Over the past 15 months, Wall Street has made history twice over. We witnessed the quickest downturn of at least 30% in the S&P 500's storied history -- it took only 33 calendar days for the index to erase 34% of its value -- and also reveled in the strongest bounce-back rally from a bear market bottom on record.
But if there's one thing that's transcended this volatility, it's the importance of patience. Investors who buy stakes in great businesses and then allow their investment theses to play out over long periods of time are often handsomely rewarded.
Best of all, you don't need to have a mountain of cash at your disposal to build wealth on Wall Street. The rise of fractional share investing and the elimination of minimum deposit amounts for many brokerages now allow investors to put nominally small amounts of money to work on a regular basis.
For example, if you have $20 to invest right now that won't be needed to cover bills, emergencies, or other basic needs, that's more-than-enough capital to put to work in the following trio of smart stocks.
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Cresco Labs
The cannabis industry could have Americans seeing green in more ways than one this decade. As more states wave the green flag on medical and recreational pot, marijuana stocks like Cresco Labs (CRLBF 1.25%) are bound to benefit.
Like most multistate operators, Cresco has a growing retail presence. Taking into account its acquisition of Bluma Wellness in Florida and its pending purchase of Cultivate in Massachusetts, the company will soon have in the neighborhood of three dozen operational dispensaries and enough licenses in its back pocket to open another dozen or so retail locations.
What's particularly interesting about Cresco's retail approach is that it's focused a lot of its attention on markets where license issuance is limited. For example, it's maximized its initial retail presence in Illinois by opening 10 dispensaries. Targeting states where license issuance is limited ensures that Cresco is able to build up its brand awareness without being steamrolled by larger multistate operators.
Even more exciting is Cresco's wholesale segment. Most analysts on Wall Street aren't fans of wholesale cannabis because it generates lower margins than the retail side of things. But in Cresco's case, it's making up for these weaker margins with insane volume.
Cresco possesses one of only a small number of cannabis distribution licenses issued in California, the biggest marijuana market in the world by annual sales. This license allows Cresco to place third-party and proprietary products into more than 575 dispensaries statewide.
Look for Cresco to turn the corner to recurring profitability this year.
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SSR Mining
For much of the past decade, gold stocks have been an afterthought. With growth stocks ascending to the heavens and most gold-mining companies struggling with high debt levels, the industry was left on the shelf by investors. But mid-cap gold-and-silver miner SSR Mining (SSRM +0.87%) is a hidden gem that investors with as little as $20 will dig.
On a macro basis, gold has a number of tailwinds in its sails. The Federal Reserve has pledged to keep lending rates at or near historic lows through at least 2022. Further, its monthly bond-buying program should help weigh down long-term yields. With few avenues to generate guaranteed income that'll top inflation, investors are more likely to put some of their money to work in gold. This should lead to higher average selling prices for all gold stocks, including SSR Mining.
But there's more to like than just a higher gold price. SSR merged with Turkey's Alacer Gold last year to create a more diverse and financially productive company. The expectation is for at least 700,000 gold equivalent ounces (GEO) to 800,000 GEO of annual output for the next five years and approximately $450 million in annual free cash flow in 2021 and 2022.
The cash flow is notable for one key reason: SSR Mining is among a small number of gold stocks with a very large net cash position. An historically conservative management team has allowed the company to build up $866 million in cash and cash equivalents. As a result, it's now paying a $0.20 base annual dividend and may repurchase up to 10 million shares of its stock.
At around 5.5 times Wall Street's operating cash flow forecast for 2021, SSR Mining remains quite the bargain.
Image source: Getty Images.
Skillz
Another smart use of $20 would be to put that cash to work in rapidly growing esports and gaming company Skillz (SKLZ 0.60%).
Back in 2019, ResearchAndMarkets.com released a report calling for the global esports market to grow by roughly 20% annually between 2019 and 2025. If accurate, it would generate more than $3 billion in annual sales by mid-decade. The problem is that it's difficult for gaming developers to break into this highly competitive industry.
The solution? Skillz isn't a developer. Instead of taking on established gaming companies, it's chosen to be a gaming facilitator. It's built a platform that allows developers to show off their latest creations and lets gamers compete against each other for cash prizes. In turn, Skillz and the developer keep a cut of the cash prize. Since it's a lot cheaper to maintain a gaming platform than it is to develop new games, Skillz is yielding a gross margin on revenue of 95%.
Early returns suggest that the Skillz platform is resonating with users. It ended the first quarter with 467,000 paying users, which represents 17% of its player base. Comparatively, conversion rates of paying to playing are usually a meager 1.6% to 2%, per Wappier Gaming Apps.
Unlike Cresco Labs and SSR Mining, Skillz won't be profitable this year and probably not in 2022, either. It's been aggressively spending on marketing to fuel its expansion. However, the multiyear agreement Skillz signed with the National Football League in February could be all it takes to quadruple sales by 2024 and push the company to recurring profitability by 2023.
