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Opportunity is Knocking
With inflation ticking up and fears of an economic recession looming, there have been a lot of sell-offs in stocks lately. The downturn has further fueled fears, and many investors are in a state of panic or indecision. There are plenty of the best stocks trading for significantly less than they were just 6 months or a year ago. Five of the best stocks to invest in now are detailed below.
The current market presents great buying opportunities for some of the best stocks! Many stocks were overvalued as recently as a year ago, with the market frenzy driving prices higher and higher without much focus on company fundamentals. But now many of the best stock are well below their 52-week and all-time highs. The opportunity to invest money into some great companies is there. The unemployment rate remains low at only 3.7%, and while some companies in Silicon Valley have initiated layoffs, many others are performing well and are poised to do even better in the year to come! The rebound from COVID remains strong for many and they continue to press forward. With stock prices declining, there are many solid companies that are ripe for the picking!
List of 5 Best Stocks Right Now
Hilton (NYSE: HLT)
The real buying opportunity with Hilton presented itself back in spring of 2020, when the stock took a serious pummeling due to the global onset of COVID. Travel, dining out, and the world as we know it essentially came to a standstill. Yet, human resiliency went to work with leading medical care professionals throwing all they had at this new and very concerning pandemic. The outlook at Hilton was bleak at the time. For those who remained confident and optimistic about the future, however, there was a great opportunity invest money at a really discounted price.
After trading at about $111 per share just two months prior, Hilton stock dipped to about $67 per share in May 2020, more than doubling your investment just 2 years later by simply buying & holding it if you were smart enough (or lucky enough) to have invested at that time. However, the world is still continuing to open up to increased travel, and Hilton is continuing to grow and expand operations! So, an opportunity to buy into HLT at an attractive price considering the long-term value still remains.
Hilton's stock is trading down nearly -10% year-to-date (YTD), and it's well off of its 52-week high of $167 per share. Despite any ups and downs in the stock price's movement, there is a clear long-term trend when we look at the past 5 years. A quick look at key profitability metrics also tells us that Hilton is performing superiorly relative to the sector median in most respects.
As a brand, it doesn't get much bigger and better than Hilton, which resonates high-quality around the world. The company's net debt-to-EBITDA ratio has fallen back to 2019 levels and the company seems to be trading at an attractive P/E ratio of about 30. And with increasing RevPAR (revenue per available room) and consistent earnings growth, I believe Hilton could see longer-term upside from here. A full recovery for the company with people itching to get out and travel, combined with a solid growth plan already in motion as indicated by the company, will create more value for investors.
Medpace Holdings (NASDAQ: MEDP)
For those not familiar with Medpace, it's a company that provides clinical, research-based drug and medical device development services. It operates across North America, Europe, and Asia, and its stock is highly attractive as an investment opportunity. The stock is down -2.46% in the past year, but it's also up more than +67% in the past 6 months! This has been driven by strong reports in Q2 and Q3 on performance related to both revenue and earnings. And with it currently priced at $220 per share, it's a bit pricey but still off of its 52-week high of $235 per share. The long-term prospects for this company appear to be very sound as well. It's definitely one to keep any eye on if you're worried about current price levels, but I anticipate the stock climbing as high as $269 per share within the next year. They have a lot in the pipeline stemming from new business awards.
Medpace Competitive Advantage
Medpace's strength lies in phase I-IV clinical trials across major therapeutic areas like Oncology (which made up 32% of FY21 Revenue), Metabolic Diseases 14%, Cardiology 10%, Anti-Viral and Anti-infective (AVAI) 10%, Central Nervous System (CNS) 11%, and Other 23%. For further context, pharmaceutical or biotech companies like Pfizer or Moderna often need to conduct clinical trials to successfully discover and market a drug. Some of those trials are done in-house while others are outsourced to third parties known as Contract Research Organizations (CROs).
Medpace is a CRO to the pharma and biotech industry. It is also a customer of choice in the aforementioned therapeutic areas for small and midsize biotech companies. It operates on a contractual basis as a CRO, with contracts awarded through request for proposal (RFP) processes. As seen below, Net New Business Awards have steadily ticked up over the most recent quarters, providing an increased funding environment for the company. This will ultimately translate to increased revenues and profits.
Medpace sets itself apart as a CRO in the industry with a focus on full service at a fixed price with no ancillary services. In contrast, Medpace's peers tend to offer ancillary services which takes away from their focus and, I believe, the development of any real expertise. Trying to focus on too many areas prevents mastering any one! So, I believe Medpace's focus is an asset to the company. Medpace also focuses on small-to-mid size biotech companies. That's part of it's niche business strategy, whereas most of its competitors tend to solely focus on industry giants.
Medpace Financial Analysis
MEDP is also tremendously profitable and has continued to grow return on invested capital (ROIC) and return on equity (ROE) consistently even through the height of the pandemic period. In the past 4 years, revenue has grown at a 17.5% compounded annual growth rate (CAGR) versus 14.5% for its peer group. Other key financial metrics are highlighted in the chart below with figures from '18 through '21 and inclusive of the trailing twelve months (TTM). We see strength in the numbers. There's a clear trend of growth in key areas. The numbers reflect good profitability and sound management practices with a focus on shareholder value. It's pretty clear why this is one of the best stocks right now.
Medpace is one of the best stocks to invest in right now. It's one of the best stocks in a number of respects, but as always, be sure to do your own research before making any investment decisions. The current price level may be a bit high, but with a P/E of 30 it still remains reasonably priced. This is especially the case when compared to peers, and the focus should always be on the long-term.
As with any investment as well, MEDP is not without risk! The funding environment is the most critical risk factor for all CROs, including MEDP. A significant reduction in funding driven by, for example, changes in health and regulation could adversely impact its business. Other adverse implications could be reductions in R&D spending or underpriced contracts (which are based on fixed terms).
LuLu Lemon Athletica Inc. (NASDAQ: LULU)
The stock of Lulu Lemon is currently trading down -25% in the past year, but it's up +26% in the past 6 months. It's also trended up pretty nicely over the length of its trading life with a hiccup over the past couple of years due to COVID. It's one of the best stocks for long-term investment, and it's up +417% over the past 5 years! The brand has pushed itself into the circle of elite athletic brands, so the value of the stock still has plenty of upside in its future outlook.
The company's primary market is premium female yoga and athletic apparel, but it now has a growing menswear segment. Products are distributed via two channels, company-operated stores and an e-commerce platform. To allow for control over pricing, discounting, expenses, product assortment, and marketing, the company sets itself apart from competitors by not wholesaling its products. You have to buy directly from Lulu Lemon! Retaining such control aids in maintaining the quality of the brand.
LULU's Future Outlook
Lulu Lemon's "Power of Three x2" five-year strategic plan showcases its three key priorities:
- Product innovation - product differentiation entails a higher percentage of nylon microfibers than a traditional polyester blend, with bacteria/smell resistance to survive more washes than similar products. LULU products are more expensive as a result, but are also of better quality. Customers are willing to pay more because the brand's quality is valued.
- E-commerce - the COVID pandemic boosted this channel, which now accounts for ~45% of total sales. Continued growth of this channel aligns with the overall trend of business. It also presents opportunity for higher profits since the e-commerce division operates on higher margins.
- International expansion - sales outside of North America are currently ~16% of revenue as of Q2 2022. It's building its brand overseas and most promisingly in China. China makes up the second-largest activewear market in the world, where it has a significant opportunity for new stores and online sales.
LULU Financials vs Peers
Compared to the Industry Average, we see LULU with a very strong standing. Key metrics indicate management's effectiveness in managing retained earnings, assets, and wealth creation for shareholders. Return on assets, return on equity, and return on invested capital are all strong.
We also observe dominant statistics as applies to profitability. LULU fairs very well against top competitors such as Adidas (ADDYY) and VF Corp (VFC), the maker of North Face products in EBITDA Margin, ROE, asset turnover, and other key metrics.
Etsy, Inc. (NASDAQ: ETSY)
Etsy stands out with a platform that connects crafty makers of things with customers looking for unique e-commerce products. Like a lot of e-commerce platforms, Etsy too benefited significantly from the COVID pandemic, as more business moved online. But Etsy absolutely killed it, growing at more than twice the rate of overall e-commerce! Its growth has been pretty spectacular across all product categories. That's why its considered one of the best stocks right now. And Etsy not only survived when Amazon rolled out its own handmade items platform; it won. But this could still be the early days of an excellent long-term growth story.
Etsy Financial Analysis
Revenue over the past year has grown 11% versus prior year, and free cash flow margins have remained strong at 27%. Etsy is consistently profitable and generates strong free cash flows, so I'm not overly concerned with the fact that its cash & cash equivalents line on the balance sheet has recently declined while debt has increased. It has made some recent acquisitions to facilitate growth, and it's clear the company is reinvesting in the business. The company continues to manage its costs and investments well. It has struck a good balance between growth and profitability, so I'm expecting that an improved balance sheet will transpire over the next couple of years. Reinvestment will translate into increased business, profits, and returns!
The above charts highlight the strength of ETSY in a number of areas. We can observe high levels of returns - ROE, ROA, and ROTC - indicating management's effectiveness in leveraging assets and invested capital while also driving wealth creation for shareholders. And eyeballing the top chart demonstrates clear trends in top-line (revenue) and bottom-line (profits) figures, as well as margins. All trending at healthy levels.
I believe Etsy to be a high-quality business with a solid competitive advantage. It has strong brand awareness and an established network effect, which resonates well with users. The current pressure driving the stock down largely stems from economic factors. But the current share price could prove to be great money investment for the long-term. Because of its business model and brand strength, the market opportunity is huge for Etsy. And, with the stock recently suffering a decline (down from a 52-week high of $307 per share), now could be a great time to give it more careful consideration.
Adobe (NASDAQ: ADBE)
Adobe provides digital media design and publishing solutions that allows customers to securely edit, create, share and scan digital documents across devices. Adobe's stock is down -52% in the past year and is trading at a P/E multiple of 24.28. The decline is largely driven by the sell-off of overvalued tech stocks as a whole recently.
Also contributing to the stock's decline was a recent announcement of an acquisition of Figma for a whopping $20B. Figma is a cloud-based design software company that actually competes directly with Adobe. The belief by many investors is that the company overpaid for Figma. However, many working professionals feel like Figma's products are superior to Adobe, so the acquisition was actually strategic. It took out the competition and it absorbed superior technology into their product line-up. Smart move by management, in my opinion! This is a long-term, strategic play. So, I believe the decline has simply provided a great money investment opportunity. Adobe is in one of the best companies in the software business.
Per the charts below, both revenue and earnings have demonstrated clear upward trends in the 5 years through Dec 2021. And projections for those metrics are poised to maintain those trends as well.
Adobe still maintains a strong balance sheet with $5.8B in cash and only $3.627 billion in long-term debt so far. Overall, the company has $26.7B in total assets and only $12.4B in total liabilities. A look at other key financial metrics in comparison to the industry average and key competitors, such as Salesforce (CRM) and SAP, demonstrates Adobe's dominance in the industry. See below:
Adobe Future Outlook
Adobe had over 26 million subscribers at the end of 2021, and that number has grown pretty rapidly in recent years. Online advertising, the acquisition of Figma, the release of new products, and upgrades of existing products, will all continue to fuel growth. It has what I would consider to be a very strong competitive advantage highlighted by its brand awareness and its software's ubiquity.
I can personally attest that Adobe's products are simply the best on the market for anyone wanting to edit photos, edit videos, etc. Its unique pdf format is also widely used both professionally and personally. Adobe only had one truly big competitor, and that was Figma which it recently acquired! There are also high switching costs for users who have familiarity with using Adobe products, especially as applies to its enterprise customers. This one is win in my opinion, and the long-term should prove a very beneficial finance investment.
Considering the state of the market right now, there's actually no shortage of solid money investments for stocks right now. The above list are 5 of the best stocks on my radar right now. There are also other great buying opportunities including Microsoft and Starbucks. Both of these are very well positioned in their respective markets for the long-term. Take position to move forward with wealth creation. Stay abreast to Raising InvestorIQ (please subscribe) for investment analysis and other investing resources to remain informed and connected!
The information provided on this site is based on my own personal experience, research, and analysis, and it is not to be construed as professional advice. Please conduct your own research before making any investment decisions. I am not a professional financial advisor, stockbroker, or planner, nor am I a CPA or a CFP. The contents of this site and the resources provided are for informational and entertainment purposes only and do not constitute financial, accounting, or legal advice. The author is not liable for any losses or damages related to actions or failure to act related to the content on this website.