Considering the immense challenges the market has contended with over the past year, investors have a lot to be thankful for. For instance, the tech-heavy Nasdaq Composite has nearly doubled since hitting its bear market low on March 23, 2020.
But for some high-flying stocks, a 100% gain would represent mere peanuts. Over the trailing year, the market's five top-performing stocks have skyrocketed. If you had the foresight and stomach to invest $100,000 into these five stocks exactly 12 months ago (as of March 2, 2021), you'd have at least $3 million today, if not more.
1. GameStop: $3.09 million
Easily the most familiar name on this list is video game and accessories retailer GameStop (GME -4.95%). Had you invested $100,000 into GameStop at this time last year, you'd be sitting on close to $3.1 million today.
The driving force behind this explosive move is Reddit's WallStreetBets (WSB) forum. Retail investors on WSB agreed to work together to buy shares and out-of-the-money call options on stocks that are heavily short-sold, with the purpose of effecting a short squeeze. In early January, no publicly traded company had a higher short interest, relative to its float, than GameStop. This made it the perfect target for retail investors.
The concern moving forward is that GameStop's shares have wildly detached from the underlying fundamentals. Even with e-commerce sales more than quadrupling during the 2020 holiday season from the prior-year period, total sales still declined by 3%. That's because GameStop is, first and foremost, a brick-and-mortar retailer. GameStop's tardiness in recognizing digital gaming trends has the company scrambling to cut costs and remain relevant. That hardly seems to merit a close to 3,000% gain.
2. Bit Digital: $3.55 million
Next up is cryptocurrency mining stock Bit Digital (BTBT 5.97%). Despite losing almost 29% on a year-to-date basis, Bit Digital has gained more than 3,400% over the trailing year. That means a $100,000 investment would be worth a cool $3.55 million now.
Bit Digital's focus is on purchasing and maintaining equipment that allows it to mine Bitcoin (BTC -0.30%). "Mining" involves using high-powered computers to solve complex mathematical equations that validate transactions as true on Bitcoin's network. The "reward" for doing so is 6.25 Bitcoin, which is worth about $303,000 at the time of this writing.
The worry with cryptocurrency mining is that it may not be a sustainable operating model. Bitcoin underwent three extensive downturns of 80% (or more) in the last decade, and it's not clear that Bit Digital would survive if the world's largest digital currency were to decline by that much again. It's also a very crowded industry.
Perhaps more concerning, Bit Digital is a foreign issuer, and in December it reminded U.S. investors that it "is not required under home country practice to publicly announce its quarterly results." That sounds like a big no-go for investors.
3. Marathon Digital Holdings: $3.98 million
Surprise! It's another cryptocurrency mining stock. Marathon Digital Holdings (MARA 8.19%) has more than tripled on a year-to-date basis, and it's nearly gained 3,900% over the trailing 12 months. That means a $100,000 initial investment would be worth almost $4 million today.
The thesis here is the same as Bit Digital, with a few exceptions. For example, Marathon Digital should have far more miners in operation than Bit Digital. By the first quarter of fiscal 2022, all 103,060 of its purchased miners should be operational.
Furthermore, Marathon Digital also owns Bitcoin. While it's not uncommon for mining companies to hang onto some of the digital currency they've mined, Marathon actually purchased $150 million worth of the world's largest cryptocurrency in late January for an average of $31,168 per token. With Bitcoin worth closer to $48,500, Marathon' $150 million stake is now valued at over $233 million.
While owning Bitcoin will provide Marathon some degree of downside buffer that Bit Digital doesn't have, it doesn't change the fact that the world's largest digital currency is highly volatile and prone to prolonged downtrends. It's not certain if large-scale mining operations can survive these downturns.
4. Riot Blockchain: $4.16 million
Who would have guessed it? Another cryptocurrency mining company. If investors had the foresight and fortitude to invest $100,000 into Riot Blockchain (RIOT 6.38%) last year, they'd be sitting on a return of more than 4,000%.
Unlike Marathon, Riot hasn't purchased Bitcoin to add to its balance sheet. It is, however, buying and deploying S19 Pro Antminers to generate more block rewards. In mid-February, the company deployed 2,002 of these miners, bringing its total up to 11,542 in operation. The company has an additional 26,100 S19 Pro Antminers on order, which will bring it up to full operating capacity of 37,642 miners by October 2021.
Though a higher price for Bitcoin means more valuable block rewards, the knock against a company like Riot Blockchain is that innovation plays virtually no role in its success. Riot is essentially riding the coattails of a highly volatile digital currency that, as noted, has a history of prolonged declines. With block rewards halving over time and global mining competition seemingly growing by the day, Riot's long-term success is dubious, at best.
Even after retracing more than 35% off of its 52-week intraday high, Riot is also valued at a lofty 20 times Wall Street's consensus 2021 sales. That's a nosebleed valuation for a company absent of innovation.
5. MicroVision: $5.75 million
However, the best-performing stock over the trailing year has nothing to do with Bitcoin. Previously a penny stock, scanning technology company MicroVision (MVIS -0.78%) now sports a $2.6 billion market cap, and it's up by more than 5,600% in 12 months. That means a $100,000 investment is now worth a whopping $5.75 million.
MicroVision's macro move looks to be the result of two catalysts. First, MicroVision's move higher coincided with the WSB rally on Wall Street. The company had both a low share price and relatively high short interest, which made it a popular stock among retail investors, at least for a few weeks.
Second, MicroVision is developing 3D perceptive light detection and ranging (lidar) technology that can be used for autonomous driving. On Feb. 10, the company provided an update on the development of its Long Range Lidar (LRL) Sensor, noting that it expects to meet its April milestone of completing A-Samples of its LRL Sensor.
Though there's a lot of buzz surrounding anything having to do with electric vehicles and autonomous driving technology, let's not overlook the fact that MicroVision is undertaking dilutive share offerings to raise capital and is no lock to have its products chosen by commercial vehicle manufacturers. It's probably best to take a wait-and-see approach after such a huge run-up in price.