Stock portfolios without exposure to the future of global commerce are destined to leave gains on the table, as innovations replace legacy processes with greater efficiency, productivity and ultimately profits in shareholders’ pockets.
To avoid settling for mediocre returns and falling short of long-term financial goals, individual investors should keep on top of stocks making money through modern means, paving the way for the next generation of practitioners in their industries to build legacies and create shareholder value.
To get our readers started, here are three innovative stocks to consider over the weekend, each of which is backed by an underlying company embracing a future-oriented approach to serving its target market.
Royalties Inc.
Royalties Inc. (CSE:RI) is building a portfolio of uncorrelated, yield-generating royalties with a consistent track record across multiple assets, price levels and terms.
The company owns a 2 per cent stake in Music Royalties, a Canadian acquirer of passive music royalties that currently owns 27 cash-flowing investments yielding 7.2 per cent per year, including songs from Rihanna, Jay-Z, Avril Lavigne, Jennifer Lopez and the Backstreet Boys.
Other music-related holdings include a selection of American songwriters’ public performance royalties paid by Broadcast Music yielding 9 per cent per year, and an interest in the publishing and public performance royalties of songs performed by artists including Britney Spears, Joe, Michael Jackson and R. Kelly, which are paid by SOCAN and Universal Music Publishing Group and also yield 9 per cent per year.
Additionally, Royalties Inc.’s portfolio is diversified by:
- A 100 per cent interest, subject to a 1.5 per cent net smelter royalty, in the strategically located Bilbao silver-lead-zinc-copper project in Zacatecas, Mexico
- 88 per cent of the outstanding shares of Minera Portree de Zacatecas, which holds a 2 per cent net smelter royalty on six mining concessions on Capstone Copper’s Cozamin Mine, which has generated free cash flow at all points of the copper price cycle since its first full year of operation in 2007
Considering music’s universal appeal, the high calibre of the artists behind the royalties, and silver’s strong case for a near-term breakout, not to mention the attractiveness of passive income’s ability to unlock free time, Royalties Inc. makes for a compelling allocation opportunity worth a thorough look.
Shares of Royalties Inc. have given back 30 per cent year-over-year, and are down by more than 84 per cent from their five-year high.
Tim Gallagher, Royalties Inc.’s chief executive officer, recently sat down with Stockhouse’s Ryan Dhillon to provide an overview of the company.
Vertiqal Studios
Our second innovative stock pick is Vertiqal Studios (TSX:VRTS), which is dedicated to the creation and distribution of viral videos. The company produces more than 100 videos per day across 138 owned-and-operated channels, which command an audience of more than 43 million followers and subscribers and generate more than 2 billion views per month.
Some of the company’s standout accounts include @gaming (10.5 million followers) and @gamelancer (5.1 million followers) on TikTok, @Egirl (1.9 million followers) on Snapchat, and @gaming (882,000 followers) on Instagram.
While Vertiqal has only put up net losses on its income statement, the company is making notable operational improvements on the road to profitability. These include a 51 per cent reduction in adjusted EBITDA loss, a 24 per cent reduction in normalized cash expenses, and a 47 per cent increase in gross margin in fiscal 2023, all while growing revenue by 36 per cent year-over-year to C$4,845,926.
The company expects growth to continue in 2024, with positive adjusted EBITDA and guided revenue of C$8.6 million, representing 79 per cent growth year-over-year, thanks to deals with TikTok and Meta, Snapchat portfolio growth, and video production expansion across the U.S. market.
Backed by a direct line to millennial and Gen Z audiences, and a track record of connecting them with high-profile brand partners, including the NHL, the NCAA, Royal Bank of Canada, Samsung and Universal Music Group, Vertiqal is the beneficiary of strong barriers to entry that make it a valuable partner to brands, agencies and creators looking for turnkey production and distribution on social media.
The market disagrees, having pushed shares of Vertiqal Studios down by 84.62 per cent since July 2023, opening the door for a contrarian play to capitalize on robust marketing operations tailored to the internet age.
Jon Dwyer, Vertiqal Studios’ chief executive officer, joined Stockhouse’s Ryan Dhillon earlier this week to comment on the company’s fiscal 2023 results.
Odd Burger
Our final innovative stock pick for the week is Odd Burger (TSXV:ODD), a franchised vegan fast-food restaurant, as well as a manufacturer of a proprietary line of plant-based protein and dairy alternatives.
The company is positioning itself to ride a global multi-billion dollar vegan fast-food tailwind, propelled by the need for more sustainable food sources, by rolling out more than 100 locations across the world differentiated by their small square footage (less than 1,000 sq. ft), vertically integrated supply chain, and automated cooking technology that requires as little as one staff member on duty.
Similar to Vertiqal Studios, Odd Burger has been loss-making since inception, though it has made great strides towards generating shareholder value. The company grew revenue by more than 200 per cent from C$1.07 million in 2020 to C$3.2 million in 2023, while achieving consistent gross profitability since 2022 and cutting cash flow used in operating activities in 2023 by 50 per cent year-over-year.
In Q1 2024, Odd Burger was also able to reduce its quarterly loss to C$275,808 – representing an 81.9 per cent improvement quarter-over-quarter and a robust 78.1 per cent improvement year-over-year – as well as record its highest gross margin as a public company, coming in at 33.3 per cent of revenue, a 103.3 per cent improvement year-over-year.
With more than 70 billion land animals killed per year for food and humans’ threat to biodiversity worsening with each passing day, an investment in Odd Burger is an investment in the sustainable eating practices the world must adopt to tame climate change and reach net-zero goals.
Shares of Odd Burger are up by 14.29 per cent year-over-year, but have given back 33.33 per cent since 2019.
James McInnes, Odd Burger’s co-founder and chief executive officer, sat down with Stockhouse’s Ryan Dhillon to discuss the company’s financial results for Q1 2024.
Join the discussion: Find out what everybody’s saying about these innovative microcap stocks on the Royalties Inc., Vertiqal Studios and Odd Burger Bullboards, and check out Stockhouse’s stock forums and message boards.
This is sponsored content issued on behalf of Royalties Inc., Vertiqal Studios and Odd Burger, please see full disclaimer here.