Foolish investors know that when it comes to investing, it’s more about the risk/reward trade-off and less about risking it all with the hopes of maximizing one’s potential reward. Thus, a vast majority of penny stocks should be seen as less attractive relative to well-established small- and mid-cap stocks.
Similar to micro-caps, the growth potential of mid-caps can be hard to gauge. Sometimes, the financials do a rapidly-growing mid-cap business little justice.
One way to judge whether a high-growth mid-cap can sustain or continue accelerating its sales growth is to have a gander at the potential in untapped markets. A more compelling — and fun — way, however, is to make an educated guess of what the stock’s market cap is without peeking!
If your estimated market cap is substantially higher than it actually is, you may have a potential multi-bagger on your hands.
Consider Jamieson Wellness (TSX:JWEL), a vitamin, mineral, and supplement (VMS) kingpin that’s been around for nearly one hundred years.
The Canadian household brand has been trusted for generations, and as a firm that went public just a few years ago, the name finally has the capital it needs to really make noise at the international level while testing innovative new products, both at home and abroad.
Yes, the VMS industry is boring. But sometimes boring is beautiful, especially in an industry as misunderstood as VMS. It’s mostly a commoditized industry, but what many may not know is that Jamieson does, in fact, have a moat despite co-existing alongside fierce competitors.
Many Canadians reach for the green-capped products in the medicine aisle without thinking twice about it. Jamieson is a brand that delivers on the quality front; Jamieson is a preferred choice when it comes to vitamins as Coca-Cola is when it comes to pop.
More recently, Jamieson has been doing well in the relatively untapped Chinese market, with Costco standing in its corner. Despite being a primarily Canadian name, Jamieson is a top foreign brand in China, and as the company continues bolstering its distribution across various Chinese cities, I do see the potential for tremendous growth that could last well into the next decade.
The Jamieson growth story is compelling, and the brand is renowned. You’d think that the stock could have a market cap in the billions, but it’s just shy of $950 million.
The nearly century-old company looks to be in the very early innings of its growth story and at today’s levels, I’d back up the truck on the name over any penny stock.
Stay hungry. Stay Foolish.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has the following options: short January 2020 $180 calls on Costco Wholesale and long January 2020 $115 calls on Costco Wholesale.