One of the best and the worst things about the market is that it’s always changing. Sometimes, the change is predictable, and investors can plan accordingly, moving their assets around to take maximum advantage of the market dynamics (or absorbing the financial blow with minimal damage).
Sometimes, the market is too unpredictable. The long-term investors, if they’ve invested in good companies and thriving businesses with promising futures, benefit in both situations. If they can predict the market, they can adjust their portfolio accordingly, but if they can’t, they don’t get panicked about the state of their holdings and don’t sell low to minimize their losses.
The simple confidence that your holdings will eventually recover can prevent you from making foolish investment decisions. But if you seek short-term growth, you need to look for assets/stocks with very specific characteristics and traits.
And some market conditions also need to change in your favour before you can experience powerful short-term growth, like your stocks growing 100% before the year ends.
Mississauga-based Cargojet (TSX:CJT) is Canada’s premier cargo airline. It was one of the most coveted growth stocks up until a few months ago, but its recent fall from the top, namely, its 2021 peak, is making investors a bit worried. The stock that grew over 600% in the last five years (including its post-crash spike) is currently trading at a 28% discount to its November 2020 peak.
The revenue has also taken a dip, though not as hard as the stock price. It spiked in 2020 when the demand for medical supplies rose exponentially, and the e-commerce boom gained even more traction.
But in the first quarter of 2021, after the economy partially recovered, the revenues dipped a bit. And if that was the primary reason for the dip in stock, it might change after promising second-quarter results.
With a fleet of 28 planes, reliable delivery times, and a deal with Amazon that Cargojet secured in April, the airline is still a major cog in the country’s “e-commerce” machinery. And once the stock takes to the skies again, it can easily grow your capital by 100%.
A marijuana stock
The “expectation” that Cronos Group (TSX:CRON)(NASDAQ:CRON) will grow 100% in 2021 is tied to cannabis legalization in the US. Once that ship sails, both Canadian and U.S. marijuana stocks are likely to go through the roof. Whether they will keep growing for a long time or stay at their peak valuation for the foreseeable future is difficult to say.
If the “sentiment” in the investor community would be anything like what it was in Canada, the hype might be short-lived, and you might consider cashing out once you’ve made a reasonable profit.
Cronos is an innovative cannabinoid company with a decent global reach and six well-known brands under its banner, three of which are available in the U.S., making Cronos ideally poised for growth if the U.S. federal government legalizes Cannabis.
The stock has already been through a 100% growth phase within the year (from the beginning of the year to its February peak), and if the right trigger is pulled, it might grow more than 100% in 2021.
Not every stock is worth holding on to for a long time. Some stocks are ideal for short-term growth spurts, but getting the timing right is the key. If you don’t open a position at the right time and, more importantly, if you don’t exit it near or at the peak, your asset might become a liability.
Keep an eye on the bullish run of your short-term asset and the bull market in general to make a timely exit.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends CARGOJET INC.