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All Contents © 2019The Kiplinger Washington Editors
By Will Ashworth
| December 5, 2017
Care to guess how many stocks have gained 30% or more so far in 2017? According to Finviz.com, out of 1,747 stocks with a market cap of $2 billion or higher, 555 have delivered YTD performance of 30% or more. Naturally, as 2017 comes to a close, most investors will dwell on the ones that got away this past year.
With the benefit of hindsight, there were a couple of seeming no-brainers that anyone could have picked: Weight Watchers International (WTW), Oprah's little darling, and Universal Display (OLED), whose reign at the top of the Organic Light Emitting Diodes (OLED) display industry shows no signs of letting up. It's easy to look back at the year that's passed and wish you'd bought these two stocks that are up 276% and 231% year to date, respectively.
There are plenty of others. You can learn a lot from the stocks you didn't own this year that will help you be a better investor next year. Here are 10 stocks I wish I'd owned in 2017.
Prices and data are from the original InvestorPlace story published on Nov. 30. Click on ticker-symbol links in each slide for current prices and more.
The sale of new homes in the U.S. hit a 10-year high in October, an indication that Americans have forgotten about the housing crisis almost a decade earlier. One company that benefits directly from a robust housing market is Sherwin-Williams (SHW) whose paints and stains are a welcome addition to any home, new or existing.
"The Valspar integration plans and synergy progress is in line with our expectations. We remain focused on strengthening the performance of our core businesses and our newly acquired businesses," stated CEO John Morikis in its Q3 2017 earnings report. "We have implemented appropriate pricing initiatives to offset increasing raw material costs, and continue to focus on volume improvements in all businesses and all regions."
Sherwin-Williams completed the acquisition of Valspar in June. It first announced it was buying its competitor in March 2016. Up 49% year to date through Nov. 28, 2017, the writing was definitely on the wall heading into 2017.
Another beneficiary of a healthy housing market is Mohawk Industries (MHK), a manufacturer of flooring and carpet. Its stock is up 40% year to date, double the S&P 500. Interestingly, MHK stock hasn't had a negative calendar year return since 2008, the year the housing market went in the tank.
A $10,000 investment in Mohawk Industries at the beginning of the bull market back in March 2009 would be worth a little more than $163,000, an annualized return of 37.6%.
Mohawk Industries announced Nov. 20 that it is acquiring Godfrey Hirst Group, Australia and New Zealand's largest flooring manufacturer with $334 million in annual sales. Although the company didn't reveal how much it was paying for the company down under, it did say it would be accretive to earnings in the first 12 months.
"Mohawk is using its strong management team and balance sheet to increase its participation in the global flooring market," stated Mohawk Industries CEO Jeffrey Lorberbaum. "With Godfrey Hirst, Mohawk will become the leader in flooring products in both Australia and New Zealand with a platform for significant growth."
Earlier this year I wrote an article about three ETFs I thought should never be in your portfolio calling them "The 3 Worst ETFs in the World". One of them, the Spirited Funds/ETFMG Whiskey & Spirits ETF (WSKY), made the argument that we are at the beginning of a 25-40 year supercycle for the demand of whiskey and spirits.
I made the argument that you should just buy Diageo (ADR) (DEO) as a proxy for the whiskey industry and forego the management fee.
"Why pay an annual management fee of 0.75% when you can simply buy Diageo stock—a good proxy for the liquor industry and the largest producer in the world—and do so for no more than the brokerage commission?" I wrote Feb. 2.
It was right there in front of me.
I all but agreed with the ETF provider's thesis that whiskey was on the rise. I even revisited the ETF in September and admitted that I was too hard on WSKY. That it made sense to own if you wanted to capture a bunch of companies that didn't trade on the NYSE or Nasdaq.
As Diageo was the top holding when I first wrote about WSKY, I knew it had a chance to have a good year in the markets and it did up 39% year to date.
Like most investors, I didn't see the iPhone X being such a huge success for Apple (AAPL).
Many experts were pointing to a slowdown in smartphone sales—or at least a plateau—heading into 2017 and given the higher price of Apple's new phone; it didn't look good for the world's largest publicly traded company.
Over Black Friday weekend, Apple is said to have sold six million iPhone Xs, many of them with 256GB of storage, making its most expensive phone ever sold, even costlier for those who doled out a G-note.
With 15 million sold in just three weeks, Apple is set to deliver a strong holiday quarter.
In early February, I predicted that Apple's recurring services revenue would take AAPL stock to $200. It now appears that the iPhone won't be relegated to passenger status as we enter 2018.
Up almost 50% year to date, I wish I'd pulled the trigger earlier in the year, but you can't own them all.
The minute LaCroix showed up on my local grocery store's shelves, I should have been buying National Beverage Corp. (FIZZ) stock.
Living in Canada, we sometimes don't get hot products until they're bursting at the seams. The mere appearance of the popular line of flavored sparkling waters was a confirmation of the drink's popularity. A buy signal if there ever was one.
Up 113% year to date, many believe there are more gains to be had with FIZZ stock in 2018.
Susquehanna just upped its 12-month target price from $108 to $150 suggesting there's a 25% chance it will be sold; however, even without a sale, the brand's revenues and overall profitability bode well for the stock.
Mad Money's Jim Cramer sees a big short-squeeze happening with FIZZ stock recently recommending that younger investors can take a chance with this stock despite the enormous gains over the past year.
Who knew sparkling water could be so popular? They said the same thing about energy drinks.
If you're unfamiliar with Noah Holdings Limited (ADR) (NOAH), it's a rapidly expanding Chinese asset management firm focussing on high net worth investors in the country.
I first recommended NOAH in 2013 when it was a much smaller company with annual revenues of just $87 million. Today, annual revenues are approaching $500 million with 20% operating margins.
Up 243% since June 2013 and 99% year to date, NOAH had been either hot or cold since its IPO in November 2010.
The company expects its non-GAAP net income in fiscal 2017 to increase by a minimum of 14% to $125 million. Look for its online wealth management platform to continue to experience rapid growth in 2018. In Q3 2017, its internet business saw revenues increase by 172% year over year but is not yet profitable.
With China's economy coming back to life in 2017, I should have known that financial services companies would have been a prime beneficiary of the renewed growth.
I first heard of Camping World Holdings Inc (CWH) because of CEO Marcus Lemonis's CNBC show, The Profit, which helps small businesses succeed. Little did I know that he walks the talk he dishes out on his show.
Since taking his company public in October 2016 at $22 a share, CWH stock is up 109% through Nov. 29. It continues to benefit from a hot RV market that's getting buyers from all kinds of customers including millennials.
"RV sales have been growing rapidly and have already surpassed their mid-2000s peak. RV dealer Camping World Holdings could be the biggest beneficiary of the trend. The company 'not only sells the units, but also can capture high-margin service revenue,'" BMO Capital Markets analyst Gerrick Johnson said in a Nov. 25 Barron's article. "Young adults who are buying their first RVs or trailers often finance their purchases and are more likely to pay for servicing, rather than doing it themselves."
Could I have seen its 43% gain in 2017 coming? You bet.
Atlantic magazine ran a story in December 2016 that showed how RV sales follow the economy both up and down.
"We've been a leading indicator up and down for decades now," said Kevin Broom, a spokesman for the Recreational Vehicle Industry Association, the trade group representing the industry. "It's a large discretionary purchase that people borrow money to make."
RV sales have headed higher since the 2009 market bottom and are getting very close to breaking the 2006 record.
Another sign the economy is healthy is that both the major credit card payment processors' stocks are doing well in 2017—Visa (V) and Mastercard (MA) are up 42% and 45% year to date respectively.
Could we have seen it coming?
I do think there were signs the economy was growing as we entered 2017 despite a wobbly retail industry. Fortune ran a story in November 2016 that suggested Americans would have more than $1 trillion in credit card debt by the end of the year, the first time since 2008.
"That high-water mark is actually an encouraging sign of economic recovery," stated Fortune contributor Matthew Heimer. "Since the Great Recession, Visa, MasterCard, American Express, and Discover have become increasingly efficient profit machines. In 2016 they're on track to post $20 billion in earnings on $70 billion in revenue, according to S&P Global, up from $9.6 billion and $48 billion, respectively, in 2010."
So, yeah, we could have seen it coming. Maybe not the returns Visa and Mastercard have managed to deliver for shareholders in 2017, but better than the single-digit returns of 2016.
As the economy goes, so goes Visa and Mastercard.
Sometimes it pays to listen to your advice.
If I had done so last December, I might be sitting on a 105% gain after recommending buying Alibaba Group Holding Ltd (BABA) stock as it dropped close to $80.
"Could BABA stock really be headed for e-commerce oblivion simply because a single man, albeit a powerful one, is opposed to China's currency manipulation?" I asked December 8. "Alibaba's $2.1 billion in free cash flow for Q2 makes BABA stock a sound investment. Understanding that its main source of revenue is relatively protected from competition, it's vital that investors figure out what this means for the BABA stock price. Fear of the unknown has created significant volatility in BABA stock. Trump in office clearly won't change that."
Interestingly, since then, BABA stock has been relatively free of volatility.
Regardless, I've liked Jack Ma's vision for Alibaba for some time and have written several positive articles about the company in 2017.
I should have been a buyer of its stock.
Arcos Dorados Holding (ARCO) is the world's largest McDonald's (MCD) franchisee with more than 2,100 restaurants in Latin America and the Caribbean.
In January 2017, I called ARCO one of "The 3 Best Restaurant Stocks to Buy in 2017". It's up 90% year to date. Call it my revenge pick after being horrifically wrong about the stock in 2011.
Earnings and same-store sales excluding currency devaluations were healthy heading into 2017. In the third quarter ended September 30, 2017, the company's systemwide comparable sales were up 10.4% year over year with net income of $23.4 million, a big turnaround from the $1.8 million loss a year earlier.
I might have missed buying ARCO, but that doesn't mean you should. If you can handle the obvious risks of a Latin American investment, I see a better outcome for its shareholders six years from now.
This article is from Will Ashworth of InvestorPlace. As of this writing, Ashworth did not personally hold a position in any of the aforementioned securities.
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