In February, CNBC reported that a $1,000 investment in Monster Beverage (NASDAQ:MNST) on Feb. 14, 1994, would have been worth approximately $2 million on its 30-year anniversary, a 200,000% return. It’s these kinds of cheap stocks that can make you rich in the long run if you make the right play at the right time.
In Monster’s case, co-CEOs Rodney Sacks and Hilton Schlosberg were the right duo to build the energy drink empire. “‘Some of it is clearly right place, right time,’ said Stifel consumer and retail managing director Mark Astrachan. “I think there’s an element to it as well of being really good at what you can do, because you can’t be as lucky as they’ve been for as long as they’ve been, without being really good at running a business,’” CNBC’s Natalie Rice wrote in February.
So what other companies have these types of visionary leaders with the confidence and patience to run with an idea for 20 or 30 years until it becomes a massive success? Here are my three ideas.
DLocal (DLO)
DLocal (NASDAQ:DLO) is a Uruguayan financial technology (fintech) company. It was founded in 2016 as a disruptor of online payments in emerging markets. The company’s share price has gotten hammered in 2024, down 53% year-to-date (YTD).
It’s been hit because its gross profit margins are slipping. Although its total payment volume (TPV) was 49% higher in Q1 2024 to $5.3 billion, its gross profit margin fell by 11% to 34% so its gross profit only increased by $1.2 million year-over-year (YOY).
As the Motley Fool’s John Quast wrote in May, the company’s top 10 customers accounted for 60% of its revenue with one representing more than 10%. One of these 10 got a reduced take rate agreement during the quarter which had to do with the lower gross profit margin.
The company’s revenue in its Egypt market increased 11-fold in the first quarter to $39 million, which is the same amount as its total revenue for Africa and Asia in Q1 2023. So it appears that the company is no longer reliant on Latin America for all of its revenue. Trading at just over $8 at the time of writing, DLO has potential for investors looking for cheap stocks.
HighPeak Energy (HPK)
HighPeak Energy (NASDAQ:HPK) owns over 100,000 acres of land in the Midland Basin in Texas. It has some of the best operating margins of its Permian peers. Over the past five years, its shares have returned 110%, more than double Exxon Mobil (NYSE:XOM).
Texas oil and gas veteran Jack Hightower runs HighPeak. He took the company public in August 2020 by merging with Pure Acquisition Corp., an energy-focused special purpose acquisition company (SPAC) Hightower created in November 2017, raising $414 million in its April 2018 initial public offering (IPO).
The company reported Q1 2024 results in May that included operating revenue of $287.8 million, 29% higher than a year earlier, with operating income of $103 million, 16% higher than Q1 2023. Discretionary cash flow was $195.7 million during the quarter, 27% higher YOY. It produced 49,729 barrels of oil equivalent per day (Boe/d) during the quarter, up from 37,222 a year earlier.
From a valuation perspective, its enterprise value of $2.98 billion is 3.51x its EBITDA, less than half Exxon Mobil’s at 7.42x. Trading at just under $16, HPK is another great choice for cheap stocks with potential.
Iris Energy (IREN)
Iris Energy (NASDAQ:IREN) took a tumble on July 11 after short seller Culper Research called the Bitcoin (BTC-USD) miner’s plans for artificial intelligence (AI) “contrived nonsense,” Bloomberg reported.
Culper believes that Iris’s data centers can’t support the power high-performance computing requires, suggesting that it’s making this pivot to take the spotlight off the fact Bitcoin mining no longer is very profitable since the halving earlier this year.
Coincidentally, Bernstein initiated coverage of IREN stock on July 9 with an “outperform” rating, suggesting that miners like Iris Energy are attractive partners for companies looking to build AI data centers because of their available electric power.
“Bitcoin data centers are ideal for retrofit due to high power density racks, cooling infrastructure and general data center operating capabilities,” Investor’s Business Daily reported Bernstein’s comments in a note to clients.
Bernstein added it believes 15% of Iris Energy’s power capacity will be reallocated for AI data centers and co-hosting situations. Bernstein has a $26 target price, more than double where it’s currently trading.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
