The Motley Fool

2 Speculative Stocks for Younger Investors

Image source: Getty Images

I tend to stay away from speculative investments until they have proven some sort of market fit. However, I make certain exceptions for industries that I am very comfortable with. On that note, I think younger investors could allocate a small portion of their portfolio towards these types of investments, because they have the luxury of time on their side, allowing them to recover if they were to lose the invested capital.

I will stress that there is a very good chance that nothing may come out of these investments, but there is an off chance that the company could find the required market fit and skyrocket. What two speculative investments could become very profitable in the future?

Changing the face of delivery

As it stands, humans are still heavily relied upon during the delivery process. Companies are certainly making progress in incorporating artificial intelligence and robotics during the manufacturing process (think Tesla), but there is yet to be a company that provides reliable drone delivery services. Now, companies seem to be racing to become the first one to break out and provide this service. As a result, drone delivery is creating a buzz around the world.

Enter, Drone Delivery Canada (TSXV:FLT). Drone Delivery Canada is the leading company in this industry within the country. Currently, the company is still very small (with a less than $150 million market cap), which means that its stock can be very volatile. Although Drone Delivery Canada does not currently have a proven business model, the company has been successful in securing trials with Air Canada and government contracts.

For a glimpse of how speculative this company currently is, look at its price-to-sales ratio, which is currently 63,692.85. Because of the astronomic valuation, personally, I would keep this company on my watch list. I will wait until I see an increase in sales year over year and a large increase in its customer base.

Legalization can boost this industry

There is a very good chance that you may have been able to guess what kind of company this section is about, given the header. The use of recreational marijuana has been legalized in Canada for a while now, but it is still illegal federally in the United States. Until that changes, I would expect companies in this industry to struggle. For example, Aurora Cannabis recently underwent a reverse stock split to avoid being delisted.

However, if federal legalization does happen in the States, I would look towards Canopy Growth (TSX:WEED)(NYSE:CGC), since it is a leading company in the marijuana industry. In April 2019, the company became the largest by market cap in the world. However, since then, it has fallen over 67% from those levels.

The company has been reporting increased revenue in each of the past four years, so there is the possibility that it could return to its former market capitalization. However, investors could be playing the waiting game for quite some time. I would keep this company on my watch list until federal legalization occurs in the United States.

Foolish takeaway

Speculative investments are certainly not for everyone. However, given the current direction that technology is moving towards and certain societal trends, there could be some very interesting opportunities that present themselves to investors. If you are interested in these companies, make sure you do your research and understand everything from the company’s business model to the potential market available for capture.

Are you looking for more stocks that could hit big?

This Tiny TSX Stock Could Be the Next Shopify

One little-known Canadian IPO has doubled in value in a matter of months, and renowned Canadian stock picker Iain Butler sees a potential millionaire-maker in waiting...
Because he thinks this fast-growing company looks a lot like Shopify, a stock Iain officially recommended 3 years ago - before it skyrocketed by 1,211%!
Iain and his team just published a detailed report on this tiny TSX stock. Find out how you can access the NEXT Shopify today!

Click here to discover how!

Fool contributor Jed Lloren owns shares of Tesla. David Gardner owns shares of Tesla. Tom Gardner owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.