The past 11 months have been challenging for Americans, as well as the investing community. The unprecedented coronavirus disease 2019 (COVID-19) pandemic has claimed 400,000 lives in the U.S. and caused the stock market to set multiple records for volatility in 2020.
However, a new year brings new opportunity. The rollout of COVID-19 vaccines, coupled with ongoing dovish monetary policy and aggressive fiscal stimulus, could be the spark that continues to fuel a young bull market. Though investing is never a straight line from Point A to Point B, long-term investors eventually reach the latter and come out well ahead from where they began.
If you have, say, $4,000 that you can put to work in the market right now, which won't be needed to cover emergencies or pay bills, you have more-than-enough money to buy the following four game-changing stocks in 2021.
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Vertex Pharmaceuticals
Few companies in the drug-development space have offered game-changing potential for their patients quite like Vertex Pharmaceuticals (VRTX 0.02%). While all eyes are on COVID-19 vaccine stocks, Vertex is simply dominating the treatment landscape for cystic fibrosis (CF) -- a genetic disease characterized by thick mucus production that can obscure the lungs and pancreas. Although CF doesn't have a cure, Vertex has brought to market a number of gene-based treatments that are improving lung function and quality of life for CF patients.
The company's latest approved treatment is Trikafta. After breezing through late-stage trials, this three-drug combination therapy was approved five months ahead of schedule by the U.S. Food and Drug Administration. Trikafta achieved blockbuster status ($1 billion or more in annual sales) faster than almost any other drug in history. Wall Street has Vertex's latest treatment on pace for $6 billion in peak annual sales, but this figure may prove conservative.
With Vertex, investors are also getting a company with a half-dozen other non-CF treatments in the works. This includes phase 1/2 studies for CTX001 as a treatment for sickle cell disease and beta thalassemia, and VX-864 for alpha-1 antitrypsin deficiency. Given Vertex's history of drug-development success, it's a screaming bargain in the healthcare space.
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Lovesac
The words "game-changing" and "furniture company" probably don't belong in the same sentence. Then again, small-cap Lovesac (LOVE -0.47%) isn't your run-of-the-mill furniture company.
Lovesac builds modular furniture that speaks to the millennial generation. Its sactionals -- its top-selling product (about 80% of total sales) -- can be rearranged to fit most livable spaces, and there are more than 250 covers to choose from. For you ESG investing fans, the yarn used to make Lovesac's sactionals is entirely made from 100% recycled plastic bottles. It's eco-friendly furniture that speaks to consumers who want choice and change.
What's been most impressive about Lovesac is the way it's navigated the COVID-19 crisis. Whereas most furniture companies have physical showrooms that have been adversely affected by coronavirus closures, Lovesac has predominantly pivoted to an online platform. While it's still looking to add showroom partners (ahem, Best Buy), shifting about two-thirds of its sales online during the pandemic has improved its already low overhead and pushed the company into profitability about two years ahead of schedule.
Lovesac's unique operating approach and abundant choices should lead to a doubling in annual sales within the next four years.
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GrowGeneration
Marijuana stocks are blazing-hot, once again. However, the biggest upside might just be found in the ancillary companies that help proliferate growth in the cannabis industry. That's why GrowGeneration (GRWG 6.57%) is a game changer worth buying.
GrowGeneration operates retail hydroponic and organic gardening stores throughout the United States. As of the end of 2020, it had 39 stores in 11 states, with plans to increase its aggregate store count to 55 stores in 15 states by the end of the current year. Considering that U.S. pot sales could triple between 2019 and 2025, growers will be looking at ways to improve yield and ensure that pests don't destroy their crops. In short, GrowGen isn't going to see a slowdown in business anytime soon.
GrowGeneration is also a company that doesn't shy away from inorganic growth. It's made nearly a dozen acquisitions since 2014, including the buyout of The GrowBiz, which increased its West Coast store count by five locations. While acquisitions have certainly helped GrowGen deliver year-over-year sales growth ranging between 123% and 199% over the past eight quarters, same-store sales growth (i.e., year-over-year sales growth for existing locations) tallied a scorching 63% in 2020 from the previous year.
GrowGen should be profitable in 2021, is looking to continue its rapid retail expansion, and might produce sales growth in excess of 80%. Those are figures investors can get behind.
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Sea Limited
Finally, we can't talk game-changing investments without bringing Singapore's Sea Limited (SE -3.02%) into the conversation. This is a company that more than doubled its sales in 2020, will probably double its full-year revenue again by 2022, and could do so once more by 2025.
Sea is a company that has three high-growth operating segments, each with a key purpose. Digital entertainment is currently the company's primary generator of earnings before interest, taxes, depreciation, and amortization (EBITDA). In the third quarter, gaming-arena users were up 78% from the previous year, but paying quarterly users jumped nearly 124%. With consumers stuck in their homes due to the pandemic, the company's gaming ventures have proven quite lucrative.
Secondly, there's the company's burgeoning e-commerce platform Shopee, which, for the moment, is primarily focused on Southeastern Asia. Over the long run, Shopee has Amazonor MercadoLibre potential and is the company's largest growth driver. Gross orders and gross merchandise value both more than doubled in Q3 2020 from the prior-year period.
Third, Sea offers digital financial services. The company ended September with nearly 18 million people paying for its mobile-wallet services. Considering how underbanked some parts of Southeastern Asia are, this expansion into fintech could be far more profitable than Wall Street is giving the company credit for.
Look for Sea Limited to continue its winning ways in 2021and beyond.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Sean Williams owns shares of Amazon and The Lovesac Company. The Motley Fool owns shares of and recommends Amazon, GrowGeneration, MercadoLibre, and Sea Limited. The Motley Fool recommends Vertex Pharmaceuticals and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool has a disclosure policy.
