I’ve long said there’s a big difference between investing and speculating. The key difference between the two that I think about is the time horizon involved in each. Typically, investing for any meaningful period of time is what most investors should be after. That’s because, in the words of Charlie Munger, the money made in investing comes not from the buying or selling, but the waiting.
That said, I’m not going to ignore the value that speculating can have for individual investors. The world’s biggest casino is the stock market, after all. And while the best investors tend to like to keep it boring, there’s something to be said about gamifying investing and making it fun and interesting, at least for a portion of one’s portfolio.
Trying to pick stocks that will beat the market over a given period of time also requires patience, but trying to time entry and exit points with more speculative positions is difficult. I’m going to cover three stocks I view as relatively speculative picks (in the fact that each have 10x potential, but could also be zeros over an extended period of time). That said, these are speculative picks I think investors ought to have patience with in order to realize their long-term value.
With that in mind, let’s dive in!
The Metals Company (TMC)
One of the more speculative small-cap stocks I continue to pound the table on is The Metals Company (NASDAQ:TMC).
What The Metals Company does is provide investors with leveraged exposure to a critical shift in how the global market will source critical battery minerals. The company’s deep sea mining technology allows for golf ball sized nodules to be pulled off the ocean floor. These nodules contain one of the most difficult to mine minerals used in battery development, or minerals that are becoming increasingly costly to produce above ground, including manganese, high-grade nickel, cobalt, copper and other minerals.
As the world shifts toward EV batteries and grid-scale storage, I anticipate the need for TMC’s core commodity operations will surge. The issue many investors may have is that TMC is still pre-revenue from an operational perspective, with operations slated to start in a little over a year.
If TMC can put continue to progress well and future announcements signal an earlier commercialization timeline, the pull-forward effect of investors receiving cash flows sooner than expected could drive a rush toward such companies. I think given the current macro setup for the mining and commodity sectors, this is a company which should outperform in the coming months as TMC’s ramp up to commercialization in the Clarion-Clipperton zone continues.
NexGen Energy (NXE)
NexGen (NYSE:NXE | NXE Price Prediction) is the high‑octane growth leg of a uranium portfolio, which I’d argue has bolstered many long-term investor portfolios in recent years (particularly for those who are more cautious on the risk spectrum).
Offering pure‑play exposure to what is widely regarded as one of the world’s most attractive undeveloped uranium projects at Rook I in Canada’s Athabasca Basin, NexGen is a top option for investors looking for exposure to the rising price of uranium. Indeed, this key catalyst has led to a surging valuation for companies that are pre-revenue, or still in the exploration stage of large uranium deposits. And given my past commentary around NexGen and its world-class reserves, it should come as no surprise that this stock is taking off.
The company’s operational losses have widened in recent quarters, as NexGen scales its project work. However, that’s the kind of trend I think investors want to see, with greater mining development today leading to potentially more explosive cash flow growth over time. That is, assuming the price of uranium continues to remain high.
With other countries globally looking to not only build out small nuclear reactors (in addition to traditional large-scale reactor projects) as well as enriching uranium to potentially protect against foreign adversaries (ahem, European nations), this is a stock that is in no shortage of catalysts.
Investors can’t assess NexGen on the basis of its fundamentals for now, which makes it inherently risky. However, for investors with a long-term timeline who are able to handle near-term volatility, this is a stock I think can be included as a small position in an otherwise speculative corner of one’s portfolio.
Whitecap Resources (WCPRF)
Last, but certainly not least on this list of top small-cap stocks I think investors should consider right now is Whitecap Resources (OTCMKTS:WCPRF).
Whitecap Resources offers a compelling blend of free‑cash‑flow growth, disciplined capital returns, and torque to higher commodity prices. What’s perhaps most important is that all these key factors are offered at a valuation that still reflects more skepticism than its balance sheet and asset base warrant.
The company controls a diversified portfolio of oil and gas assets in Western Canada. These assets are focused on high‑quality, low‑decline reservoirs that support stable production and efficient capital deployment. With these assets increasingly being ramped up (Whitecap’s production growth has been impressive), I think the company’s cash flow growth profile should support plenty of capital appreciation upside over the long-term, holding commodity prices stable.
Of course, if crude and natural gas prices head higher over the course of the coming months and years (either due to geopolitical upheaval or other factors which are becoming more prescient), this is a company that could certainly continue to provide greater capital repatriation to investors. As the company’s debt reduction plans coincide with greater buybacks and dividends over time (current yield of around 5.5%), I think double-digit upside is more than in the cards for this energy company still valued at less than $12 billion.
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