With the stock market near record highs, it can be hard for investors to know where to turn. The stocks that are on sale lately are stodgy dividend payers. Those are great for income and reliability, but they’re not likely to lead to life-changing fortunes.
On the other hand, the big and popular tech stocks, such as the FAANG names, are already widely-known and highly-priced. Fortunes are rarely made following the crowd, either.
Taking that into account, here are four potential multibagger stocks that are more off the beaten path. They have smaller market caps, are earlier in their growth stages, and haven’t become consensus “must-own” stocks, yet. These are riskier names, and some of them could end up failing.
That’s the risk that comes with hunting for multibagger stocks. That said, here are four names to put on your watch list that could triple or more in coming years.
Potential Multibagger Stocks For 2018 And Beyond: JD.com (JD)
Source: Daniel Cukier via Flickr
The ongoing tariff drama between the United States and China continues to take a heavy toll on Chinese stocks. On Friday, a series of tariffs went into effect, showing that all the noise is starting to turn into a more tangible risk.
Not surprisingly, Chinese stocks, as measured by the Xtrackers Harvest CSI 300 China A ETF (NYSEARCA:ASHR) are having a rough 2018. The ASHR ETF is down 19% year to date and almost 30% from its January peak.
With that selloff comes opportunity. Leading Chinese online retailer JD.com (NASDAQ:JD) has sold off again. While many investors think of Alibaba (NYSE:BABA) as the Amazon (NASDAQ:AMZN) of China, it’s much closer to eBay (NASDAQ:EBAY).
eBay isn’t a terrible company by any means. But, Amazon won because it controlled the whole purchasing experience, whereas eBay, as a marketplace for third-party vendors, has had much less success in becoming truly dominant.
JD.com, as the leader in authentic high-quality goods, has the edge against Alibaba in selling to the emerging wealthier Chinese consumer. JD’s dramatic lead in logistics also positions it to win against Alibaba in convenience and reliability.
Ultimately, China is large enough for two large online retailers. And both companies are growing aggressively outside of their home market. However, given Alibaba’s way larger market cap than JD, JD stock is the obvious compelling growth play here.
Selling at less than 1x price/sales, that ratio could easily triple without looking too expensive. And, with JD growing sales more than 30%/year, there is plenty of upside coming on that front as well.
Potential Multibagger Stocks For 2018 And Beyond: Despegar.com (DESP)
Despegar.com (NYSE:DESP) is Latin America’s leading online travel agency. Despegar is Spanish for “take off,” and while DESP stock has had a bumpy run since its IPO, it should head upward in coming quarters.
The company dominates the travel market in Brazil, Argentina, and Uruguay, and is building out its presence in other attractive markets including Colombia and Mexico. Unlike many recent tech IPOs and competitors in the online travel space, Despegar is already solidly profitable.
It is trading at 31x trailing and 21x forward earnings. Combined with a more-than-20% annual revenue growth rate, Despegar is a cheap stock with plenty of upside.
Shares have fallen from an IPO in the high-$20s and a subsequent peak around $36 to just $20 now. It’s been a victim of horrible economic and political news out of Argentina and Brazil. But, as a diversified player with revenue from across Latin America, it will continue to grow, regardless of the stumbles any one economy may face.
Stocks in this space tend to trade for at least 4x sales, compared to DESP stock at 2.5x currently. Throw in a 20% growth rate, and Despegar stock could double fairly quickly.
Potential Multibagger Stocks For 2018 And Beyond: Carbon Black (CBLK)
Like Despegar.com, Carbon Black (NASDAQ:CBLK) is a recent IPO that launched in the mid-$20s, ran up to $35, and has landed back in the low $20s with a thud. Carbon Black is a U.S.-based business in the security software space, however.
It specializes in analyzing and encrypting data for clients using machine learning algorithms. And, like the SAAS stocks as a whole, CBLK stock has slumped in recent trading sessions.
With that comes a nice chance to buy back below the IPO price. The company is well-positioned to benefit in the growth in cloud security services, and partnerships with Dell and IBM (NYSE:IBM) give it access to a lot of potential new customers. The company increased sales 39% last year, on top of 65% growth in 2016, showing the multibagger stock potential here.
Perhaps most importantly, almost 90% of Carbon Black’s revenue is recurring. This means that once Carbon Black acquires a customer, it tends to hold onto them for a long time. While Carbon Black is still losing money, its margins are improving as revenue grows.
Once it hits the crossover point and becomes profitable, shares could soar. Wall Street is enamored of this sort of business selling security services on a subscription basis, and the revenue growth rate certainly impresses as well.
Potential Multibagger Stocks for 2018 and Beyond: Uxin (UXIN)
Source: Maher Najm via Flickr
Considering the selloff in Chinese stocks discussed above, JD.com isn’t the only interesting potential multibagger stock from that country at the moment. That brings us to Uxin Ltd (NASDAQ:UXIN).
Uxin is another recent IPO. Its IPO priced at $9/share, and has slumped into the 7s thanks to the concerns around Chinese companies. That sets up a chance to buy below the offer price. What’s the reason to buy Uxin?
Simply put, Uxin is China’s leading online used car marketplace. The company has more than 40% market share in its space, and reported that its website facilitated 68% more vehicle transactions in 2017 as compared to 2016.
The company also hails with a powerful investor/backer, leading Chinese search engine company Baidu Inc (NASDAQ:BIDU). They appear to derive a lot of free search engine traffic, which helps keep costs down. That said, Uxin is still quite unprofitable at this point.
However, revenue more than doubled in 2017, and gross profit exploded. If growth continues at anything close to its current rate, Uxin stock should trade multiples above its current $7.50 price in coming years.
At the time of this writing, the author owned shares of JD, IBM and DESP.
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