Forget the sundial and AMC: These stocks can make you rich | The variegated fool

If you invest in the stock market long enough, you need to see something unprecedented.

Last year, it was the coronavirus disease 2019 (COVID-19) crash that dried up 34% of the benchmark S&P 500 in less than five weeks. Meanwhile, in 2021, it is the historic battle between retail investors and institutional investors with big money.

A businessman holding two large stacks of one hundred dollar bills.

Image source: Getty Images.

Investors should ditch solar growers and AMC Entertainment

Over the past three weeks, retail investors in Reddit’s WallStreetBets chat room have teamed up to buy shares and call-out-of-the-money options on a small subset of shares. Many of these companies fit one of two qualifications. They either have a large short interest in which retail investors try to influence a short clamp, or they have a low stock price. That is why we have witnessed a film operator AMC Entertainment (NYSE: AMC) and Canadian marijuana stock Solar growers (NASDAQ: SNDL) ascend to heaven.

Unfortunately, the stocks that retail investors are chasing higher have been severed from their underlying fundamentals in a big way.

For example, AMC was heading for bankruptcy before its stock rose from below $ 3 to as high as $ 20 per share. Shares. Although the company was able to raise money by selling shares in its common stock and issuing debt, this is does not guarantee its survival. Without an end to the pandemic, AMC’s cinemas remain closed or largely unfilled. And if that was not enough, AT&T subsidiary WarnerMedia releases its new movies on HBO Max the same day they hit theaters in 2021.

Meanwhile, Sundial Growers has aggressively raised over $ 600 million in cash and paid off its debt, but has done so before drowning of existing shareholders in new share issues. The company’s share count has risen by over 1 billion shares in just four months. Now with a billion-dollar valuation, Sundial continues to lose money and is miles behind its Canadian peers in the cannabis market.

These stocks can make investors rich

Simply put, the movements we are witnessing in Solur and AMC are not sustainable. They are driven by emotion and not operational growth, which is a recipe for disaster.

If you want to get rich in the right way, buy quality companies and hang on to them for long periods of time. The following trio of companies fit the bill perfectly.

Someone using a tablet to browse a pinned table on Pinterest.

Image source: Pinterest.

Pinterest

Do not be put off by the fact that Pinterest‘s (NYSE: PINS) shares have risen almost 260% over the following year. This social media company is still in the beginning of its growth phase and has the potential to be one 10-bagger over the next 10 years.

Prior to the pandemic, Pinterest’s monthly active user share (MAU) increased by an average of 30% annually between 2017 and 2019. This growth accelerated to 37% last year, which is likely a function of people being stuck in their homes in response to COVID-19 pandemic. But no matter how you look at Pinterest’s MAU data, the crystal clear conclusion is that it’s getting more popular with each passing quarter.

What gives Pinterest such robust sales growth potential is its focus on international markets. Of the 124 million net new MAUs achieved in 2020, 114 million came outside the United States. Although the average turnover per User (ARPU) outside the US ($ 0.88) is only a fraction of what it is in the US ($ 15.34), these former US users allow Pinterest to grow its international ARPU at a lightning-fast pace. The more users Pinterest attracts, the easier it will be to attract ad dollars.

Do not just overlook either how perfect a platform Pinterest is for e-commerce. Instead of having to extract information from its users, Pinterest’s MAUs willingly write about the things, places, and services they like. This makes it incredibly easy for small businesses to target these users. As a medium, everything Pinterest needs to keep its user base engaged and ensure that small businesses have the tools they need to be successful.

Green Thumb Industries

If you really want to own marijuana stocks, Solar growers should be almost the last name investors buy. Instead, focus on successful U.S. multistate operators heading for recurring profitability, such as Green Thumb Industries (OTC: GTBIF).

Green Thumb’s success comes from a number of factors. First, the company is it relatively selective in the market, it is chosen to operate. It currently has 52 dispensers in legalized states with the option to open as many as 96 retail locations in a dozen states. What stands out is the company’s focus on states like Illinois, Nevada and New Jersey – the latter of which legalized recreational pots in the November election. Illinois, for example, is a limited licensing state (ie only a certain number of retail locations are allowed). When the Land of Lincoln reached $ 1 billion. Dollars in weed sales in the first year after the legalization of pots for adults, Green Thumb has a good chance of securing a significant share in this burgeoning market.

Another reason why Green Thumb is so successful is its inorganic growth. In June 2019, Green Thumb closed its acquisition of Integral Associates, giving the company access to more than half a dozen retail locations in Nevada, including the only location on the Las Vegas Strip. The tourist-dependent Silver State is expected to lead the country to cannabis spending per capita. Inhabitant in the middle of the decade.

Finally Green Thumb generates about two-thirds of its revenue from derivatives (eg foods, beverages, vapes, topicals and concentrates). Derivatives offer significantly higher margins than dried cannabis flower, which is a big reason why Green Thumb is turning the corner to profitability ahead of many of its peers.

An engineer inserting a hard disk into a data center server tower.

Image source: Getty Images.

Quickly

One final stock that can make investors rich is the edge cloud provider Quickly (NYSE: FSLY).

Similar to Pinterest, Fastly is a company that has benefited from the COVID-19 pandemic. With companies pushing online and into the cloud, it is seen traffic on its network increase. Fastly is responsible for fast and secure acceleration of content delivery to end users.

Interestingly, it has not always been smooth sailing for the company. In October, Fastly’s third-quarter sales update shook Wall Street. The company modestly lowered its forecast after ByteDance, a parent of TikTok, drew most of its traffic from Fastly’s network. In the first half of 2020, TikTok Fastlys was the leading revenue generator (approximately 12% of total sales).

However, when Fastly reported operating results for the third quarter, you would hardly know that TikTok’s traffic was significantly reduced. Total sales increased 42% compared to the previous year, and more importantly we saw one dollar-based net expansion of 147%. When it comes to layman, that means the company’s existing customers spent 47% more in the September quarter than they did the previous year. Fast has no problem picking up new clients and scaling up right next to its fast-growing clientele.

As online traffic is expected to grow well by the end of the pandemic, Fastly has a real chance of tripling its sales over the next four years.

This article represents the author’s opinion, that may disagree with the “official” recommendation position for a Motley Fool premium advisory service. We are motley! Questioning an investment dissertation – even one of our own – helps all of us think critically about investing and make decisions that help us become smarter, happier and richer.

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