Sometimes, a joke can get too far out of hand. Dogecoin is an example of that. Sometimes, a discussion on an internet board and a few memes can become an engine of growth for a company, like what happened with GameStop (NYSE:GME). But these growths, even though they come from the most organic source, that is, individual investors, are not truly organic.
While it might not be an accurate comparison, there is a significant parallel between the growth and dip patterns of GameStop and cryptocurrencies like Dogecoin. The official overlap between the two is “memes,” which is as far from “official” as one thing can get, but there’s the sense that many retail investors are bonded through the internet and can seize back control from institutional investors.
It’s a beautiful sentiment and has evolved into a tangible force, as we can see from three major spikes in the GameStop stock (in the last 12 months), but it’s not safe or reliable. A meme stock, like memes, can be considered a fad, and fads come and go. There are more reliable stocks to harness powerful growth, and they might be a better option for most investors.
An insurance company
Insurance companies (and their stocks) tend to be stable and mature, but Trisura Group (TSX:TSU) is aggressive. Although the bulk of its recent growth happened after the 2020 crash, the stock was growing at a steady albeit relatively slow pace before 2020. The traditional steady and current aggressive growth pushed the three-year compound annual growth rate (CAGR) to 79%. It’s quite low compared to GameStop, but this growth is relatively easier to track and leverage, unlike GameStop’s spikes.
Trisura has been operating in the country for 15 years, but it didn’t start out as an independent company. The company started out as a subsidiary of Brookfield Asset Management, but it spun off in 2017 and its performance has been quite exceptional since then. In the last 12 financial quarters, its revenues have sunk compared to the previous quarter only twice.
It’s financially stable, moderately overvalued, and promises relatively secure capital appreciation prospects.
A venture capital company
The U.S.-based Hamilton Thorne (TSXV:HTL) is a tech company that operates in a very specific niche, that is, high-precision laser devices and advanced image analysis systems. The company has a decent geographic presence and its products are being used in 75 different countries. Its core strength is its proprietary laser technology that forms the backbone of its entire product line.
Most of the company’s revenue is generated by its consumables, that is, items necessary to run Hamilton’s products. This “enforced consumer loyalty” promises stable revenues; the more new equipment the company sells, the more its long-term consumables’ consumers will grow.
Hamilton stock has been growing quite steadily for the past several years. Its 10-year CAGR is quite sustainable at 26% and is enough to grow your nest egg to decent proportions in a decade or so.
The problem with assets that are driven by speculation is that they can fall just as fast as they grow based on the speculation and information surrounding the stock. Many investors undoubtedly made a decent return on GameStop stock, but for each investor who hit the jackpot with this company, there are probably five others who actually lost money simply because they couldn’t leverage the market timing properly.