance, and commercial insurance. Of course, the beauty of a platform stock like this one is that the networking effect is so powerful. (A "platform stock" refers to a company that joins users of products and services with those who create them, using a marketplace designed by that company. Think Uber or Redfin.) As the company gets bigger, its value proposition becomes stronger and stronger.

Zillow pulled this off in real estate. That's a vast, trillion-dollar market -- and yet Zillow was able to become a go-to destination for anybody seeking a new home. Those prospective buyers would start with Zillow, and real estate agents would pay the company for its valuable leads. 

EverQuote is trying to accomplish a similar feat in insurance, which is another trillion-dollar market. Arguably, EverQuote's value proposition is even stronger, as its customer leads have already filled out the paperwork and are clearly interested in buying insurance. Notable clients of EverQuote include TravelersProgressiveMetlife, and Nationwide. EverQuote has produced 56% revenue growth in its most recent quarter, and the company has now achieved EBITDA profitability.

How is the No. 1 stock of 2019 doing this year?

My family bought shares of Axsome Therapeutics in December, after the stock had already had a 24-bagger in 2019. We quickly got a double in a matter of weeks when the company released even more good news. So far in 2020, the stock has been a bit of a disappointment, dropping 20%. In the biotech universe, 2020 will be remembered as the year of the coronavirus vaccine. Either your biotech stock has a coronavirus vaccine candidate, or it doesn't. And believe me, you'll notice the difference.

While COVID-19 is getting all the headlines, sometimes it's smart to invest in companies the market is ignoring. Axsome has a variety of drugs in clinical trials for central nervous system (CNS) disorders including depression and Alzheimer's. Depression is a $15 billion market opportunity. There is a good chance that Axsome's AXS-05 drug will be the new frontline therapy for major depressive disorder if the FDA approves it later this year. If so, it will be the first new depression drug to hit the market in more than 30 years.

"Clinical depression is a potentially life-threatening condition," said Professor Maurizio Fava, Associate Dean at Harvard Medical School. "Currently marketed antidepressants fail to provide adequate treatment response in almost two thirds of treated patients[.]"

While Axsome jumped from micro-cap status last year, running up an amazing 3,600%, the company is still very small, with a market cap of $3 billion. Given the outsized market opportunity, and the high probability of FDA approval, this stock should continue its advance over the next several years.