Every investment portfolio should ideally have a weighting reserved for riskier stocks. These are the stocks that could potentially make you lose it all. On the flipside, they could also potentially provide life-changing returns.
Let’s explore two such riskier stocks for Canadian investors.
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Ballard Power: The risk is elevated but the potential remains
I’ve been a fan of Ballard Power Systems Inc. (TSX: BLDP) and its fuel cell engines for a while now. It hasn’t been a financial success story though, as this market has been difficult due to the high level of disruption and the high cost of change that are involved.
In fact, there has been a marked deterioration in the environment for Ballard. Macro-economic and political uncertainty is weighing on the hydrogen industry, and this has caused a push out of hydrogen projects and a deterioration in financing.
In response, Ballard has embarked on a global restructuring to reduce its cost structure and reduce the intensity of its investments. In 2025, we can expect a 30% reduction in costs. This will extend Ballard’s cash runway.
In fact, speaking of cash, Ballard entered the quarter with a strong cash position of $640 million. In its latest quarter, cash used from operations totalled $84mln. Annualized, this equals $336mln. The cost reductions plus reduced investment will lessen this cash burn in the coming years.
Clearly, Ballard’s story has deteriorated in recent months/years. The hydrogen adoption curve has been pushed back, and this has changed the investment case. However, the potential is still there, as the global push toward decarbonization remains. And Ballard’s fuel cell engines are the energy source of choice for the majority of heavy-duty vehicle operators globally.
So, I will continue to watch closely for signs of life in the hydrogen market. If Ballard can survive the next couple of years, I think that it has a lot of potential in the medium to long term. The fuel cell market is big and its adoption still appears very likely.
Well Health stock: Attractive risk/reward
Well Health Technologies Corp. (TSX: WELL) is another riskier stock that has great potential. But unlike Ballard, this one is actually experiencing sustained positive momentum.
In fact, Well Health stock has rallied 37% so far this year and 94% since the end of 2022. This is being driven by record-breaking results. In its latest quarter (Q3 2024), Well Health continued this trend with its 23rd consecutive quarter of record-breaking results.
Like Ballard Power, Well Health is also a disruptor of its chosen industry. It’s a leading tech company that’s working to digitize the healthcare industry. It is, in fact, revolutionizing health care systems. This is driving efficiencies, better patient care, and ultimately, a better experience for both providers and patients.
The healthcare system has been notoriously behind in its use of technology. Well Health saw this opportunity and began to change this. The company’s long-term goal is to capture $4 billion in revenue, which is 10 times the current level and would still only be a mere 5% market share.
Also, of the 20,000 clinics in Canada, Well Health owns only 200. This market is prime for consolidation and Well Health has its sights set on it.
The bottom line
Both Ballard Power and Well Health stock have big upside potential, but both are risky stocks. Dedicating a small percentage of your total portfolio to stocks like these could mean a big payday in the years ahead.
