The influence of “memes” on the stock market has graduated from ironic and funny to tangible and, in some cases, downright frightening. Up until a few years ago, it would have been impossible to believe that a small number of retail investors from a relatively small internet community have the potential to influence the market to a significant extent.
But an 8,000% spike in a stock that was essentially “dead” before it became the target of retail investors on social media is difficult to ignore.
There is no denying that several meme stocks have explosive short-term potential and might have decent long-term potential, but more investors are likely to lose money on these stocks, because they don’t think and “invest” like traders. This is an important distinction many investors fail to make.
If you are more interested in the relative surety of investment growth rather than rolling the dice with meme stocks, it might be a good idea to stick with steady stocks.
An industrial stock
While industrial automation is not a new concept, it’s going to evolve even more rapidly with the fourth industrial revolution. This makes companies that have already established a leadership position in this sphere of enticing investments. One example would be ATS Automation Tooling Systems (TSX:ATA). The company has been around since 1978 and has grown to impressive proportions. It has 28 manufacturing facilities and 50 offices in 20 countries.
The company has a wide variety of brands under its banner, and the bulk of its revenue (60%) is generated from automation and integration solutions. It has a diverse customer base and an adequately fragmented future focus.
The ATA stock has grown over 200% in the last five years, and its 25.3% five-year CAGR is more than enough to double your investment capital in less than half a decade (if it can sustain its growth phase).
A utility stock
If you are looking for modest growth combined with decent dividends, consider adding Algonquin Power and Utilities (TSX:AQN)(NYSE:AQN) to your portfolio. The company offers a five-year CAGR of 15.4%, which is lower compared to ATA’s but significantly more sustainable. It also offers a decent 3.5% yield. In addition, the company is quite fairly priced right now, with a price-to-book ratio of 1.8 and a price-to-earnings ratio of 10.4.
Algonquin is not just financially stable as a utility stock; its revenues are growing at an incredible pace. The company has about three GWs of renewable-powered capacity (including operational and under construction). The stock is both safe and growth oriented, and it might have several good years ahead.
Granite REIT (TSX:GRT.UN) is one of the relatively few growth stocks in the REIT industry. It grew over 100% in the past five years and currently offers a modest 3.68% yield. The stock stayed stagnant for most of 2020 (after its initial recovery spell) and through the first two months of 2021, but it has taken off again since early March and has grown (relatively consistently) 12% in the last three months.
Granite’s most attractive feature is that it has the perfect property portfolio for the e-commerce boom the world has been going through. Almost 90% of its properties are distribution centres (e-commerce) and warehouses. The portfolio is also geographically diversified, with one-third of its properties located in Europe.
Your chances of losing money with meme stocks are just as high (or potentially even higher) than making it big with these stocks. And that’s with the added “stress” of actively managing your time-sensitive investments. Compared to that, the three stocks are almost buy-and-forget stocks, and you can keep them in your portfolio for years, even decades, to accumulate growth (and create cash value with dividends).
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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends GRANITE REAL ESTATE INVESTMENT TRUST.