Investors shouldn’t be scared out of this market. On the contrary, they should be looking for buying opportunities as stock prices trend lower. This is especially true for buy-and-hold investors who are in it for the long term. And there are lots of great stocks available right now at decent prices. Many stocks are downright cheap. This has led to the emergence of high-risk high-reward stocks.
Investors looking to take positions in well-managed companies that have a history of rewarding their stockholders can find plenty of opportunities in the current market. There are also beaten-down names that have new catalysts working in their favor and the potential to turn their operations and share price performance around for the better. The key is to look for opportunities, buy with conviction, and hold for the long term.
So here are some of those high-risk high-reward stocks.
Dillard’s (DDS)
For all its success, you’d think that the upscale American department store chain Dillard’s (NYSE:DDS) would get more attention. Sadly, no. But the company that continues to be run by the same Dillard family that founded it back in 1938 during the Great Depression has a remarkable track record.
While DDS stock is flat this year, it has gained 325% over the last five years, outpacing many technology stocks over the same period of time.
Dillard’s has achieved success mainly through careful family stewardship that emphasizes slow and steady growth and places a premium on two-way loyalty between management and employees. With fewer than 300 stores in 29 states, Dillard’s is no Walmart (NYSE:WMT). However, the company’s measured approach and focus on providing customers with a positive shopping experience has led to success. DDS stock looks affordable right now trading at only six times future earnings. It also pays a quarterly dividend of 25 cents per share. This makes it one of those high-risk high-reward stocks.
Alcoa (AA)
Aluminum giant Alcoa (NYSE:AA) has struggled mightily in recent years. AA stock is down 34% this year, including a 25% decline over the last 12 months. However, hope arrives at the beaten-down company in the form of a new chief executive officer (CEO). The Pittsburgh-based company just announced that William Oplinger has succeeded Roy Harvey as CEO. Alcoa added that Harvey will remain on as a strategic adviser until the end of this year to help with the transition.
Oplinger had previously served as Alcoa’s chief operations officer and knows the company intimately. The previous CEO, Roy Harvey, had been at Alcoa’s helm since November 2016, which is when the aluminum maker went public. Alcoa didn’t discuss the CEO change, saying only in a written statement that the executive shake-up is part of its “succession planning process.” However, the leadership change comes ahead of Alcoa reporting its Q3 financial results in mid-October.
While it might take some time, a new CEO could help to get AA stock moving back in the right direction after a long period of underperformance. Alcoa’s stock also pays a quarterly dividend of 10 cents a share. Al in all, it’s one of those high-risk high-reward stocks to consider.
Costco (COST)
Big box retailer Costco (NASDAQ:COST) continues to thrive and just reported strong financial results that beat Wall Street expectations on both the top and bottom lines. The company is benefitting from strong grocery sales even as consumers cut back on discretionary and big-ticket items such as furniture and electronics at its stores. Drawn by more affordable groceries, traffic at Costco stores worldwide rose 5.2% and gained 5% within the U.S. on a year-over-year basis during the company’s most recent quarter.
Investors and analysts continue to hold out hope for two developments at Costco, both of which could transpire in Q4 of this year. The first is a long-awaited membership fee hike. The last time Costco raised its membership fees was in 2017. Analysts say it is only a matter of time before the company acquiesces and lifts it membership tiers. The second event is a special dividend payment. The last such payment to stockholders occurred during the pandemic. A strong finish to the year could provide management with the impetus to reward shareholders.
COST stock is up 25% this year and has increased 158% over the last five years.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.