Without a doubt, drawdowns in the stock market are frightening. However, history has shown that deep drops in U.S. equity prices generally result to be a golden opportunity for investors.
What are the finest steals today? AMC Entertainment Holdings and Beam Therapeutics are two of my personal favorites in this market. Here’s why I feel that, even at $1,000 invested in either one of these undervalued growth stocks over the next ten years, you’ll come out ahead.
AMC: A misunderstood value play
AMC Entertainment Holdings’ near-term growth prospects and fundamentals aren’t likely to attract many traditional value investors. The company is saddled with debt as a result of the pandemic, and the movie industry is only now beginning to recover from this crisis.
A deeper look, on the other hand, reveals that AMC stock might be a real bargain at these levels. Here’s a quick rundown of why this company is so undervalued.
To begin with, the competitive risk from streaming appears to be greatly exaggerated at this time. In light of AMC’s excellent first-quarter 2022 results, it is abundantly clear that the filmgoing industry is still a viable business model in today’s global scenario.
Second, although AMC’s debt overhang may be a problem, it isn’t the end of the world. Bears have argued that AMC’s large debt load might be difficult to tackle given its debt-related interest expenses.
Fortunately, AMC’s leadership has a solid strategy in place to handle this problem. The firm, for example, aims to diversify its business model in the coming years so that it may generate multiple sources of income. Bears have panned AMC’s plan to convert the company into a Warren Buffett-style company as unrealistic, arguing that management lacks the financial resources to execute such an endeavor. However, with $1.16 billion in cash and equivalents on hand as of late, AMC should be able to add a few more sources of income in the not so distant future.
I’m a firm believer in AMC’s core business, with its combined with the corporation’s stated growth goals, will ultimately result in market-beating returns for its shareholders over the rest of the decade.
Beam: A gold mine in precision medicine
Beam Therapeutics is a gene-editing firm that focuses on developing game-changing therapies for a variety of serious illnesses. While the firm is still in its preclinical stage of its life cycle, I believe Beam has the potential to become one of the field’s most powerful players.
My enthusiasm comes from the biotech’s breakthrough base-editing tech, which has the potential to become a best-in-class platform in terms of precision. Furthermore, Beam’s tissue-specific delivery systems may give it a significant edge in terms of efficacy.
What are the company’s future objectives and inflection points? In the near future, Beam intends to begin human clinical trials soon for its sickle cell disease initiative. The firm is also working with Pfizer on treatments for muscle, liver, and central nervous system rare genetic disorders. Over the next 12 to 24 months, both of these initiatives should result in several catalysts for shareholders.
What is the long-term goal? The biotechnology industry as a whole may be valued at $20 billion by the end of the decade, according to an Emergen Research research report. Beam’s unique platform and focus on using very efficient delivery systems for certain diseases might allow it to capture an outsized share of this quickly expanding market. That’s a big opportunity for a firm with a current market value of only $2.8 billion.
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