It is an annual tradition in financial-investing-trading world to name a top pick for the year ahead. All the major brokerage firms do this, and financial media publishes many articles with lists of stocks that analysts and others believe will deliver superior returns.
It makes for interesting reading, and there are often some very good ideas presented, but I am ambivalent about this process for several reasons.
First, it is often unclear what the goal should be. If is to name a stock that is going to produce a very large gain in the year ahead, then the only logical approach would be to select a very high-risk stock that has the potential for a very big move. Typically that would be a low-priced stock and a thinly traded one at that. If you are lucky, then the stock has to increase by 2x or 3x, if not more, and far exceed what any big-cap name could do.
Second, buying a stock at the start of the year and holding it for a full year is not a logical holding period for most people and a suboptimal way to approach the market, if those were the parameters and one were to do that. This approach ignores market conditions and ordinary volatility. You can't just pick a stock and hold it for a year and hope that it pays off. You have to manage the trade.
If you are going to pick a stock that is going to hold up and offers a good ratio of a potential return to the risk taken, then you would likely choose something safe and "boring," which may have a possible catalyst. Apple (AAPL) and Microsoft (MSFT) have been common favorites in the past.
I discussed these issues in my recent Real Money column, "The Best Stock in 2023 Will Be ... The One You Trade the Best." Please take a look at it before you consider trading any stock based on the view that it will be a good pick for 2023.
With that discussion in mind, my top small-cap high-risk pick for 2023 is Beyond Air (XAIR) .
XAIR is a small-cap name with little current revenue and a market capitalization of under $200 million. It is very high risk but has the potential for substantial upside should it perform as hoped.
Nitric Oxide (NO) has long been used for various medical applications, such as treating lung infections, lowering blood pressure through vasodilation, and various pulmonary diseases. It is primarily delivered to patients through high-pressure cylinders. Beyond Air has developed the LungFit device that will convert ambient Air into NO using a disposable filter that lasts about 12 hours. This eliminates the need for cumbersome and costly tanks of NO and provides an ongoing revenue stream for XAIR.
The company has received FDA approval for its first system, LungFit PH, for persistent pulmonary hypertension in newborns. The company describes itself this way: "Beyond Air is currently advancing its other revolutionary LungFit systems in clinical trials for the treatment of severe lung infections such as viral community-acquired pneumonia (including Covid-19), nontuberculous mycobacteria (NTM), and severe lung infections in other settings. Additionally, Beyond Cancer, an affiliate of Beyond Air, is investigating ultra-high concentrations of NO with a proprietary delivery system to target certain solid tumors in the pre-clinical."
Beyond Air has jumped various FDA hurdles and is now actively engaged in the marketing and sales process. It is poised to announce contracts early next year.
There are many other medical companies in the market that have innovative products and the potential for healthcare industry contracts, but we have a much higher level of confidence in this case due to the very strong insider buying.
Director Robert Carey has bought 100,000 XAIR shares since mid-November with an average purchase price of about $5.80 and now holds 842,000. Carey was previously the chief business officer of Horizon Therapeutics, which was recently acquired by Amgen (AMGN) .
The CEO and Chairman of Beyond Air, Steven Lisi, has been a consistent insider buyer, with his most recent buy being 73,000 shares at $6.62 in July, giving him 1,446,445 shares.
Technically, XAIR stock has struggled with the overall market and is trading near support at the $5-$6 level. We are looking for a move out of the current trading range on strong volume. The current overhead resistance is around $6.75
There are four buy ratings on the stock from analysts that are more than six months old, with price targets ranging from $13 at Oppenheimer to $23 at Ladenburg. Truist has a $20 target is why XAIR is my top small-cap, high-risk pick for 2023. However, please note that this is a stock that should be actively traded as conditions develop.
(Please note that due to factors including low market capitalization and/or insufficient public float, we consider XAIR to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)