In less than two weeks, we'll mark the one-year anniversary of when the epic coronavirus disease 2019 (COVID-19) crash began on Wall Street. Despite losing 34% of its value in less than five weeks, the broad-based S&P 500 recouped all of its losses and finished last year higher by 16%. Considering how challenging last year was, this was an incredible performance.
Yet what's even more jaw-dropping are the returns we've witnessed in individual stocks. Over the trailing three-month period, more than 8% of the stocks listed on the major U.S. exchanges (minimum market cap of $300 million) have doubled.
However, three momentum stocks really stand out. If you had the foresight and stomach to invest $200,000 into the following stocks three months ago, you'd have well over $1 million today.
Sundial Growers: $1.23 million
For the past quarter, there hasn't been a hotter marijuana stock than Canadian licensed producer Sundial Growers (SNDL 4.89%). This penny stock has galloped higher by nearly 520% since the early part of November.
There are three reasons investors are suddenly piling into Sundial Growers' stock. First, the entire pot industry is excited about Democrats taking control of Capitol Hill. Joe Biden's victory in November, followed by Democrats winning both Georgia Senate runoffs in early January, may pave a path forward where cannabis is legalized at the federal level. Canadian producers like Sundial are eagerly awaiting the opportunity to enter the more lucrative U.S. market.
Secondly, Sundial has been aggressively working to improve its balance sheet. The company conducted numerous share offerings, as well as converted some of its debt to equity. With debt no longer a concern, management has been able to turn its attention to shifting the company's operating model from wholesale to retail cannabis.
Third, Sundial is one of a handful of stocks caught up in the recent Reddit-rally frenzy. Although the company doesn't have particularly high short interest, it's a penny stock, and retail investors tend to fancy low-priced stocks.
Unfortunately, there are very good reasons Sundial is a penny stock. Management's ongoing share issuances are absolutely drowning existing investors. Additionally, transitioning to retail cannabis isn't going to happen overnight. In the meantime, Sundial is producing some really ugly year-over-year comparisons and losing a significant amount of money.
Despite being up big, Sundial Growers is a pot stock to avoid like the plague.
Blink Charging: $1.11 million
Another high-flying stock that's been tearing it up for the past three months is electric vehicle (EV) charging-equipment and EV network charging-services provider Blink Charging (BLNK 3.42%). A $200,000 investment in Blink three months ago would be worth north of $1.1 million today.
Why the overwhelming optimism, you ask? It primarily has to do with alternative-energy investors favoring the new administration in Washington over the previous administration. Biden and the Democratic Congress are expected to tackle climate change with an abundance of clean-energy initiatives. This includes promoting EVs.
In fact, Biden announced two weeks ago that he'd like the federal government's entire fleet of vehicles to be electric powered. As the U.S. continues to shift toward alternative-energy solutions, companies like Blink are going to be expected to step in to help the supply infrastructure needed to charge EVs.
Investors are also probably satisfied with the company selling 5.4 million shares of stock in mid-January for $232.1 million in gross proceeds. Though this was dilutive to existing shareholders, it gives Blink a mammoth pile of cash with which to execute its long-term growth plan.
But like Sundial, this optimism looks misplaced. While there's no question that EV infrastructure will be critical to reducing the reliance on fossil fuel-powered vehicles, Blink hasn't exactly proven that its charging solutions or networks will be chosen over other competitors.
Furthermore, Blink now commands a $2.1 billion valuation, yet may only generate about $5 million in total sales in 2020. Even if the company were to double its sales many times over, the need to expand distribution and innovate will likely keep it in the red for a long time to come.
Bionano Genomics: $4.41 million
But the creme de la creme of big returns over the past three months goes to genome analysis company Bionano Genomics (BNGO 4.40%). Investors who had the foresight (or luck) to invest $200,000 in Bionano three months ago would have north of $4.4 million today. Not too shabby!
For the past two months, Bionano has bombarded Wall Street and investors with an abundance of news concerning its optical genome mapping (OGM) system known as Saphyr. In a late December study, Bionano's Saphyr proved to be considerably more sensitive in identifying large structural variations than Pacific Bioscience' OGM technology. Also, Bionano's genome mapping technology was considerably cheaper than PacBio.
But what appears to have really put Bionano Genomics on investors' radar was a study released in early January regarding autism-risk genes. Specifically, three Autism Spectrum Disorder risk genes were identified. The ability of Bionano's OGM system to hone in on problem genes in difficult-to-treat diseases at an affordable price could be a game changer.
Like the other top-performing companies, Bionano Genomics also took the opportunity to raise capital. It closed a $101.8 million underwritten offering in mid-January, and then raised an additional $230 million about two weeks later. Developing and implementing new medical technology isn't cheap, and this added capital will go a long way to ensuring that Bionano is able to advance Saphyr.
While I think this is a really interesting story stock that could have intriguing research implications in the coming years, it's also important to realize that it's many years away from generating significant revenue from its genome analysis system. As such, Bionano probably belongs on investors' watchlists, rather than in their portfolios.