First of all, no stock capable of quintupling your money in just over three years is a low-risk investment, so keep that in mind as we go on. And yes, as odd as it may seem, 2025 isn't much more than three years into the future. Having said that, there certainly are some impressive companies that could deliver this kind of return -- or more -- in a relatively short time frame if things go well.
To turn $10,000 into $50,000 in three years, there are some things to look for. A small-cap valuation certainly helps, as does a relatively untapped and large market opportunity. Great management is another thing to look for, as are deep pockets to fund rapid growth. And here are three companies that check all of these boxes.
The way we buy and sell homes could change dramatically
To put it mildly, the traditional way we buy and sell houses is outdated. It can take months to sell a home, and the process is clunky at best -- there are showings, staging, negotiations, etc. -- and the timeline is up to the buyer and the mortgage lender in most cases.
That's where iBuying comes in and is why I recently added Offerpad Solutions (OPAD 0.26%) to my portfolio. If you aren't familiar, iBuying is where a company (like Offerpad) makes an all-cash offer to buy a home directly from its owner. The seller gets to choose the closing date and avoids the pain points mentioned in the previous paragraph. The company gets a fee for its service (similar to a real estate agent's commission), and then resells the home, hopefully for a profit.
iBuying makes up just 1% of the real estate market right now, but the potential is huge. Over $2 trillion worth of residential real estate is sold in the U.S. every year, and that's not to mention all the adjacent services like homeowners insurance and moving help that sellers need. If iBuying starts to gain serious traction and Offerpad can do it profitably, the company's $1.7 billion market cap could multiply several times over in the coming years.
Don't underestimate the value of data
Most people know 23andMe (ME 7.10%) for its consumer-facing genetics testing kits, and while this is certainly an excellent revenue stream, it's not the most exciting part of the company's business.
Where the real long-term potential lies is in the massive genetics data library the company has accumulated, with nearly 12 million genotyped individuals. To put this in context, consider that the second-largest collection of genetic data belongs to Regeneron Pharmaceuticals, which has less than 10% of this amount.
Here's the point. 23andMe has a 50-50 partnership with pharmaceutical giant GlaxoSmithKline to leverage the company's genetics information to develop therapeutics. The company currently has some exciting candidates, and if successful, this could easily be a multibillion-dollar revenue stream for 23andme, which is currently valued at just $3.3 billion.
A social networking stock you might not have considered yet
Technically, Nextdoor isn't public yet, but it has agreed to go public through a special purpose acquisition company (SPAC) deal with Khosla Ventures Acquisition Co. II (KVSB), which values the neighborhood-focused social media platform at $4.3 billion.
Nextdoor's stats are impressive. The platform has 27 million weekly active users and nearly one-third of U.S. households have a Nextdoor verified user. The company's revenue grew by 49% in 2020 and is expected to grow at a similar pace this year. What's lacking is monetization -- Nextdoor's active users generate about one-sixth the revenue of the typical Twitter user. But the company is also valued at a small fraction of other major social media platforms, so if it can figure out how to make money, the potential is huge.
Finally, I mentioned great management as one of the things to look for, and while all three of these companies have it, it's worth specifically calling out in Nextdoor's case. Nextdoor is led by CEO Sarah Friar, and if that name sounds familiar, it's because Friar was the CFO of Square who led the company's rise from niche payment processor to a $100 billion fintech ecosystem. With a massive opportunity to pursue, I can't wait to see what she can do, especially considering the nearly $700 million in fresh growth capital that is set to come with the SPAC deal.
Prepare for volatility
If you invest in any of these stocks, it's important to mentally prepare yourself for a roller-coaster ride. In fact, since I bought Offerpad in my own portfolio just a few weeks ago, the stock has soared to a high of nearly $21 and has fallen to less than $7. That's a big price swing in a short period of time, and while this is certainly an extreme example of short-term volatility, it's important to remember that you're buying these for the long haul.