One common misconception about the stock market is that you need a large sum of money to begin investing. But with a little patience, even a $20 investment in the right stocks can help you earn a handsome return. A small amount of money invested in growth stocks in various sectors will not only diversify your portfolio but also help it grow over time.
Cannabis company Tilray Brands (TLRY -0.52%) and biotech company Exelixis (EXEL 0.89%) are two examples of outstanding growth stocks that you can buy for $20. These two come from volatile but rapidly growing industries. Let's look at what qualifies them for your portfolio right now.
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1. Tilray
Canadian cannabis company Tilray is a good option for investors looking to enter the cannabis industry with a small investment. Since its merger with Aphria in 2021, Tilray has survived the turbulent times that have befallen the Canadian cannabis industry. Demand-supply imbalances, regulatory pressure in Canada, and delays in U.S. federal legalization have all impacted Canadian marijuana growers.
Despite the headwinds, Tilray reported its 16th consecutive quarter of positive adjusted EBITDA, which totaled $14 million in its most recent quarter. Its total net revenue, however, fell 4% year over year to $145.6 million in its third quarter of fiscal 2023 (three-month period ended Feb. 28).
Tilray's strength is its ability to grow beyond the cannabis industry. It has entered the beverage industry by acquiring SweetWater Brewing, Breckenridge Distillery, and Montauk Brewing in the United States. After acquiring Manitoba Harvest, a U.S.-based hemp company, it also earns wellness revenue.
Though the U.S. is a promising market for Tilray, it can also expand its operations in Europe. Germany might soon legalize recreational marijuana, prompting other countries to follow suit. Tilray is already a widely recognized company in Germany. It earns a significant portion of its distribution revenue from its German subsidiary, CC Pharma.
In fiscal 2023, Tilray expects to have positive free cash flow, which will fuel its future growth strategies. It ended the quarter strong with $408.3 million in cash and marketable securities.
Cannabis stocks have struggled over the last two years and might be investors' least favorite investment sector at the moment due to the lack of progress toward legalization. However, the industry is growing at an exponential rate, and growth stocks usually take time to show their full potential. By 2031, the global legal cannabis market could be worth $149 billion.
We must also note that this industry is risky. Investors who are willing to accept these risks might be interested in Tilray, which is currently trading as low as $2.50. The stock is down 60% from its 52-week high, making now an excellent time to buy.
2. Exelixis
The star product of oncology drugmaker Exelixis has already been driving growth for the company. Cabometyx is a cancer treatment that is used to treat advanced renal cell carcinoma (RCC) as well as other types of cancer. It's also used with Bristol-Myers Squibb's Opdivo (nivolumab) to treat advanced RCC in patients who haven't had any previous treatment. In 2022, this drug alone generated $1.3 billion in revenue, propelling the company to a 12% year-over-year increase in total revenue to $1.6 billion.
Cometriq is another Cabometyx variant used to treat thyroid cancer. During the year, it made $25.3 million in sales. However, the adjusted net profit for the quarter fell to $265 million from the previous year, driven primarily by an increase in research and development (R&D).
The biotech company is wise enough to understand that it requires more than one successful product to thrive in this cutthroat industry. During the quarterly results, management stated, "We progressed three promising biotherapeutics, XB010, XB014 and XB628, from internal discovery into preclinical development."
To develop a strong product portfolio, the company continues to invest heavily in R&D, which totaled $891.8 million in 2022. It also has a solid balance sheet to back up its pipeline initiatives. Exelixis had $2 billion in cash at the end of the year.
Without a doubt, biotech companies are risky investments because trials can fail or regulatory approvals can be delayed. However, companies such as Exelixis that use innovative methods to manufacture drugs for difficult-to-treat diseases will always be in demand. The company looks poised to leverage funds from its successful treatments as it expands its portfolio. If this biotech stock, which is currently trading as low as $19 per share, can keep pace with the growing needs, it could make for a solid long-term investment.
Sushree Mohanty has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol-Myers Squibb. The Motley Fool recommends Exelixis. The Motley Fool has a disclosure policy.
