Last week, the benchmark S&P 500 reached another new all-time high, which has pretty much been an ongoing theme since 2021 began. But don't be fooled into thinking that, just because the market is near a record high, there aren't excellent values that can be scooped up by investors.
Additionally, don't overlook great companies just because they don't have a triple-digit share price like many of these fastest-growing tech and healthcare stocks. It could be argued that some of the best values today can be found boasting single-digit share prices. The following trio of companies can all be purchased for less than $10 a share, yet they're some of the smartest stocks you can buy right now.
To state the obvious, the United States is where you'll want to focus your investment activity in the cannabis space. Even if the federal government continues to drag its heels and no reform measures are passed, we've watched 36 states legalize medical marijuana, with another 18 waving the green flag on adult-use consumption or sale. That's more than enough opportunity for the U.S. to generate tens of billions of dollars in annual revenue by mid-decade.
What'll make Jushi a resounding success is the company's core focus on three states and its willingness to lean on inorganic growth.
To address the former, Jushi expects 80% or more of its revenue this year will derive from Pennsylvania, Illinois, and Virginia. Pennsylvania is where the company has 13 of its 20 operational dispensaries.
What's special about these states, aside from the fact that they're all capable of $1 billion or more in annual sales (Illinois is already there), is that they limit how dispensary licenses are assigned. Both Pennsylvania and Illinois cap how many retail licenses can be issued, as well as how many licenses a single business can hold. Meanwhile, Virginia assigns dispensary licenses based on jurisdiction.
The key point is that Jushi is focusing on states where competition is purposefully being reined in by regulators. That's good news for a relative small-fry that's trying to build up its brand and create a loyal following.
In terms of organic growth, Jushi hasn't been afraid to put its capital to work to bolster its cultivation presence in its trio of core states, or to expand into promising markets. In April, for example, the company completed its acquisition of Franklin Bioscience in Nevada. The deal gives Jushi the ability to cultivate, process, and distribute cannabis in the Silver State. By 2024, tourist-centric Nevada should be leading the nation in cannabis spending per capita.
Jushi will likely be one of the fastest-growing pot stocks of the decade, making it a steal of a deal with its share price in the single digits.
Another really intriguing stock is next-generation auto insurance company Root (NASDAQ:ROOT).
I know, I said the word "insurance" and you probably fell asleep. But I assure you, Root isn't like your typical insurance company.
For example, the vast majority of auto insurance companies break policy pricing down by broad-based factors like your credit score and gender, which tells the insurer absolutely nothing about your capacity to drive safely. Root wants to completely ditch this impersonal process and introduce policy-pricing factors that make sense and lead to fairly priced insurance. It plans to do this by relying on telematics.
Essentially, highly sensitive instrumentation found in smartphones (e.g., gyroscope and accelerometer) will provide copious amounts of data on factors like hard braking and G-forces during turns. Root can aggregate this data by states, counties, and cities to effectively price policies up front.
Although Root is still in the very early stages of its existence, it's already seeing its new approach to pricing insurance policies pay off. During the first quarter of 2020, the company's direct accident period loss ratio fell from 106% to 80%. However, there were arguably fewer drivers on the road due to the pandemic. But in the first quarter of 2021, the direct accident period loss ratio fell again to 77%, and Root actually generated a nominal gross profit. It would seem that telematics-based insurance is a viable operating model.
Keep in mind that auto insurance won't be Root's only foray. The company plans to push into new verticals, such as renters insurance, where it'll benefit immensely from add-on sales and word-of-mouth marketing.
Understandably, Root is a work in progress that'll likely be losing money for years to come as it builds up its member base and refines its policy pricing and data science-based marketing campaign. But given its early reception, Root looks to have all the tools needed to be a long-term winner.
Teva Pharmaceutical Industries
A third smart stock with a sub-$10 share price that has the potential to make its shareholders a lot richer is brand-name and generic-drug manufacturer Teva Pharmaceutical Industries (NYSE:TEVA).
Teva is about as cheap a healthcare stock as you're ever going to find, with an estimated price-to-earnings ratio of a little over 3 this year. The reason is that it's contending with a mountain of issues. For instance, the previous management team buried Teva in debt up to its eyeballs by overpaying for generic drugmaker Actavis. More recently, Teva has taken flak for lawsuits tying it to the opioid crisis. The uncertainty of potential fines has pummeled the stock.
So, where's the good news, you ask? Look no further than CEO Kare Schultz, who took the helm at Teva in September 2017. Schultz is a turnaround specialist who's helped reduce Teva's annual operating expenses by $3 billion and slashed the company's net debt from north of $34 billion to under $24 billion. By the end of 2023, the company is expected to have its net debt levels down to around $15 billion.
As a Teva shareholder, my personal expectation is that Schultz will work with regulators to put much of the company's opioid and generic price-fixing litigation in the rearview mirror. Additionally, being able to settle by providing free or reduced-cost generics, or possibly paying a cash settlement over an extended time frame, will allay near-term concerns.
As for the company itself, it's set to benefit from an aging population in the United States and around the globe. With brand-name therapies increasing in price, patients, insurers, and physicians will be looking to generics more than ever to meet clinical needs.
As with Root, Teva might require some patience from shareholders. However, the payoff should be well worth it for long-term investors.