These 2 Stocks Have a Lot of Risk But Their Upside Could be Huge

Looking for an alternative option for your portfolio? These two stocks have a lot of risk now, but their long-term potential remains huge.

| More on:
People walk into a dark underground mine.

Source: Getty Images

Do you have an appetite for risk? High-risk investments often carry the biggest rewards, but there’s never a guarantee of those risks paying off. But what about some former market darlings that are now down on their luck? Some stocks have a lot of risk now but carry huge potential upside.

Here’s a look at two such stocks to consider.

First things first: A reminder

Let’s start by stating something that every investor should know. All stocks, even the most defensive, carry some risk. That’s part of the reason why it’s always a good idea to diversify your portfolio with stocks from different segments of the market.

So then, which two stocks have a lot of risk, but also lots of upside?

That would be Air Canada (TSX:AC) and Cameco Corporation (TSX:CCO). Both stocks have endured less than stellar results over the years, due to different factors.

Fortunately, they’re both compelling investment cases at this juncture.

The case for Air Canada

Pre-pandemic, Air Canada was regarded as one of the best-performing stocks of the past decade.

Unfortunately, that changed when COVID restrictions took effect. The pandemic closed global markets to travel and trade. By extension, it also brought Air Canada’s international and cross-border air travel to a grinding halt. This forced Air Canada to ground planes, lay off staff, and cut costs for its survival.

As expected, those closures and cuts had a roll-on effect on Air Canada’s quarterly results, which were in a word, dismal. Fortunately, closures are in the past, and global markets have reopened. And as a result, Air Canada has restored much of its pre-pandemic service levels, and the stock has staged a recovery.

As of the time of writing, Air Canada still trades down nearly 5% year to date. However, in the period since the pandemic started, Air Canada is still down by 41%.

That’s incredible considering that Air Canada recently saw its operating revenue hit $5.3 billion, more than double the amount from 2021. The airline also generated an operating income of $644 million, the first positive number since the pandemic started.

Looking forward, Air Canada has moved to resume much of its pre-pandemic service for next summer. In short, expect the airline to make a recovery over the next year, albeit a slow one.

The case for Cameco

All stocks carry some risk, but not all stocks have a lot of risk. Cameco has traditionally fit in that latter category.

Cameco is one of the largest uranium miners on the planet. The uranium mined by Cameco is then sold on to nuclear reactor operators around the world as fuel. Those sales are party to long-term contracts that typically span a decade or more in duration.

So then, why is Cameco one of the stocks that have a lot of risk? That’s because uranium fuel is tied to the demand for nuclear power. That demand can disappear in an instant when an accident at a nuclear facility occurs. That was the case following the Fukushima disaster back in 2011.

In the years following that incident, demand for uranium plummeted, and as a result, so too did the price of uranium. In fact, the price of uranium dropped and stayed in the low US$20s per pound for several years.

Fortunately, the uranium market has now recovered. The growing necessity of generating massive amounts of clean energy has ushered in a renaissance for nuclear power. Globally, there are now nearly 50 reactors under construction and hundreds more in various staging of planning and approval.

This has driven uranium prices, and by extension, Cameco’s stock price, back up.

In fact, as of the time of writing, Cameco is beating the market, up over 7% for the year. And that’s not all. The recent acquisition of Westinghouse moves Cameco away from being a pure-play uranium miner, and closer to becoming a uranium utility.

It’s an intriguing idea and one that holds plenty of long-term potential, which is why Cameco is one of the stocks that has a lot of risk, but even more upside.

In my opinion, both Cameco and Air Canada are unique long-term investments that can form part of a larger, well-diversified portfolio.

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 Demetris Afxentiou has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Metals and Mining Stocks

A miner down a mine shaft
Stocks for Beginners

Canadian Mining Stocks: Buy, Sell or Hold?

Canadian mining stocks have seemed like such a strong investment, but with shares down significantly this year, what should we…

Read more »

Gold king in chess game face with the another silver team on black background (Concept for company strategy, business victory or decision)
Stocks for Beginners

Great News for Gold Stock Investors!

Gold has hit an all-time high! Which is good news for some gold stocks, and really good news for others.

Read more »

Gold bullion on a chart
Metals and Mining Stocks

If Gold Prices Continue to Climb, These 3 Stocks Could Skyrocket

Market certainty and geopolitical tensions typically enhance the demand for gold, and this rise is reflected in a wide range…

Read more »

gold stocks gold mining
Metals and Mining Stocks

Why Agnico-Eagle Stock Rose 5% on Monday

Agnico-Eagle stock is up 15% in the last year as inflation fears and elevated geopolitical risk are sending gold prices…

Read more »

gold stocks gold mining
Metals and Mining Stocks

Add Some Bling to Your TFSA With This Gold Mining Stock

Agnico Eagle Mines (TSX:AEM) stock looks too cheap to ignore as gold looks to make its next move.

Read more »

four people hold happy emoji masks
Metals and Mining Stocks

Got $200? 2 Lithium Stocks to Buy and Hold Forever

Lithium stocks may not be in the headlines like chip stocks, but they have just as much growth potential over…

Read more »

A miner down a mine shaft
Metals and Mining Stocks

Can NexGen Energy Stock Continue to Surge Higher?

NexGen Energy is a pre-revenue uranium stock that has returned over 2,000% to shareholders in the past decade.

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Metals and Mining Stocks

Is Newmont Mining Stock a Good Buy Right Now?

Shares of Newmont Mining are down almost 60% from all-time highs, making the gold stock a top choice for value…

Read more »