January served as a reminder that stock market crashes and corrections are a normal part of the investing cycle. While rapid moves lower in equities can, at times, be unnerving, these periods of heightened volatility represent the price of admission to one of the world's greatest long-term wealth creators.
Regardless of whether this latest correction has hit its trough or is still searching for a bottom, we've witnessed a number of great companies back significantly off of their all-time highs. Investors willing to leverage time as their ally may find that the following five discounted stocks can make them wildly rich by retirement.
The past couple of months have been brutal for any company involved in financial technology (fintech). That includes cloud-based lending platform Upstart Holdings (UPST 3.54%), whose shares quadrupled in value, then promptly lost 80%, all within a period of six months. However, this discount represents the perfect opportunity for long-term investors to pounce on a fintech innovator.
What makes Upstart so interesting is the vetting process its platform utilizes to make quick loan approval/denial decisions for lenders. In particular, it leans on artificial intelligence (AI) and machine-learning to speed up the loan-vetting process. This saves lenders money, and it's far more-convenient for consumers looking for a loan.
To build on this point, more than 90% of the company's revenue is derived from banking fees or service revenue, with no credit exposure, as of the third quarter. This means higher lending rates and recessions will be less likely to directly impact Upstart's growth potential and profitability, relative to other financial stocks.
But the real lure for Upstart might just be its opportunity in auto loan and mortgage loan originations. The company acquired Prodigy Software last year, giving it an AI-driven auto loan service platform. The market for auto loan originations is over eight times the size of personal loans, which is where Upstart has focused most of its attention till now. Pushing into larger loan origination pools could secure high double-digit growth for a long time to come.
Biotech stock Novavax (NVAX -2.48%) is another discounted growth stock with all the tools necessary to make patient investors wildly rich by retirement.
Novavax is one of a handful of drug developers to have brought a coronavirus disease 2019 (COVID-19) vaccine to market globally via emergency-use authorization (EUA). The company's vaccine, NVX-CoV2373, produced an 89.7% vaccine efficacy (VE) in a large-scale study in the U.K. last March, and a similar 90.4% VE in a U.S./Mexico trial that published in June. It's one of only a select few vaccine developers to reach the 90% VE barrier, which could make it one of the most-popular global COVID-19 vaccines over time.
The mutability of the SARS-CoV-2 virus that causes COVID-19 is also a long-term positive for Novavax. With COVID-19 likely becoming an endemic illness similar to the flu, it's quite possible that booster shots or variant-specific inoculations could be needed going forward. In other words, what initially looked like a bountiful one-time revenue opportunity for drugmakers could be a recurring sales opportunity for COVID-19 vaccine developers.
The other thing to consider is the speed at which Novavax developed a successful COVID-19 vaccine. This same technology can be used to develop combination vaccines, or to target other airborne viruses. Novavax appears inexpensive when taking into account the potential scope of its drug-development platform.
Another growth trend with multidecade legs is the rollout of electric vehicles (EVs). That's why the significant pullback in Nio (NIO -1.35%) is such an incredible opportunity for long-term investors.
Nio's execution, even in the wake of semiconductor chip supply shortages, has been nothing short of phenomenal. Though deliveries took a modest step back in January (9,652 EVs), they topped 10,000 in November and December. The expectation is for the company to ramp its annual run-rate production from around 120,000-130,000 EVs to as much as 600,000 EVs by years' end. This growth should stem from its existing EVs, as well as the introduction of three new vehicles.
In addition to quickly ramping up production, Nio is based in the world's leading auto market, China. Although China isn't its only opportunity, it's a market where significant EV market share is up for grabs.
Furthermore, investors shouldn't overlook Nio's innovation. Aside from bringing new EVs to market, the company introduced its battery-as-a-service (BaaS) program in the summer of 2020. Enrollment in BaaS allows EV buyers to charge, swap, or upgrade their batteries in the future, and it lowers the initial purchase price of an EV. In return, Nio keeps buyers loyal to the brand, and it's trading lower-margin near-term sales for high-margin fee-based revenue raised by BaaS enrollments.
Nio has the look of a company that'll be wildly profitable within a few years.
Select marijuana stocks also have the ability to make long-term investors richer beyond their wildest dreams come retirement. Following a pullback of more than 60%, multi-state operator (MSO) Trulieve Cannabis (TCNNF 0.49%) is ripe for the picking.
The modus operandi for most MSOs is to plant their proverbial flags in as many legalized markets in the U.S. as possible. Trulieve didn't take this route. Rather, it focused most of its attention on the medical marijuana-legal Florida market. Currently, 112 of the company's 160 operating dispensaries are located in the Sunshine State.
Why Florida? Aside from the state generating some of the highest cannabis sales in the country, Trulieve was able to saturate the Sunshine State while keeping its marketing budget relatively low. The result was a push to recurring profitability that was years ahead of its competition. The company holds around half of the state's dried cannabis flower and oils market share, which means it'll be well-positioned if Florida does legalize adult-use weed in 2024.
But make no mistake about it, Trulieve does have a plan to grow its business beyond Florida. In October, it closed the largest U.S. pot acquisition in history. The buyout of MSO Harvest Health & Recreation boosted its presence to 11 states, as well as gave it a leading position in Arizona (Harvest Health's home market), which legalized adult-use weed in November 2020.
On a nominal basis, there simply isn't a more profitable pot stock than Trulieve Cannabis.
A fifth discounted growth stock that can make you wildly rich by retirement is tech-driven real estate company Redfin (RDFN 1.54%). Shares of Redfin have plunged by almost three-quarters since hitting their all-time high.
The big concern for Redfin looks to be the Federal Reserve's newly hawkish stance. The prospect of higher interest rates almost certainly means mortgage rates will head higher. This could lead to a knee-jerk reaction in the short-term that reduces homebuying and selling activity, thusly hurting real estate-based business.
However, Redfin brings two key competitive advantages to the table, relative to traditional real estate companies. First off, it's saving its clients a boatload of money. Whereas most real estate firms charge a listing fee/commission of between 2.5% and 3%, Redfin's fee is either 1% or 1.5%, depending on how much previous businesses was done with the company. Based on a median sales price of $358,000 for existing homes in December, according to the National Association of Realtors, sellers could be saving more than $7,100 by choosing Redfin over a traditional real estate company.
Redfin also provides a level of personalization that most traditional real estate firms can't match. It offers a variety of services, such as aiding with staging and upgrades to maximize the selling value of a home, to its iBuying program, which purchases homes with cash and removes the haggling and hassles associated with selling a home.
Look for Redfin's share of existing home sales in the U.S. to continue to grow over time.