Diversification is an important part of any sound investment strategy.
In fact, it’s critical that a portfolio be well-balanced to help minimize risk and maximize opportunity. After all, you never want to put all your eggs in one basket. Plus, not only can diversification reduce your exposure to a single egg, stock, or industry, it can help reduce volatility, and reduce your risk of a potentially bad outcome.
One way to do that is by investing in stocks in several different industries, such as artificial intelligence and technology, the green energy boom, electric vehicles, oil and gas, healthcare, and even biotech. Another way is to invest in different categories of stocks, including large cap stocks, dividend stocks, growth stocks, small cap stocks and value stocks.
It’s also a good idea to have a few lower-priced stocks in the mix, too.
Granted, some lower-priced stocks aren’t worth the hassle. Many will fail to live up to investor expectations. However, there are also hidden gems with long-term potential. Remember, even Apple, Microsoft, and Advanced Micro Devices were once low-priced stocks.
Here are three more we believe have solid potential, as well.
Editas Medicine (EDIT)
Look at gene editing stocks, like Editas Medicine (EDIT), for example.
By “editing genes,” we have the ability to alter, remove, and even add a DNA sequence to help treat countless disorders we never thought treatable.
Right now, there are about 7,000 diseases caused by genetic disorders, which occur when a mutation affects your genes, or when you have the wrong amount of genetic material, as noted by the Cleveland Clinic.
Plus, according to Interesting Engineering, “Thankfully, the growing world of genome editing could be the ‘spell-checker’ needed to detect and eventually fix these.” That “spell-checker” could very well help treat cardiovascular diseases, cancer, and neurogenerative issues, such as Alzheimer’s, and Parkinson’s. It may even help with sickle cell anemia, lymphoblastic leukemia, lung cancer, multiple myeloma, Beta thalassemia, etc.
One of the potential standouts with gene-editing is Editas Medicine (EDIT) – whose EDIT 301 is already seeing positive initial safety and efficacy data for sickle cell disease (SCD) and transfusion-dependent beta thalassemia (TDT).
With Sickle Cell Disease (SCD), for example, the company presented positive initial clinical safety and efficacy data from trials in June. It’s now on track to dose 20 SCD patients in trials by year end. With Transfusion-dependent Beta Thalassemia (TDT), the company already presented positive initial clinical safety and efficacy data from the first patient treated in June. The company is now on track to post additional clinical data by the end of this year.
Further positive data from those studies could have a substantial impact on this sub-$10 stock.
Recursion Pharmaceuticals (RXRX)
Recursion Pharmaceuticals (RXRX) is a clinical stage TechBio company that’s decoding biology to industrialize drug discovery with artificial intelligence and machine learning.
Helping, tech powerhouse, Nvidia just invested $50 million in the company “to accelerate development of its AI foundation models for biology and chemistry, which, in collaboration with NVIDIA, it intends to optimize and distribute to biotechnology companies using NVIDIA cloud services,” as noted in a company press release.
That’s substantial news.
In addition, Recursion will use Nvidia technology to help create AI models and software to discover new drugs. Plus, it may help with the five human trials Recursion is conducting, including a mid-stage trial to treat cerebral cavernous malformations. Even better, Recursion is working on treatments for neurofibromatosis, familial adenomatous polyposis, mutant cancers, ovarian cancers and cancer immunotherapy.
Here’s what makes AI and drug development even more exciting.
Traditional new drug development has a fail rate of 90%, according to the National Institutes of Health. With AI and machine learning, failure rates could drop, and the design of drugs could become far easier. Plus, with these tools, we may know exactly which molecules should be used to create game-changing treatments for diseases we never thought were treatable.
In fact, according to Pfizer, “AI could assist pharma companies in getting medicines to market faster. AI today not only does flashy gene-sequencing work, it’s being trained to predict drug efficacy and side effects, and to manage the vast amounts of documents and data that support any pharmaceutical product.”
Switching gears, keep an eye on ChargePoint (CHPT).
At less than $10 a share, the stock is inexpensive with plenty of catalysts. For one, automakers are racing to build a massive electric vehicle charging network. In fact, according to CBS News, automakers say the new charging network will nearly double the number of quick-charging plugs in Canada and the U.S. Plus, the Biden Administration wants 67% of all new auto sales to be electric by 2032, which will only increase charging station demand.
Also, according to research firm Wood Mackenzie, “The number of electric vehicle (EV) charging ports in the U.S. is estimated to increase four times from current levels to 18M by 2027,” as noted by Seeking Alpha.
“Tesla and ChargePoint currently dominate the charging ports market, with the former claiming a 61% market share of DCFC ports in the U.S. Meanwhile, CHPT leads with a 46% market share of level 2 ports, which Wood Mackenzie defines as EV chargers with a charge rate between 3 kW and 19 kW of AC power,” they added.
We also have to consider that recent weakness may be a strong opportunity with CHPT.
Analysts at Gabelli Funds has also defended the stock following its earnings-induced pullback. The firm noted that CHPT’s Q1 was positive with revenue coming in at the higher-end of previous guidance. Plus, the company noted it expects to cut its EBITDA loss from Q1 by two-thirds by Q4 of this year. “The negative reaction to the earnings report is likely due to a lower-than-expected 2Q guide, which we think is overblown,” they added.
“Gabelli thinks that as CHPT continues its path to inflect cash flow positive in 2024 the stock will perform well. Of note, Gabelli has a $14 2024 private market value, which represents almost 50% upside from the current price,” added Seeking Alpha.