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These stocks have been printing money for small investors in recent weeks.

The broader market has been unstoppable since a stock market crash in the first quarter of 2020. The benchmark S&P 500 is up 75% since the bear market bottomed on March 23, 2020, while the Nasdaq is up a whopping 104%.

These recovery rallies are historic in scale – yet they pale in comparison to the gains posted by a handful of stocks that have recently captivated retail investors. Had investors had the foresight to invest $250,000 in the following three stocks a month ago, they would be sitting on at least $1 million on Feb. 10, if not more.

Sundial Growers: $1.08 million

One could argue that Canadian licensed marijuana stock Sundial Growers (NASDAQ:SNDL) is currently the most popular stock among retailers and traders. It is extremely liquid (over 2.5 billion shares traded as of Feb. 10) and can be purchased for less than $3 per share. The stock price shouldn’t affect your investment thesis, but traders love cheap stocks.
Sundial’s incredible rally, which would have turned a $250,000 investment into $1.08 million in one month, is tied to a combination of the Reddit-fueled rally and continued speculation that the U.S. would legalize marijuana at the federal level.
Since the end of September, the company’s outstanding shares have skyrocketed from just over 500 million to 1.56 billion. What investors are left with is a company headed for a $4.5 billion market cap, losing money and expected to generate a meager $63 million in full-year revenue.
In other words, Sundial investors are likely playing with fire, and they will ultimately get burned.

Naked Brands: $1.11M

Another big winner that will have investors scratching their heads in disbelief is designer, wholesaler and retailer of intimate apparel and swimwear Naked Brands Group (NASDAQ:NAKD). Just a month ago, Naked Brands’ share price was $0.34 per share, and now it’s over $1.50 per share. That means a $250,000 investment has turned into about $1.11 million in just a few weeks.
The fuel behind this monumental rally is twofold. First, on Jan. 21, Naked Brands announced a strategic shift that included divesting its unprofitable brick-and-mortar stores and focusing exclusively on growing its e-commerce platform. Because companies that focus on e-commerce often have lower overhead costs, margins on retail products can be higher.
Second, interest in short positions in Naked Brands has skyrocketed, making the company the perfect target for the Reddit crowd on WallStreetBets (WSB). Small investors in the WSB chat room have been buying shares or out-of-the-money calls in heavily shorting companies like Naked Brands to create a short squeeze.
Investors should be especially wary of Naked Brands. The company has lost money every year between fiscal 2015 and fiscal 2020, and sales have been declining since fiscal 2018.

Cassava Sciences: $1.48M

Clinical-stage biotech stock Cassava Sciences (NASDAQ:SAVA) actually tops the list. A $250,000 investment a month ago would be worth nearly $1.5 million as of Feb. 10. This is after a more than 50% drop from its intraday high on Feb. 4.
Shares of Cassava Sciences caught fire after a Feb. 2 press release presented interim analysis of an open-label, early-stage trial for the treatment of Alzheimer’s disease. Cassava notes that the National Institutes of Health-funded study showed an average 10% improvement in cognitive scores from baseline to month six, as well as improvement in dementia-related behaviors.
In addition, Cassava Sciences does not have a large number of outstanding shares, which made it a popular target of the Reddit-fueled rally.
Keep in mind, however, that this is a very early interim analysis. Alzheimer’s disease has proven particularly difficult to treat, with the vast majority of late-stage clinical trials unsuccessful.

Source: (fool.com)