Five months ago (I can’t believe it has been that long), I started a series that I called, “Estimating Upside” where I would I tried to estimate roughly how much upside the companies in the Freedom Portfolio had over the next 5 years.

I divided the companies into three groups:

• Slow Growers: Companies that can 2x to 3x over the next 5 years – a 15% to 25% compound annual growth rate (CAGR)
• Medium Growers: – Companies that can 4x to 7x over the next 5 years – a 32% to 48% compound annual growth rate (CAGR)
• Fast Growers: – Companies that can 8x to 10x over the next 5 years – a 52% to 58% compound annual growth rate (CAGR)

I previously wrote about those first two groups. You can find the slow growers here and the medium growers here. Somehow I let three months go by between that last post and now. You would think that writing about the fast growers would be the most exciting part of this whole exercise! Anyway, it’s time to finally get around to finishing this series up.

Before we dive in, I wanted to note two things:

1. The market caps listed below are as of August 24th
2. Enjoy the data and graphics associated with the widgets below? Then I encourage you to check out stockcard.io where you can check out the same data on many more companies. You can save 10% on a VIP subscription by using my promo code: “paul”

Now let’s get on to the show.

Fast Growers – 8x to 10x – 52% to 58% CAGR

Etsy (ETSY) – Now: $25 billion – Then: $200 to $250 billion

I believe the COVID lockdowns have shown that ecommerce has become big enough that it is no longer just Amazon (AMZN) dominating everybody else and sucking up all the oxygen in the space. Additionally, I believe that the hard times encountered by many during COVID will see an increase in people looking for “side hustles” or to start up their own business. Etsy should be well positioned to capitalize on both. They’ve also been aggressively looking to expand both the areas they operate in and also internationally with their recent acquisitions of Depop (a global fashion resale marketplace) and Ello7 (the “Etsy of Brazil”). Finally, just check out that market cap. $25 billion is roughly 2% the size of Amazon (AMZN) and half the size of Ebay (EBAY). It seems like there’s plenty of room for Etsy to become a major player in ecommerce right now.

Verdict: Etsy is one of my favorite “new” ideas (if you can consider a company I started investing in a year ago “new”). They had huge growth during COVID, aren’t resting on their laurels, are growing and strengthening their network, and appear to have a long runway ahead of them for growth. Looking to hold this company for many years.

Fiverr (FVRR) – Now: $6 billion – Then: $48 to $60 billion

For Etsy, I mentioned an increase in people looking for “side hustles”. What better company to capitalize on that then Fiverr? If your answer was Upwork (UPWK), then my response would be that Upwork seems to be more geared towards contractors versus the side hustles I am thinking about, but I also don’t see why there can’t be multiple winners in this space. Like Etsy, Fiverr appears to be doing a great job of strengthening its network of buyers and sellers as well and starting to move “upstream” with Fiverr Business to capture some of that freelance work for businesses. The traditional employer / employee dynamic seems to be shifting. More people are demanding flexibility in terms of remote work and worker shortages seem to be putting employees back in the driver’s seat. I believe Fiverr will thrive in this new era.

Verdict: In case it wasn’t obvious, I’m also very excited about the future prospects for Fiverr. The recent large drop in the stock price after a slight decrease in future projections doesn’t have me worried at all. Looking to hold on for many years.

Redfin (RDFN) – Now: $5 billion – Then: $40 billion to $50 billion

Real estate is highly fragmented and Redfin currently has a market share of just around 1%. That market share has been rising slowly, but steadily, and I think the stickiness of the business and the value proposition that it offers means that those gains could accelerate over time. I think it’s very reasonable to think they could triple or quadruple their market share over the next 5 years. It’s a different business model, but competitor Zillow (Z) has a market cap of $40 billion right now, so it’s not at all unreasonable for a real estate company to reach those heights. Between their brokerage, mortgage, title, Redfin Now and Redfin Direct, they have a ton of areas they can grow into.

Verdict: I’m obviously super bullish on Redfin and love the risk/reward with this company. I do think it could take many years for the advantages that Redfin possesses to become obvious to the market, but I am quite content to hold onto my shares in the meantime.

fuboTV (FUBO) – Now: $4 billion – Then: $24 billion to $40 billion

Netflix and other streaming services can offer plenty of scripted content for people looking to cut the cord and leave cable, but live sports is a bit harder to come by. Fubo has the chance to be the go-to for people looking to fill that void. Additionally, there is a good chance Fubo can add on a compelling gambling offering as well. DraftKings (DKNG) is another gambling play with a market cap of $25 billion and Netflix obviously is much larger with a market cap of $260 billion. I believe video streaming will be big enough to have multiple winners, and while Fubo is a risky play right now, I do believe getting to the same market cap as DraftKings (and 1/10th the size of Netflix) is very achievable if they can execute.

Verdict: A few years ago, there was a lot of hype over marijuana legalization, but I thought that was overshadowing that sports gambling was becoming increasingly legal and accepted. I believe Fubo can benefit from that growing trend in addition to the obvious transition to streaming video. Excited to see where this company will be a few years from now.

ShockWave Medical (SWAV) – Now: $7 billion – Then: $56 to $70 billion

I’ll be honest, when I first created these categories and ranked Shockwave here, it was a $4 billion company. Unfortunately, it took me so long to getting around to writing this that it has already almost doubled. At the time, I thought a $32 to $40 billion market cap was attainable, but even I have to admit that $56 to $70 billion is a bit of a stretch. It’s obviously not unheard of for a medical device company to get that large, but a lot of the companies that I think are most similar tend to be under $50 billion.

Verdict: Even though I might not believe ShockWave can be a 10 bagger in the next 5 years, that doesn’t dull my excitement for the company. They still have an innovative solution for a problem that doesn’t seem like it will be getting any smaller anytime soon.

Nano-X Imaging (NNOX), DermTech (DMTK), and TransMedics Group (TMDX) – Now: $1 billion – Then: $8 billion to $10 billion

I started writing up descriptions for each of these companies separately when I realized that I kept repeating myself. So, to avoid unnecessary redundancy, I decided to just put them all together since they are all very similar companies (medical devices in the early stages of attempting to revolutionize their particular area) with similar market caps.

The case for any of these companies going up 10x should be an easy case to make after the above. If ShockWave can get to a $7 billion market cap, then Nano-X / DermTech / TransMedics can most certainly get to at least that large based on the potential they have to upend medical imaging / skin cancer diagnoses / organ transportation around the world. The reason for the lower market cap is undoubtedly because of the increased risk, as these companies are generally earlier along on the FDA approval process. Any of these could be huge winners, but there’s also an increased chance of

Verdict: That wide range of outcomes is why I am happy keeping all of these companies to a smaller position size for now. I love the upside, but there’s plenty of potential pitfalls as well. If/when the risk on these companies goes down some, there will be plenty of time to add to my position.

Your Thoughts

What do you think? A jump of 8x to 10x over 5 years is pretty extreme. Which of these have virtually no chance? I love to hear reasons why I am wrong so please let me know!