For most investors, predictable growth stocks are usually the best bet for the long-term growth of their investment portfolio, even if they tend to be slower than more erratic stocks. And since the majority flock to these stocks, they also tend to be more expensive. That’s the natural tradeoff to tying your capital to stock that might pay off only when certain conditions are met. But such stocks also have the potential to offer relatively oversized returns.
A tour operator
Transat (TSX:TRZ) is a Montreal-based tour operator that has been suffering alongside the rest of the touring and airline sector. The company was supposed to be bought by Air Canada, but the larger airline has backed out of the deal, leaving Transat to suffer a brutally harsh market. The stock is still 68% down from its pre-pandemic valuation. It spiked almost 70% earlier but has come down about 29% from that point as well.
The stock is likely to languish at or near these new lows, at least until the next holiday season. The risk is its financial viability till then. But if the tourism sector sees activity at or near the pre-pandemic levels, or TRZ gets another decent acquisition offer, the stock might spike again. And since it’s so far down its pre-pandemic valuation, if it goes to just that point, you can expect more than 100% growth.
A tech stock
BlackBerry (TSX:BB)(NYSE:BB) has already offered oversized gains in the recent past, and it might do so again. The trigger last time was Reddit. Next time, it might be a significant new contract or a breakthrough tech innovation. It is already making waves in vehicle automation, and once that market becomes more mainstream, BlackBerry stock might spike again.
It’s a long way down from its glory days when it was one of the most well-known names in the cellphone industry. And the glory days might not return again, but the company still has a strong reputation in the “security” realm, and if some of its cybersecurity products gain more traction, the company can grow in that arena as well.
A golden stock
When it comes to golden stocks, one condition that can trigger an upward momentum and ensure oversized returns is market turbulence. Kinross Gold (TSX:K)(NYSE:KGC), for example, grew almost 200% between 2019 (beginning) and the 2020 spike that was triggered after the crash. The stock has come down a long way since then, making it both discounted and quite undervalued.
It’s a good practice to hedge your portfolio with a few gold securities anyway. And if you buy Kinross when it has hit rock bottom and exit the position when it peaks after a market correction or crash, you might easily be able to double your investment, leaving you more capital. You can rebuild the “hedge” when the stock market is strong and gold stocks are down in the rut.
The three stocks offer oversized gains, but they are not consistent growth stocks. You can’t rely upon the usual variable (time) for returns from these stocks and have to monitor the market for particular triggers that can cause a spike. But the good news is that while you do have to track the market to know when to sell, you have many more instances to buy.