Before we go any further, you need to realize that these “stocks to buy” (and I put the term in quotes for a reason) represent incredible risks. Yeah, yeah, I know Warren Buffett said to be scared when other people are greedy, and Greedy when others are fearful. I’m not entirely sure he realized that people would quote that excerpt for all eternity.
Either way, the idea behind these stocks to buy presents a simple framework. These market ideas are down significantly – extremely – on a yearly basis. However, big losses could equate to big gains, especially if the underlying stocks revert to prior plateaus. The compelling angle is that the losses are so great that even a higher partial return can produce extraordinary gains.
The Federal Reserve is driving the intense volatility in these contrarian stocks to buy. With the central bank committed to hawkish monetary policy, borrowing costs soared amid shrinking money supply. This is problematic for many risk ideas in the market. At the same time, it also presents an opportunity for the risk-tolerant player.
If that’s you, here are stocks to buy if you’re feeling greedy (and maybe a little reckless).
|IIRP||Innovative industrial properties||$90.91|
Once a hot name amid Covid-19, online car retailer carvana (NYSE:CVNA) now feels the heat. Around the time the mysterious SARS-CoV-2 virus was floating around, several people from New York City and likely other East Coast metropolitan residents bought cars for the first time. It’s an understandable story. No one wanted to take public transport back then.
Today, the situation has changed radically. For one thing, Covid-19 fears fade. As a result, the incentive to purchase vehicles from Carvana (and incur an above-average transaction cost for the convenient door-to-door delivery service) has diminished. Second, soaring inflation in the first half of 2022 hurt consumer confidence. While that narrative may now swing the other way, the trajectory may take time to materialize.
However, for the avid hunters of stocks to buy, Carvana has a little trick up its sleeve. Speak the wall street journalthe average age of cars on US roads hit a record 12.2 years. So, it might be better to buy a new (or brand new) vehicle than fix a money pit.
Personally, I think you either have to have nerves of steel or be completely reckless to bet big on LendingTree (NASDAQ:TREE). Let’s see, as of the close of trading on October 12, TREE stock has lost over 82% of its equity value since the start of the year. Alright, I’m going with the last review. It is sheer recklessness to buy shares of LendingTree.
Basically the problem, as I said earlier, is the Federal Reserve. Due to the unprecedented support Washington ordered to essentially save the US economy amid the outbreak of Covid-19, the M2, or money stock, dramatically expanded. Now the Fed has the unenviable task of unwinding said expansion. This is going to be deflationary for the money supply. Plus, it’s going to be deflationary for consumer sentiment.
Yes, the profitability of lenders will increase but who will borrow? It’s the Catch-22 here.
However, I suppose it could be argued that several astute consumers still exist on the sidelines. With deflationary forces driving down the price of various assets, products such as mortgage services could rise. It’s a terribly risky bet among stocks to buy but it’s there for you if you want it.
Innovative Industrial Properties (IIPR)
Arguably one of the safest ideas in the “botanical” (marijuana) space, Innovative industrial properties (NYSE:IIRP) does not supply botanical products itself. Instead, the company is structured as a real estate investment trust. Additionally, Innovative Industrial is focused on providing real estate capital to those engaged in the cannabis business.
Since Innovative simply provided controversial companies with the means to conduct their business, the REIT managed to avoid the reputational issues associated with pure botanical specialists. This is the positive side of the story. Unfortunately, throughout this year, the narrative did not go well. The IIPR lost nearly 63% of the stock’s value as consumer sentiment deteriorated in discretionary buying.
Still, I guess the IIPR bullish frame is gaining relevance. Some weak medical evidence suggests that some green plants may provide specific mental health benefits. With a looming global recession likely to trigger serious mental health crises if it materializes, the IIPR represents a cynical hold among stocks to buy.
One of the best performing stocks to buy during the initial phase of the Covid-19 crisis, Shopify (NYSE:STORE) previously enjoyed a hostage hearing. At the start of the pandemic, government agencies mandated shelter-in-place orders. Even when they lifted the quarantine, many jurisdictions clamped down on non-essential activities. Therefore, there was nothing else to do but perform retail therapy.
Unfortunately, soaring inflation has hurt consumer confidence. Moreover, with gasoline prices hit historic highs, buyers felt the pain. In response, people redirected their purchases to the essentials, leaving the crumbs to the discretionary sector. Of course, that didn’t help Shopify and its merchants. As of this writing, SHOP stock has plunged 81% since the start of the year.
Perhaps the opposite case here is that investors as a whole will recognize the undervalued nature of SHOP stocks. In effect, Gurufocus rates Shopify’s business as “significantly undervalued.” The key metric to watch here is the balance sheet, specifically the equity-to-assets ratio of 0.81. By comparison, the industry median is 0.58.
Beyond Meat (BYND)
One of the most popular stocks to buy when it made its public market debut, a plant-based meat company Beyond meat (NASDAQ:BYND) played in important demographic trends. Specifically, younger generations focus heavily on issues related to sustainability. Therefore, Beyond’s specialization in fake meat – which I have to say is quite tasty – has brought a lot of interest to the table.
Unfortunately, that’s about the only thing it did in the long run. Since the start of this year, BYND stock has fallen more than 78%. By data of Google Finance, BYND’s lifetime return is a loss of 79%. At the same time, I guess you can say Beyond is sitting on a killer deal. Remind that BYND’s original offering price was $25.
Beyond that (no pun intended), investors will face a tough road to the upside. It is possible that over time, BYND could be a compelling argument among stocks to buy. For instance, millennials gravitate towards fake meat. But this narrative needs to materialize as soon as possible.
While suffering significant losses at this time, Fiverr (NYSE:RVRF) makes an intriguing case for contrarian stocks to buy. A global online marketplace for freelance services, Fiverr connects professional talent with companies looking for specific jobs to fill. Therefore, Fiverr symbolizes a pure-play marketplace idea for the booming gig economy.
According to experts in the field, the gig economy could represent a gross volume of 455.2 billion dollars by 2023. In addition, contrarian stock investors to buy should consider the back to office debate. As expected, employees do not want to return to their physical positions. Moreover, 40% of them are ready to start their own business. This translates into a possibly greater expansion of the gig economy.
However, so far Wall Street is not feeling the FVRR. The stock has fallen 73.5% since the start of this year. Even in the past five days, it’s skyrocketed 10%. Therefore, investors will take substantial risks with Fiverr. Still, this gig-saving angle could be appealing.
Hive Blockchain (HIVE)
interest in Hive Blockchain (NASDAQ:HIVE) with respect to contrarian stocks to buy is an obvious case. At the end of 2020, HIVE stock soared as the underlying cryptocurrency sector took off. HIVE continued to make significant gains after a lull through November 2021. Of course, this period coincided with the peak of the crypto market. From there, HIVE suffered from severe red ink.
How serious is it? We are talking about a loss of more than 75% since the January opening. Additionally, what makes HIVE incredibly risky at this point is the sheer risky nature of the underlying company. As expected, the company ranks poorly in terms of profitability. It’s all about growth here, which is good during bull cycles. But when cryptos turn bearish, the market can be quite depressing.
However, the opposite case for stocks to buy is that eventually cryptos may make a comeback. Indeed, anything and everything can happen in this space. Therefore, it wouldn’t be the craziest thing to see HIVE jump on a blockchain resurgence. I wouldn’t hold my breath.
As of the date of publication, Josh Enomoto had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.