With the new year well underway, many investors are reviewing their current investments, looking for new opportunities, and reviewing existing holdings for Q2. With investment opportunities changing fast in today’s market, it is evident that you must act fast, and take risks to reap rewards.
With this in mind, what high-risk investment stocks could provide major growth potential over the coming months?
Four high-risk stocks investors should watch out for
Tremor International Ltd. [LSE:TRMR] is a global company offering a comprehensive software platform that allows advertisers to reach relevant audiences and publishers to maximise the profitability of their digital advertising inventory. Shares in Tremor have growth potential of 194% due to the increased demand for video advertising and commercial TV (CTV), which is currently the fastest-growing segment of the advertising technology industry.
Through a strategic focus on the fastest-growing market segments, Tremor distinguishes itself through its significant exposure to CTV. The key trends driving growth in this area are increased use of video advertising formats, a shift in advertising budgets from broadcast and cable TV to digital platforms, an increased emphasis on consumer privacy (cookies), and CTV growth projections exceeding the average growth of the advertising technology industry as on-demand and streaming platforms become more popular.
Growth in this market segment is further outlined by the digital marketing and media research firm Emarketer, who predicts that digital ad spending worldwide will grow at an average rate of 11% through 2025, and CTV and video ad spending in the United States are expected to grow by 20% and 16% respectively over the same period.
The KraneShares Global Carbon Strategy ETF [NYSE:KRBN] is comparable to the IHS Markit Global Carbon Index, which offers broad coverage of carbon credits by tracking the most traded carbon futures contracts. International carbon trading markets have existed since the Kyoto Protocols of 1997, but the emergence of new regional markets has triggered a surge in investment. As a result, ETF KraneShares has a potential growth of 80.7% as the carbon credit market develops.
The fund has also proven to be investing in developed markets, allocating means to the most liquid and mature of carbon credit markets, consisting of European, California, Regional (Eastern states) as well as British quotas.
There is an assumption that a declining carbon allowance will do one of two things. It will either increase a company’s investment in technologies that reduce carbon emissions from their own business cycle or there will be laggards who are forced to purchase credits, thereby driving up the price.
The fund’s largest exposure relates to the European carbon market. The Market Stability Reserve is like the central bank for a country, only for European carbon credits. On their website, it states that the total amount of emission allowances will be reduced by 2.2% per year from 2021, compared to 1.74% between 2013 and 2020. The reduction rate is in line with the 2030 target of at least 40% cuts in EU greenhouse gas emissions.
Vertex Energy Inc. NASDAQ:VTNR is an environmental services company that recycles industrial waste streams and non-standard commercial chemicals with a focus on recycling used motor oil and other by-products.
With the potential acquisition of Mobile Chemical LP’s refinery, a subsidiary of Shell, the Vertex share price could increase. If the deal closes, analysts at Credit Suisse expect the price to rise to £9.57 ($13) with Outperform status. On the other hand, if the deal does not close, the price will move back into the £0.75-£1.50 ($1-2) range per share.
It is possible to buy the stock, but the idea is more efficient through the options market: to do so, one must buy 15 July 2022 call options with a 7.5 strike, as well as 15 July 2022 put options with a 2.5 strike.
Buying puts will not make an investor richer in the case of a decline and the idea is to protect your position from losses. With a positive outcome, one can make £2.95 ($4) risking £0.75 ($1); with a negative outcome, the investor will not lose money.
Warrior Met Coal NYSE:HCC is a metallurgical coal producer in Alabama that operates two mines and has the potential to develop a third. Warrior Met produces two types of coking coal, High Vol-A, and Mid-Vol. Warrior Met looks promising due to rumours of conflict resolution with UMWA union; they will resume talks “in February or March”.
With rumours of a resolution of the company’s conflict with the UMWA union in the next 2-3 months, investors can capatalise on Warrior Met with the company having a potential growth of 27.6%. The key argument here is that relations are beginning to thaw again, and the likelihood of the strike being resolved is moving in a positive direction. The resolution is expected to lead to new record highs for Warrior Met’s share price. Warrior Met also has a history of declaring special dividends and we expect 2022 to be no exception.
