Risk and Reward: These 2 Stocks Can Triple

If you are open to risk, buy into these two niche markets to potentially triple your money.

| More on:
Businessman pulling out wooden brick from toppling stack

Image source: Getty Images.

During economic difficulty, consumer spending retracts to necessities. I surely wouldn’t be buying a motorcycle or a new coat at this time. But this creates an opportunity to buy low and sell high. I have analyzed two companies I believe are strong and will rebound as soon as the crisis is over. I will point out that these two picks are for investors who have a high tolerance for risk. The two companies are Bombardier Recreational Products (TSX:DOO)(NASDAQ:DOOO) and Canada Goose (TSX:GOOS)(NYSE:GOOS).

The sky is falling, but for how long?

Canada Goose has been struggling over the past few quarters due to growth prospects falling short of expectations. The main growth prospect Canada Goose was looking to explore was China. As you can imagine, Canada arresting Huawei’s CFO and daughter of the CEO has not been received well. Canada Goose has been on the receiving end of boycotts, and this affects sales. I don’t think adding COVID-19 to the mix really helped the situation either. As the virus began in Wuhan, China, Canada Goose stores closed immediately, and discretionary spending ceased worldwide. It is no wonder why the stock price dropped 50% from the beginning of the COVID-19 crisis.

It’s important to keep perspective

Yes, I know Canada Goose’s sales will be strongly impacted until the virus is gone and may take a few quarters to get back to achieving the same revenue growth, but let us not forget what they were achieving financially before the virus. The company has increase revenue and earnings per share drastically year over year. Revenue increased from $404 million in 2017 to $831 million in 2019, representing a 100% increase over two years. Canada Goose has also approximately tripled its earnings per share from $0.43 per share in 2017 to $1.36 per share in 2019.

People like to have fun

BRP was a spinoff in 2003 when Bombardier sold the division to a group of investors. Typically spinoffs are done to allow the main company to shed assets that are not performing as well as others. That is not the case with this company. Since 2015, the company has increased revenues at an average of 10% per year. What is most impressive has been BRP’s ability to increase earnings per share from $0.59 per share in 2015 to $2.28 per share in 2019, representing an increase of over three times.

There is a saying among investors: “Past results aren’t indicative of future performance.” I believe in this circumstance, they can be. The underlying business model has not changed. Management has not abandoned ship and continues to grow the company at an impressive rate. There has been some insider selling approximately nine months previously when the price was in the $60-per-share range, but since the share price drop, no selling has occurred. I would interpret the share price in the past reached an overvalued level but currently could be considered undervalued.

Foolish takeaway

I will repeat that these two investments are risky, as they heavily rely on global economic stability. BRP has sold off approximately 70%, and Canada Goose has dropped approximately 50%. If BRP and Canada Goose’s share price returns to its former glory, you might end up with a pleasant surprise in your trading account when the economic turmoil resolves itself. Consider buying today!

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 Andrew Gudgeon has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Canada Goose Holdings.

More on Investing

Young woman sat at laptop by a window

SPY Stock Is Just the Tip of the Iceberg for Canadians Investing in the U.S.

These two BMO ETFs are great alternatives to just buying SPY.

Read more »

TFSA and coins
Stocks for Beginners

How a BIG New TFSA Change Could Affect You in 2024

Canadians are in for a BIG surprise for the TFSA in 2024. Here's how TFSA changes could help you keep…

Read more »

Growing plant shoots on coins
Dividend Stocks

2 Under-the-Radar Dividend Payers With Solid Growth Prospects in 2024

These under the radar monthly dividend payers could provide good growth prospects in 2024 and beyond.

Read more »

Bank Stocks

3 Reasons I’m Buying Royal Bank Stock Today

Royal Bank (TSX:RY) stock has shown signs of strength and yet still put aside $720 million in provisions for loan…

Read more »

Business success with growing, rising charts and businessman in background
Tech Stocks

Growth Stocks: A Once-in-a-Lifetime Opportunity to Get Rich

Here's why investing in quality growth stocks such as Docebo and Datadog may allow you to generate sizeable returns.

Read more »

Question marks in a pile
Dividend Stocks

Should You Buy BMO Stock for its 5.2% Dividend Yield?

BMO stock has outpaced the broader markets in the past two decades. But is this blue-chip TSX bank stock a…

Read more »

Mature financial advisor showing report to young couple for their investment
Bank Stocks

3 Top Financial Stocks to Buy on the TSX Today

The top financial stocks to buy on the TSX today are two small lenders and one Big Bank.

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Canopy Growth Corp: Will it Ever Be a Buy?

Canopy Growth Corp (TSX:WEED) keeps going lower. Will it ever find a bottom?

Read more »