The stock market has gotten off to a fast start in 2021. Popular indexes are mostly higher, and many individual stocks have been soaring.
But just because a company's shares have skyrocketed so far this year doesn't mean that their future prospects are all that good. A number of heavily shorted stocks have come into the limelight, as traders fight to force short squeezes and punish those betting against their shares. Some people will make fortunes trading these shares. Others will lose everything.
Fortunately, there are strong performing stocks in the market that actually have some fundamental reasons supporting their upward moves. Below, we'll look at three stocks that are already up 50% or more in just the first four weeks of the year. And unlike many other high-flyers, there's actually a decent chance that these companies will be able to support their higher share prices with fundamental success. To learn more about them, read on below.
1. Stitch Fix
Stitch Fix (SFIX -4.44%) has recently come into its own. After languishing for several years, the e-commerce fashion company started its ascent last summer. The stock has quadrupled since late July.
Stitch Fix's business model is easy to understand but hard to execute well. The company works as a personalized styling service, coming up with clothing and accessories to ship to subscribers on a regular basis. Clients pay for what they keep and can send unwanted items back to Stitch Fix.
Underlying that model is a sophisticated combination of artificial intelligence and human curation that seeks to match products with tastes. Over time, Stitch Fix has put up an impressive track record of success getting its subscribers to buy chosen items, and it's getting even smarter about its customers over time.
E-commerce retail is still a fast-growing business, and CEO Katrina Lake sees a $400 billion opportunity for its business. With revenue of less than $2 billion over the past 12 months, that leaves a long runway ahead for Stitch Fix to keep expanding.
2. Penumbra
Penumbra (PEN -0.32%) has flown under the radar of most investors for more than five years. However, the medical device maker has started to pop up on screens with a better than 50% rise so far in January.
Image source: Getty Images.
Penumbra came public in 2015, with a lineup of medical products for patients suffering from neurological and vascular conditions. Among them are the Indigo Aspiration System, a minimally invasive device that helps treat pulmonary embolism, and the Benchmark intracranial access system for neurological treatment. A host of other catheters and related products fill out Penumbra's offerings.
Since the IPO at $30 per share, Penumbra has jumped nearly ninefold. However, late last year, the company had to recall its JET 7 Xtra Flex catheters due to concerns about potential damage in use. That concerned stock analysts, leading to downgrades at crushing the share price.
Nevertheless, Penumbra is handling the recall well, and enthusiasm about its other products has helped the stock recover. With demand for catheters and systems at high levels, Penumbra should be able to hold onto its recent gains and potentially build on them.
3. Aphria
Aphria (APHA) has gone through a lot in the past three years. The marijuana stock soared in late 2017 and early 2018 as the cannabis craze hit its peak. When its shares came to the U.S. stock market in late 2018, investors were excited to see the recognition of Aphria's rise to rest among the leaders of the industry.
However, subsequent challenges hurt Aphria just as much as the rest of the cannabis industry. Shares of Aphria lost well over 75% of their value between early 2018 and the March 2020 lows.
From there, though, Aphria has steadily bounced back. Rising prospects for decriminalization of marijuana in the U.S. at the federal level have sent its stock soaring. Moreover, the company decided to merge with industry peer Tilray (TLRY) to form what will be the leading cannabis cultivator in the world in terms of total revenue. Once the deal goes through, Aphria investors will own Tilray stock, receiving 0.8381 shares for every Aphria share they own currently.
Best of all, Aphria has seen its fundamental business improve. In its most recent quarterly results, revenue jumped 33% year over year, and it reversed a big loss in the year-ago period with a modest profit.
Aphria's gains bode well for the future. If the marijuana industry avoids further setbacks, then Aphria and Tilray could emerge as big winners in 2021 and beyond.
Keep your eyes on the prize
It's great that these stocks have done well so far in 2021, but the real question is whether they can keep climbing. Big jumps can be hard to sustain, but all three of these business have things going right for them right now. Compared to stocks that are rising for no good reason at all, these companies have good prospects that make them much better investments than some alternatives.
