Risk is one of the most common attributes associated with growth stocks and growth-oriented funds. But one thing many investors fail to understand that risk is relative. Many stocks are relatively riskier in certain market conditions and stable in others.
Take energy stocks as an example. Once considered rock-solid investments, many energy stocks are now counted among risky holdings with shaky long-term prospects. The risk comes from multiple factors: i.e., sanctions on energy businesses, breakthroughs in electrical power production, electric vehicles dominating the market, etc.
Similarly, for many growth stocks, growth potential and outlook are tied to several different factors. And it needs to be revised in a timely fashion. A great growth stock will only be “great” for you if you can get the timing right and realize your gains at or near the peak.
With that in mind, there are two companies that you might consider for massive growth outlooks. One is already on a tear, and the other might be explosive in the distant future.
A silver company
While it’s nowhere near its all-time peak, the silver price has risen quite sharply in 2021. The fear of inflation is forcing many investors to look towards safe-haven assets, and precious metals are experiencing increased demands. That’s partly the reason for Discovery Silver’s (TSXV:DSV) powerful 244% growth in the last 12 months.
It has pushed the valuation to new heights and raised five-year CAGR to epic proportions (204%). That’s enough to double your investment capital in less than one year if the company can keep it up. Right now, it’s all speculation, but even if inflation strikes and we start seeing its obvious impact, the demand for silver and other precious metals might shoot through the roof.
If that happens, Discovery, even in its current expensive state, might offer impressive growth. But it’s difficult to predict how long the growth phase will last and when the stock will start to normalize. It would be prudent to make an exit before the stock starts slumping in response to a powerful stock market and vanishing inflation fear.
A battery company
Electrovaya (TSX:EFL) is a Mississauga-based company that has been operating for about 27 years and focuses on Lithium-ion batteries, which are still the best battery technology we have when it comes to high-energy-density and maintenance. Electrovaya markets itself as a clean energy company that, through its “battery-powered” solutions, has saved 702 MWh energy till now and helped remove 1.2 million pounds of carbon dioxide in 2020 alone.
The company offers battery solutions and technologies in three major areas: mobility, material handling, and energy storage solutions. Both mobility and energy storage have massive future potential. Thanks to its patented technologies unique designs, the company might have the potential to land large EV, windfarm, and solar farms projects. A few such contracts can push Electrovaya’s financials and its stock desirability (and consequently, its valuation) through the roof.
The massive growth outlook of the two companies is tied to some industry-specific and general stock market factors. But if a few factors align in favour of these companies, you might benefit from a significant payoff.
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 has no position in any of the stocks mentioned.