An investor who can find a stock that is rising 15% annually has discovered something remarkable. The S&P500 itself is rising about 10% per year, and investors who pick individual stocks want to beat this. While there are market beaters, they are relatively few, so it’s a big deal when an investor finds one.
Suppose someone invested in a stock that rose 15% annually, it would rise approximately 300% over the course of ten years. That’s why a stock that quadruples in value in one decade is a big deal. But shares of The real real(NASDAQ: REAL), Carvana(NYSE:CVNA)And Byrna Technologies(NASDAQ: BYRN) did not do this until 2024.
In other words, if this trio had quadrupled in ten years, it would have been significant. But considering they did it in just one year, each of them deserves a closer look.
The RealReal has the go-to e-commerce platform for pre-owned luxury goods that have been verified. For a time, the user base dwindled and money burned, sending the stock down to a very cheap valuation. At the beginning of 2023, the price fell to less than 0.2 times sales; shares are often sold for between 1 and 2 times. And investor Michael Burry took notice.
Burry is known for his successful (and big) bet that the mortgage market would collapse just before the Great Recession. Since that windfall, he has continued to invest in select stocks and is leaning toward cheap stocks like RealReal stock in early 2023.
Since Burry’s hedge fund Scion Asset Management initially took a stake, it has increased or decreased its position in The RealReal shares, as the table shows. But he still owns 500,000 shares as of Q3 2024.
Data source: Figures from financial filings for Burry’s hedge fund Scion Asset Management. Table by author.
Investors can only speculate as to why Burry likes The RealReal stock, but there are other things they like besides the low valuation. For starters, the number of active buyers on the company’s platform just reached its highest level since the fourth quarter of 2022. Moreover, the take rate for the third quarter of 2024 was at an all-time high of 38.6%. This allowed the company to earn $2 million in free cash flow in the third quarter, marking only the second time it has ever generated positive free cash flow.
These positive developments are why RealReal stock was one of the best stocks in 2024, and Burry’s eye for value helped him buy at an opportune time.
In 2022, Carvana stock fell below $4 per share as investors feared bankruptcy. The company renegotiated its debt, which limited this risk. That sent shares flying into the stratosphere, including in 2024, as they more than quadrupled in value.
Carvana takes the mundane task of buying a car and makes it less strenuous by digitizing the entire process. This has proven undeniably popular with consumers, as evidenced by the company’s sales growth of over 200% in the past five years. So the company deserves some credit. But there are still financial headwinds.
For starters, 2024 was one of Carvana’s best sales years. But could sales take a step back in 2025? One thing to consider is that auto loan delinquencies are rising rapidly and are at the highest level in almost four years. This could slow things down for Carvana if its financial partners decide to take less risk by buying fewer loans.
US auto loans delinquent data 90 or more days according to YCharts
Additionally, Carvana struck a deal in 2023 to temporarily reduce the interest it paid on its debt. But it could ultimately result in higher payments when the end of the two-year agreement with lenders is reached. Since it expires in 2025, Carvana could use most of its cash flow to pay down its debt, which could put a damper on shareholder returns in the near future.
Most people have heard of Carvana. And many investors have heard of The RealReal thanks to Michael Burry. But almost no one has heard of Byrna Technologies.
This small company makes self-defense equipment that resembles handguns but delivers less-lethal projectiles filled with chemical irritants or regular hard plastic projectiles. And sales really start.
Byrna calls its primary devices “launchers” and only launched them in 2019. By November 2024, 500,000 have already been sold. But management believes the market is huge. It hopes to reach 5% of non-gun owners and 10% of gun owners. Management says that’s a target of $17.5 billion, while it only has $73 million in trailing-twelve-month revenue – that’s a big potential upside.
Byrna may be small, but its financial situation still has desirable qualities. First, Q3 2024 revenue rose 194% year over year to a record $20.9 million. Second, the company has net income of more than $3 million for the first three quarters of 2024, compared to a loss of $8 million in the same period of 2023. Finally, it may only have about $20 million in cash, but it also has no debt, which means the country has a relatively strong balance sheet for its size.
Byrna shares trade at ten times sales and aren’t exactly cheap. But given that it’s chasing a big opportunity and is growing quickly, profitable, and debt-free, this little stock could still have a lot of long-term upside potential even after it quadruples in value by 2024.
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*Stock Advisor returns December 23, 2024
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
These three stocks have quadrupled in value by 2024, including one small-cap stock owned by a very famous investor. Originally published by The Motley Fool
