Please ensure Javascript is enabled for purposes of website accessibility

These Stocks Could Double in 2016

By Travis Hoium – Jan 4, 2016 at 1:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investing in stocks that have the potential for 100% gains often means taking high-risk bets, but the conditions may be right for Seadrill, Garmin, and Amyris in 2016. Here's why.

Every year, there is a small percentage of stocks that surprise the market and double from where they ended the previous year. Sometimes a stock that doubles is driven by macro events, sometimes by its company performance, and sometimes, there's just been a sentiment change in the stock. Below are three stocks that I think could double in 2016 given the right conditions. 

Image: Seadrill.

Seadrill
Remember, these are stocks that could double in 2016. And if oil prices jump to $60 or $70 per barrel, I could easily see Seadrill (SDRL) stock doubling. But this is also a high-risk play because Seadrill could drop by 50% just as easily as it could double.

What Seadrill has going for it is a solid backlog over the next few years, which stood at $6.0 billion for the parent company and $12.0 billion for Seadrill Group at the end of the third quarter. That backlog doesn't guarantee profitability in 2016 or beyond, but it's a path forward to survival until oil prices rise. And that's the key to the stock doubling in 2016.  

Let me be clear that if oil ends 2016 near $35 per barrel, Seadrill will be in serious trouble. But with supply from U.S. producers falling, demand rising globally, and tensions in the Middle East heating up, I think there's a good chance oil prices will spike by the end of next year. And if they do, Seadrill's stock could easily double.

Garmin
The sport watch and fitness band craze hit its highest level yet in 2015, and companies like Fitbit took most of the attention. But for those wearing smartwatches for intense fitness purposes, Garmin (GRMN 0.64%) is still the company to go with. Its wearables provide features such as built-in GPS, multiple sport functions, and notifications that have become common on smartwatches.

What's kept Garmin under the radar is that it's still a niche product in the market. If you've done a triathlon or marathon, you probably know Garmin's devices well, but your everyday consumer may not know much about the more advanced features of the company's wearables.

That's starting to change, and it's impacting Garmin's sales mix. As the company's automotive business slowly fades, its fitness business is quickly growing. In the third quarter, auto device sales fell 14% while fitness sales jumped 23% to $143 million. That marks a fundamental shift in the company's focus, one that that should drive Garmin back to growth in the long term.  

When you look at Fitbit trading at 50 times trailing earnings and Garmin trading at 13 times earnings, I think there's a lot of value in shares. If the fitness segment continues to grow and the company catches some traction with new products in 2016, the stock could double this year.

Amyris
Another stock that could double or drop 50% in 2016 is Amyris (AMRS -2.19%). The bio-engineering company has a lot of potential, using custom-designed genetically engineered yeasts to produce high value chemicals for customers in everything from cosmetics to industrial products to food services.

Investors have long predicted that demand for Amyris' products would have a hockey-stick-like curve, so eventually, there should be some impressive growth numbers. Once the costs fell far enough, new products would be added to the portfolio, which would lead to still-lower costs, and more products, and so on. The problem is, we don't know when that hockey stick turn will come. Management thinks it'll be 2016.

This year, management believes collaboration revenue alone (payments made to develop new products for customers) may be as much as $60 million, and cash flow breakeven may arrive by the end of the year. That's a lot of growth to predict after the company earned just $24.3 million in revenue for the first three quarters of 2015, but if management is right, the stock could be a great value at just a $311 million market cap.

But like Seadrill, this will likely be a binary year for Amyris. If it meets management's expectations for growth and reaches cash flow breakeven, the stock could easily double. But if it comes up short of expectations and needs more cash (as has been the trend in recent years) we could see the stock drop again in 2016. With high reward potential comes high risk for investors.

Travis Hoium owns shares of AMYRIS INC COM and Seadrill. The Motley Fool recommends Seadrill. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

SeaDrill Limited Stock Quote
SeaDrill Limited
SDRL
Garmin Stock Quote
Garmin
GRMN
$94.50 (0.64%) $0.60
Amyris Stock Quote
Amyris
AMRS
$1.79 (-2.19%) $0.04
Fitbit Stock Quote
Fitbit
FIT

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.