If you watched HBO’s The Wizard of Lies, then you know how powerful a motivator greed is. While investing in money-losing businesses seems antithetical to that instinct, they’re actually some of the best stocks to buy. Why? Because they contain the chance to score big from any potential turnaround. Pure and simple greed.
Peter Cohan, an investor in and consultant for startups, wrote a piece in Entrepreneur magazine from 2013 that wondered if investors will ever learn to avoid money-losing companies:
“But that’s the beauty of the stock story for a money-losing company. If it were making a profit before its IPO, it would be harder to make outrageous forecasts about how much more money the company will make in the future … But when a company is losing money, the sky’s the limit when it comes to predicting how bright its future will be.”
He was speaking about IPOs but I think you get the picture. When a company’s just plodding along growing revenue by 5% annually and making money at the same time there’s nothing exciting about owning its stock.
Owning a money-losing stock that goes from $10 to $100, however, is the ultimate high for many investors. If you’re looking for this level of zen, here are seven money-losing stocks to buy for big turnaround profits.