It's no fun to see an investment lose value. That's especially true when it seems like the business is doing well. But that is the price we pay for owning stocks, the asset class with the highest average rate of return over time.
Three companies that fit that description well are BioNTech (BNTX 0.58%), Chewy (CHWY -0.62%) and Upstart Holdings (UPST -0.85%). Despite stock prices that have fallen off a cliff, they offer potential rewards if investors can take a long-term view.
At its founding in 2008, the German biotech company was focused on developing personalized treatments for every patient's disease, especially cancer.
It's a bit ironic that the company has gained fame and riches by creating one of the most widely distributed drugs in history. Comirnaty -- its COVID-19 vaccine developed with partner Pfizer (NYSE: PFE) -- has been the most administered coronavirus vaccine in the U.S. despite not participating in the government's Operation Warp Speed.
The stock is off 61% from its high as Wall Street worries about what will happen to the business after the pandemic ends. But BioNTech now has the financial ability to invest in growth. It has 1.7 billion euros ($1.85 billion) on its balance sheet and has told investors it will spend roughly 85% of that on research and development in 2022. And the funds will be replenished since it has purchase agreements for 2.4 billion doses of Comirnaty in 2022. But the real excitement is about what comes next.
BioNTech is building multiple platforms for fighting disease. The messenger RNA (mRNA) approach is well known at this point. But it's also developing cell and gene therapies, as well as treatments using targeted antibodies and small molecules. All told, it has become a disease-fighting juggernaut. Perhaps the most exciting is its patient-specific melanoma-fighting mRNA candidate. It is in phase 2 trials with data available in the second half of this year.
It's one of more than 20 drug candidates in the pipeline. Over the next decade, BioNTech could be life-changing for patients and investors.
Almost one in five households adopted a pet during the pandemic. In my own circle, the number feels closer to 100%. Chewy, the online pet store and pharmacy, saw growth skyrocket, as sales rose 83% over the last two years. It aims to be the most trusted and convenient destination for pet owners. And it's making progress.
However, Wall Street has gotten nervous. The stock is down 65% from its peak last January. Management blamed supply chain issues, shortages, labor constraints, and shipping costs for a somewhat disappointing fiscal fourth quarter, ending with January. It remains optimistic that the challenges aren't permanent.
How the stock performs in the long term could have a lot more to do with how many active customers the company can eventually get. While the amount spent per customer rose sharply in 2021, the growth of customers leveled off. As with many online companies, the pandemic pulled forward a lot of growth.
Restarting that engine in 2022 and beyond will be a good tell on how big Chewy can ultimately become. If it can keep growing its number of customers and their spending, even moderately, I believe the stock can make a great investment over the next decade.
3. Upstart Holdings
To Upstart, the price of credit is the price of the American Dream. That's because access to credit opens doors of opportunity and mobility. Founder Dave Girouard left his executive role at Alphabet's Google to make that dream possible for people left behind by the traditional lending model. According to management, 80% of Americans have never defaulted on a credit product but only 48% have access to prime credit. The difference is Upstart's opportunity.
The stock is down a lot. But don't let the 76% fall from its high fool you. So far, it's a runaway success. Shares are up 223% since the initial public offering in December 2020.
The company's performance from an accounting perspective has been phenomenal. But underneath the surface, it is even more impressive. It has expanded its network of banking partners from 10 in late 2020 to 42 today. It's capturing an increasing percentage of the loans across the platform. Perhaps most impressively, the percentage of inquiries it is converting to loans is climbing. Converting more inquiries likely means banks using Upstart are capturing market share.
The stock price might be down, but management can only control the performance of the business. So far, there is little to indicate Upstart won't succeed over the long term.