Thanks in part to the rise of trading apps like Robinhood and the advent of fee-free stock trading, millions of people are getting into investing for the first time.
But even though these new tools can make the tasks of buying and selling shares simple, the turbulent waters of Wall Street can be hard to navigate. Stocks like GameStop can run hot one minute and ice cold the next, leaving traders who show up late to the party with big losses.
That’s why we favor long-term, buy-and-hold investing at The Motley Fool. It’s the best way for retail investors to beat the market, and it allows us to focus on companies that have the best potential as businesses. That’s why three of our Foolish contributors recommend that new investors just beginning to build their portfolios should consider buying shares of Virgin Galactic (NYSE:SPCE), QuantumScape (NYSE:QS), and Brookfield Renewable Partners (NYSE:BEP).
The future of space travel
Travis Hoium (Virgin Galactic): Today, space travel remains a science fiction concept that seems out of reach to the vast majority of people. But a decade from now, commercial trips into orbit may be a regular occurrence with Virgin Galactic carrying dozens of people beyond the planet’s atmosphere every day.
The next step on Virgin Galactic’s path to that future will be to complete the testing of its first commercial spacecraft. That should happen in the next few months, and fairly soon after that, it will begin taking customers — who are paying around $250,000 each for their tickets — on short flights into orbit. From there, the company plans to grow its fleet of spacecraft, expand to new locations, and reduce its costs to bring space flight within reach for a larger number of people.
In addition, the company is pursuing another long-term goal: a Mach 3 commercial aircraft that would fly at high altitudes. If feasible, this could prove an attractive option for wealthy travelers compared to the expensive and slow private jet options currently available.
Management thinks there’s $1 billion in annual revenue potential from each spaceport, and if Virgin Galactic reaches anywhere near its potential, the company could make space flight commonplace. That would be truly revolutionary, and for beginning investors, it provides the opportunity to follow a disruptive company with incredible growth potential.
Howard Smith (QuantumScape): A great way to start a lifetime of investing is by building a foundation of broad-market index or mutual funds through 401(k) contributions or disciplined monthly contributions. But once a new investor has established that foundation, it’s natural that they might want to start branching out and picking individual stocks.
Younger investors with long time horizons can afford to make some speculative picks. The renewable energy sector offers a number of those, including QuantumScape, a company that could change the future of vehicle electrification.
QuantumScape’s stock price rocketed up by 400% when it began trading publicly late last year, but has since has fallen back to Earth. This gives investors a better entry point to open a position in the company, which is developing solid-state battery technology for electric vehicles. QuantumScape points to its test data showing improvements in battery performance, energy retention, low-temperature viability, and safety. If it can successfully commercialize its technology, it will be able to offer EV batteries that charge faster, provide longer range and better performance, and have longer life cycles than the lithium-ion batteries currently being used.
QuantumScape is notably backed by both Volkswagen and Bill Gates through his clean-energy fund, Breakthrough Energy. The German automaker also provides a market in waiting for when the batteries are available commercially. There is still much work ahead, though, and the company believes it won’t be able to begin volume production until 2024.
For a new investor with an appetite for some speculative investments, this stock makes sense. The company is currently valued at about $16 billion, and there’s no guarantee it will succeed. But if its technology delivers on its promise, it could give a nice charge to your portfolio.
The best way to make huge money in green tech
Jason Hall (Brookfield Renewable): Investors — traders, really — have put billions and billions of dollars into start-ups and speculative stocks that claim to be part of the renewable energy future. And no doubt about it, renewable energy is a huge growth industry that offers the potential for investors to make a lot of money.
But the other side of the coin is the reality that many — maybe even most — of those young companies will fail to deliver profits for their investors. Heck, a lot of them won’t even survive, and their shareholders will get completely wiped out.
Here’s the good news. You don’t have to invest in only risky companies to make money. There are a handful of incredibly solid companies that can help you grow your wealth while also helping balance out the volatility and risk in a high-growth portfolio.
Brookfield Renewable is perfect for that, since it produces steady cash flows from the massive collection of renewable energy facilities it owns and operates, selling the power to utilities on long-term contracts and rewarding investors with a solid dividend. But it’s not a stodgy, low-growth business by any means. Since going public on the NYSE in June 2013, its stock price has increased by 209%. But the true power of this investment only becomes clear when you look at its total returns. After adding in its impressive dividend payouts, shareholders are up by a massive 426%.
It’s actually been a public company for longer, trading on the Toronto Stock Exchange since November 2011. And if one goes go back to its first day as a public company, its total returns are 682%. That’s a market-crushing performance, even during what has been an incredible bull market.
If you’re a novice investor looking for stocks that can provide you with years of strong growth while also letting you sleep well at night, Brookfield Renewable should be on your list.
Better than trading
These three companies run the gamut from high-growth stocks to value-oriented stocks, and any or all would be good additions to a new investor’s portfolio. Such companies are also far better bets than trying to find the next rocket stock. Many of those overheated equities wind up falling as fast as they rose, which could leave you holding the bag when everyone else jumps off the bandwagon.