Investors were taken on the ride of their lives in 2020. During the first quarter, investors navigated their way through the fastest bear market decline in history. This was followed by a ferocious nine-month rally that saw growth stocks and technology companies skyrocket. What really stands out is that 1 in every 10 publicly traded companies with a market cap of at least $300 million rose by a triple-digit percentage last year.
However, for a small subset of companies, a 100% or 200% gain might as well be considered "just getting started." The following three electric stocks would have turned a $100,000 investment into more than $1 million in just the trailing six-month period.
ReneSola: $2.49 million
If you had the foresight and stomach to invest $100,000 into global solar power projects company ReneSola (SOL 1.79%) six months ago, you'd be sitting on nearly $2.5 million as of this past weekend.
There are three apparent reasons behind ReneSola's absolutely unstoppable rally in recent months. First, Joe Biden's victory and the subsequent Democratic senator victories in Georgia in early January potentially rolled out the green carpet for renewable energy providers in the U.S. President Biden has made clear that his administration will focus on cleaner energies. ReneSola has more project capacity potential in the U.S. than any other country worldwide.
Secondly, ReneSola has been raising capital. Having ended the September quarter with only $15.6 million in cash and cash equivalents, ReneSola has completed two direct share offerings in a matter of weeks, totaling $20 million and $40 million, respectively. The company also sold two solar parks in Romania totaling 15.4 megawatts in December. In other words, cash isn't as big of a concern as it was three months ago.
Thirdly, ReneSola looks to be capitalizing on a short squeeze. Between Nov. 30 and Dec. 31, the number of shares held by short-sellers (investors who profit when the share price falls) had quadrupled to 2.88 million. Since short-selling losses are unlimited, and these pessimists are forced to borrow from their respective brokerages, they may be getting "squeezed" out of their money-losing positions. In order to exit their position, short-sellers must buy to cover, which further propels the stock higher.
Though ReneSola is absolutely on fire right now, it's going to need to demonstrate that it can grow its solar project portfolio and return to recurring positive operating cash flow before this Fool is sold on this dramatic run-up.
Bionano Genomics: $1.18 million
Arguably the hottest stock on the planet over the past month is genome analysis company Bionano Genomics (BNGO). Shares of Bionano have catapulted more than 1,600% in the past month. A $100,000 investment six months ago would be a hearty $1.18 million, as of this past weekend.
Bionano's incredible run higher has primarily been news-driven. It all began on Dec. 23, when a publication of a study by the Human Genome Structural Variation Consortium put a big feather in Bionano's cap. This study showed that Bionano's optical genome mapping (OGM) with Saphyr was significantly more sensitive in identifying large structural variations, relative to Pacific Biosciences' OGM technology. Further, Saphyr comes with a cost per genome of $500, compared to between $10,000 and $20,000 per genome for PacBio.
The news parade continued on Jan. 4, when Bionano published a comprehensive study on autism risk genes. The company's diagnostic services subsidiary, Lineagen, identified sequence variants in three Autism Spectrum Disorder (ASD) risk genes. The belief is that Bionano's sensitive OGM technology could help healthcare companies better target their therapies at ASD and other hard-to-treat ailments.
Investors also seem stoked about Bionano Genomics' capital-raising activity. Even though dilution has whipsawed the stock a bit in January, Bionano closed a $101.8 million underwritten offering on Jan. 12, and announced the pricing of a $200 million underwritten offering on Jan. 20. Raising around $300 million in a very short period of time will allay any cash concerns for a company that ended the previous quarter with only $18.9 million in cash and cash equivalents.
What healthcare stock Bionano brings to the table is incredibly exciting. The question is, will drug developers utilize the technology? The answer to this question will dictate whether Bionano can maintain this incredible rally.
GameStop: $1.7 million
The award for head-scratching gains over the past six months goes to video game and consumer electronics retailer GameStop (GME 4.76%). Once left for dead, GameStop's stock has gone berserk. A $100,000 investment in it six months ago would be worth $1.7 million, as of this past weekend.
One reason we've seen a big-time turnaround in GameStop has to do with the company's improved operating performance. Having long relied on physical stores, consoles, and games to drive sales, the company has reduced its brick-and-mortar presence and emphasized digital gaming revenue.
For example, the company's 2020 holiday sales showed a 4.8% comparable-store sales increase, with e-commerce sales up 309% (not a typo). For the third quarter ended in October, e-commerce sales rose 257% from the prior-year period. Selling, general, and administrative expenses were down $316 million. GameStop's ability to pivot its business model to one that emphasizes high-margin digital gaming has definitely helped its top- and bottom-line performance.
The rally in GameStop is also reflective of a massive short squeeze. As noted, short-seller losses are unlimited. If the train gets moving in the wrong direction for pessimists, short-sellers have little choice but to get off the tracks and buy to cover. Doing so just fuels the fire and can send heavily shorted stocks even higher.
Investors also appear excited about the shake-up of GameStop's board of directors. More specifically, Ryan Cohen, the former CEO of pet-based e-commerce business Chewy, will be added to the board via an agreement with RC Ventures. With an increased focus on digitization, Cohen's addition is getting a big thumbs-up.
While I do believe GameStop is making good decisions about the direction the company should be headed, its valuation is nothing short of frothy considering the transformational challenges it's still facing. For the time being, it's probably a stock to avoid.