Here's a little investing secret: If you want to win a stock-picking competition in 2021, then pick a low-price, small-cap stock.
Well-known big-cap and mega-cap stocks like Apple (AAPL) - Get Report or Amazon (AMZN) - Get Report may perform well, but there is no way they could increase by multiples as a strong, speculative small stock could.
That's why I'm offering you my views on five little names that I believe have the potential to increase multi-fold in the year ahead. They all have interesting stories. But know that their success will depend on how well management performs -- and that they have the potential to be complete busts. If you want to earn big returns, however, then you must take bigger risks. The goal here is to hit at least one home run, which could more than pay for a few duds.
Taking Investing to a New 'Dimension'
Nano Dimension (NNDM) - Get Report is an Israeli-based company that has developed a 3-D printing technology that is used to fabricate multi-material and multi-layer printed circuit boards (PCBs). The company will generate ongoing revenue from the proprietary dielectric ink used in the process. Its DragonFly LDM product has been purchased by about 60 customers so far. The company reported on Dec. 4 that 10 customers have upgraded to the LDM in 2020 from older machines.
NNDM has been aggressively raising capital with several secondary offerings, but underlying support has remained quite strong in large part due to the ARK Autonomous Technology & Robotics exchange-traded fund (ARKQ) - Get Report, which held 3,884,929 shares as of Dec. 11. ARK is known for its bullish view of Tesla (TSLA) - Get Report and has been one of the top-performing funds in 2020. It has added shares in the offerings done by NNDM.
NNDM is still in very early growth stages and has had some setbacks due to Covid-19. Sales are projected to grow to around $12 million in 2021 from $2 million to $3 million in 2020. The balance sheet is very strong after the secondary offerings
Xeris Pharma Has a Good Shot
Xeris Pharmaceuticals (XERS) - Get Report is a specialty company that develops a ready-to-use injectable drug system. The company’s lead product is the Gvoke HypoPen that allows an immediate injection for severe hypoglycemia, which is when diabetics have a sudden drop in blood sugar. Previously the only product available required mixing chemicals before the injection could be done. The key is that the formulation is "non-aqueous" and can be used for other drugs, as well.
Last week Xeris received news that the European Union Committee for Medicinal Products recommends Gvoke for the treatment of severe hypoglycemia of people with Diabetes mellitus. A final decision will be made in the first quarter of 2021 and the company should launch in Europe in the second half of the year.
The company has three other drugs in phase two studies and one in stage one. The market for severe of these is huge and Xeris has stated that it would be interested in partnerships that will help to cover the expenses of bringing these drugs to market.
Xeris already has a growing income stream from Gvoke. Revenues in the third quarter were $9.5 million vs. just $0.3 million in the same quarter last year. The revenue stream will continue to build, but the catalyst here is additional Food and Drug Administration approvals or a partnership for faster development of its product for large markets.
Something to 'Bragg' About
Bragg Gaming Group (OTCMKTS: BRGGF) is listed on the Canadian Exchange. It is a holding company for Oryx Gaming. Oryx provides content and software for the iGaming industry. This is a play on gambling infrastructure, rather than gambling itself. The company is a "one-stop-shop" for a turnkey platform that allows companies to manage and run their own online casino. The company offers content as well as infrastructure and currently has over 80 customers and has been growing rapidly in the U.S. during the Covid-19 crisis. One analyst is looking for revenue in 2020 to grow 65.5% in 2020 and an additional 22% in 2021.
BRGGF is very similar to Gan Ltd (GAN), which was redomiciled in May 2020 and was a hot name when it was relisted and started trading in the U.S. BRGGF is superior on almost all valuations metrics to BRGGF, but GAN trades at 15-times last quarter's annualized earnings, while Bragg trades at just 3.3 times.
The big catalyst here will be a listing on a U.S. exchange, which BRGGF management has indicated is a goal. Given the strong numbers and the appeal of the gaming sectors, this stock is well under the radar.
Clean Up With Pacific Ethanol
Pacific Ethanol (PEIX) - Get Report was on the verge of bankruptcy when the Covid crisis hit the world. The company’s legacy business was ethanol that was primarily used as a fuel additive. This is a low margin business and was in decline. But the production of ethanol can be converted to medical-grade alcohol that is used to make hand sanitizers and other key ingredients. PEIX has completely transformed its business and is now focused on the much higher margin specialty alcohol market.
PEIX is a value play at this point. A large amount of its production is already contracted for 2021 at firm prices and the current earnings per share estimate for 2021 is $1.33, which is a forward price-to-earnings of just 4.5. The company should be debt-free and produce good cash flow very quickly
Don't 'Cell' Gamida, Buy It
Gamida Cell (GMDA) - Get Report is a biotechnology company that is using cell therapy to address blood cancers and serious blood disorders. Preliminary data has been robust and the company has already indicated that it met three secondary endpoints.
The company expected to report a full peer-reviewed data set in the first half of 2021. It originally intended to apply for a biological license application (BLA) on a rolling basis, but the FDA is requesting details about its planned commercial manufacturing sites.
Dan Rosenblum, the biotechnology expert at SharkInvesting.com, tells me, “What is really exciting about GMDA is the update on Natural Killer Cell Therapy GDA-201. In an oral presentation at the recent American Society of Hematology (ASH) 62nd Annual Meeting, it was shown that GDA-201 was well tolerated and no dose-limiting toxicities were observed in Phase 1 clinical study. GDA-201 demonstrated significant clinical activity in patients with non-Hodgkin lymphoma, with 13 complete responses and one partial response observed in 19 patients, for a response rate of 74%. ... Basically, the Natural killer cell technology produced cures in three out of four lymphoma patients.”
The company is a long way from final approval in late 2021, but the innovation of cell therapy is already attracting attention and there should be updates on progress in the first half of 2021 to drive the stock. GMDA is currently the largest holding in the ARK Israel Innovative Technology ETF at 247,218 shares.
I will be actively trading these stocks as they develop, but I feel that they have longer-term potential in the year ahead that will help to provide good support.
DePorre writes a daily column for Real Money, TheStreet’s premium site for active traders. Click here to learn more and get great columns, commentary and trade ideas from Jim Cramer, Helene Meisler, Mark Sebastian, Paul Price, Doug Kass, and others.
At the time of publication, DePorre was long NNDM, XERS, BRGGF, PEIX, GMDA.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider these names to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.