Want to double your money in 2020? It won’t be easy.
Since 2006, the S&P/TSX Composite Index has only increased by 43%. When dividends are included, the performance looks a bit better, but the fact remains that the TSX average failed to double over a 14-year period.
How then can you expect to double your money in a single year?
Thankfully, the TSX average is misleading. The second-largest sector in the index is energy, a segment of the market that has performed terribly for more than a decade. Since 2006, for example, shares of both Canadian Natural Resources and Suncor Energy have remained stagnant.
When you ignore the energy sector, the TSX looks much more attractive. Consider Shopify. Since 2015, its stock has doubled in price three times.
If you want to double your money in 2020, don’t trust legacy business like oil producers. Instead, look to growth stocks that are helping create the future.
Fly around Canada
As the second-largest country in the world by landmass, Canada depends heavily on the shipping industry. Whether it’s imports, exports, or domestic transfers, millions of Canadians rely on regular shipments.
Canada also has some of the most remote populations in the world. Shipping goods to these areas can save lives, but costs and time often get in the way. That’s where Drone Delivery Canada comes in.
Drone delivery is slashing delivery times and expenses by shipping goods via drone. Everyday packages are a long-term priority, but the company is starting with higher-need items like time-sensitive blood shipments to hospitals and high-cost replacement parts for remote mining operations.
Ultimately, this could be a $1 billion market. Drone Delivery has a multi-year lead but is valued at just $130 million. If shipments begin to scale in 2020, this stock could be an easy double.
Bet on cannabis
Everyone knows cannabis is set to become a major global industry. By 2030, many analysts project worldwide sales to hit $100 billion. The ultimate opportunity size could be closer to $300 billion.
But as with any other emerging industry, the cannabis market has faced its share of booms and busts. In 2018, many pot stocks tripled in value. This year, most pot stocks have fallen by at least half. The massive drop in valuations has set the stage for a sizable rebound in 2020.
If you want to get the most upside to a 2020 cannabis rebound, go with Green Organic Dutchman Holdings.
As with any market downturn, the smaller, lesser-known companies took the brunt of the hit. Multi-billion-dollar pot stocks fell by around 60%, but Green Organic shares fell by more than 80%. Shares now trade at 1.2 times 2020 revenues, even though the industry on average trades at 5.4 times 2020 revenues.
If the cannabis industry experiences a reversal next year, expect smaller, higher-growth stocks like Green Organic to lead the way. Closing the valuation gap even halfway would result in a quick double.
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Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify. Fool contributor Ryan Vanzo has no position in any stocks mentioned.
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