The biggest headwind to massive wealth creation from equities is not lack of good businesses. It’s lack of patience to hold after a good idea has been discovered. Legendary investors have not created wealth overnight.
While trading and speculation can deliver healthy returns in quick time, millionaires are made by buying and holding quality ideas. The focus of this column is on growth stocks under $20 that can deliver multi-bagger returns by the end of the decade.
Besides looking at stocks under $20, I have focused on businesses that have good fundamentals. Additionally, it’s likely that industry tailwinds will support healthy growth for the companies discussed. This is likely to translate into multi-fold growth in revenue and cash flows.
I must add here that markets have been relatively volatile. It’s a good idea to gradually accumulate these stocks over the next few years instead of taking a big plunge. Let’s discuss the reasons to be bullish on these growth stocks under $20.
Li Auto (LI)
Among electric vehicle stocks, Li Auto (NASDAQ:LI) seems to be significantly undervalued. LI stock has declined by almost 43% for year-to-date and trades at a forward P/E of 13.2. With strong fundamentals and healthy deliveries, I am positive on the long-term outlook.
An important point to note is that Li Auto has maintained focus on China. I like this strategy as pursuing international expansion too early is likely to translate into higher cost. It’s not surprising that Li Auto has operational efficiency and has been reporting healthy margins.
Further, the company’s management reiterated that the focus is on delivering value to customers and operational efficiency than focusing on competition and deliveries. The prudent approach coupled with investment in technology is likely to give Li Auto an edge in the coming years. The EV company is planning to launch level 3 self-driving by 2025.
Overall, with healthy deliveries growth, a cash buffer of 13.7 billion and a healthy vehicle margin, LI stock is an attractive long-term bet.
Kinross Gold (KGC)
It’s been a good year for gold according to Citi (NYSE:C), gold is likely to trade at $3,000 an ounce in the next 6 to 18 months. Considering the factors of inflation, geopolitical tensions, and global debt, I am also bullish on gold for the next five to ten years.
Kinross Gold (NYSE:KGC) is an emerging gold miner that can be a value creator in the long term. Even after a rally of 73% in the last 12 months, KGC stock trades at an attractive forward P/E of 21.65.
Further, the gold miner offers an attractive dividend yield of 1.48%.
From a long-term perspective, there are two positives to note. First, Kinross has an investment grade balance sheet and ended Q2 2024 with a liquidity buffer of $2.1 billion.
In addition, Kinross reported an adjusted operating cash flow of $478 million for Q2. With gold trending higher, the annual OCF potential is more than $2 billion.
Furthermore, Kinross has stable production visibility through 2026. However, it’s worth noting that the company had to sell Russian assets in 2022 on the back of geopolitical tensions.
I believe that with high financial flexibility, a big acquisition is on the cards to boost production.
Archer Aviation (ACHR)
The flying car market is expected to be worth $1 trillion by 2040. The early movers with good execution can be massive value creators. Archer Aviation (NYSE:ACHR) is an attractive bet with the company building through partnerships.
Among the investors and strategic partners are the likes of United Airlines (NASDAQ:UAL) and Stellantis (NYSE:STLA). In a recent announcement, the eVTOL player reached an agreement with Stellantis where the latter will contribute $400 million to scale manufacturing to 650 aircraft annually.
It’s worth noting that Archer also announced an indicative order book of $6 billion. The company is therefore positioned for healthy growth once the manufacturing facility is completed.
An important point to note is that Archer is positioned to commercialize eVTOL in the U.S. in 2025. Further, the company has partnerships in the UAE, India and Korea for commercial operations in the next 24 months. Further geographical expansion is likely and will set stage for healthy growth.
On the date of publication, Faisal Humayun did not hold (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 have (either directly or indirectly) any positions in the securities mentioned in this article.