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All Contents © 2017The Kiplinger Washington Editors
By James Brumley
| June 2017
We're halfway through 2017, and so far, so good. All the major market indices have made their way into record-high territory within the past few weeks, and the S&P 500 is up nearly 9% since the end of 2016. That’s well ahead of where it would normally be at this point in the year, and it’s being led by 60%, 70% and 80% performances by the index’s best stocks.
Investors can’t afford to go an autopilot, though … especially considering most stocks are pushing their valuation limits. Now more than usual, it will pay to be picky.
With that as the backdrop, here’s a rundown of 10 of the best stocks to buy for the latter half of 2017. Some of these stocks earned a spot on the list for technical reasons, while others are fundamental bargains. Still others are heading for massive growth.
In all 10 cases, though, there’s something outstanding that makes these stocks better than most other names to choose from.
In no certain order …
Prices and data are from the original InvestorPlace story published on June 26, 2017. Click on ticker-symbol links in each slide for current prices and more.
This slide show is from InvestorPlace, not the Kiplinger editorial staff.
When investors think of an aerospace and defense stock, companies like Textron Inc. (TXT) generally don’t come to mind. With a market cap of only $12 billion, TXT just doesn’t turn many heads.
That doesn’t mean it’s not worth owning. Indeed, here in the middle of 2017, Textron is a hidden gem within the world of defense.
Textron is not only the name behind Bell helicopters, but it’s also the owner of Cessna and Beechcraft aircraft. More relevant in light of a rekindled war on terror and more aggressive regimes though, Textron makes drones (air and sea), armored military vehicles, electronic warfare systems and more.
Much of it is the stuff you don’t think about — and rarely see — but it’s all important in the support of the strong defense initiatives that President Donald Trump seems to want.
The market’s opinions on internet giant Alphabet Inc. (GOOGL) may run hot and cold, but a closer look at the company’s historical results reveals the company’s revenue and earnings growth is a picture of consistency.
Alphabet, parent company of Google, is now into its 12th straight year of revenue growth.
It’s not just annualized revenue growth. In almost every single quarter during that timeframe, year-over-year sales have grown, and for all intents and purposes, quarterly earnings have done the same.
In other words, love it or hate it, Alphabet is a juggernaut. That consistency alone is enough to earn it a spot on a list of stocks to buy for any six-month stretch.
You may not be familiar with the name Constellation Brands, Inc. (STZ), but odds are good you’re familiar with at least some of the brand names of booze it sells. Constellation owns Corona, Wild Irish Rose, Woodbridge, and other popular beers and spirits.
Its brand names alone make STZ one of a few great stocks to buy for the rest of the year. But it’s not a quality product alone that puts Constellation Brands near the top of a relatively short list of potential purchase.
Alcoholic beverage stocks tend to do well even when the rest of the market is struggling, as beer and liquor are just one of those vices most consumers don’t give up even when times are tough.
It’s mostly a perception thing, but that doesn’t mean the strategy doesn’t pay off.
Garmin Ltd. (GRMN) is a company most investors are familiar with. It got its start years ago when then-new GPS and satellite-positioning technologies made in-car digital mapping a possibility.
Since then the company’s branched out, wading into wearables and action cameras.
And (surprise!) Garmin is actually growing the top and bottom lines. Its results are a little uneven and its growth is anything but red-hot. But GRMN shares are priced at less than 15 times the company’s trailing 12-month earnings, so investors can justify a little fiscal inconsistency.
Bonus: The dividend yield of 4% is generous, too.
Don’t sweat it if you haven’t heard of Cutera, Inc. (CUTR) — most people haven’t.
Cutera makes cosmetic surgery technology, and while it’s tops in its respective field, that’s not exactly a high-profile arena.
What makes CUTR worthy as one of a few stocks to buy as we enter the back half of 2017 is the sales growth that has materialized just within the past couple of quarters, and the subsequent swing to a profit. Sales were up 26% in the fourth quarter of last year, and the company doubled its earnings. The first quarter’s numbers weren’t quite as impressive, but still encouraging. Its new enlighten III platform was a key growth driver, and its recently-approved truSculpt technology holds a lot of promise.
It’s small, even by small cap standards, so be smart about handling it if you wade in. But Cutera could be one of the best stocks to buy over the next year or so, as 2017 could be a real breakout period for CUTR.
Analysts certainly think so. They’ve modeled more than a doubling of the bottom line, and revenue growth of nearly 19%.
If you’ve ever been in an Ulta Beauty Inc. (ULTA) beauty supply store, you’ll know why it has earned as spot on a list of stocks to buy for the second half of the year.
It’s usually packed.
There’s rarely a bad time to step into this stunningly reliable growth machine. The evidence: Last year’s top line of $4.85 billion was 23% better than 2015, and the bottom line of $410 million grew 28% year-over-year.
The kicker here is the fact that ULTA shares didn’t have a great June, sliding more than 6% from April’s close. That dip means you don’t have to pay as steep a premium as you did earlier this year to get into this seemingly untouchable, mostly Amazon.com, Inc. (AMZN)-proof retail growth story.
A year ago, cybersecurity company FireEye Inc. (FEYE) looked like it was hanging by a thread. A string of expensive acquisitions meant its losses were growing at a faster rate than the top line was, and there was no end in sight to the bleeding.
What a difference a year makes.
FireEye is still losing money. A lot of money. The losses are starting to shrink, though, as the newly implemented SaaS model appeals to a growing audience of subscribers that provide the company with ever-growing recurring revenue. Its threat-intelligence platform is starting to resonate with IT professionals, too.
With hacking and cyberattacks only expected to get worse, FEYE is right where it wants to be.
You may have held or even bought a product made by Deluxe Corporation (DLX) without even realizing it. The company prints a variety of business forms as well as checks, plus all the bells and whistles that go with them.
It’s a great business to be in. Though it seems as if it would be cyclical in nature (and to some extent, it is), forms and checks are the milk and bread of the business world. That is to say, they’re usually bought regardless of the economic environment simply because it’s difficult for an organization to function without them.
The proof comes in the form of 5% earnings growth this year, and almost 6% earnings growth projected for next year. It’s not jaw-dropping, but it’s dependable.
That being said, DLX is a particularly worthy addition to a list of stocks to be in the near future, as it may be ripe for a turnaround. The stock has fallen nearly 4% year-to-date to wildly underperform the market, and it’s down 8% from its January highs.
That seems foolish amid Deluxe’s ongoing growth.
AT&T Inc. (T) doesn’t need an introduction. It’s one of the primary powerhouses in the telecommunications world, servicing millions of customers with its wireless, television and broadband offers, turning it into $168 billion worth of revenue last year alone.
It’s that size, in fact, that makes AT&T so easy to own … I doubt the company will ever be muscled out of any of the market’s it’s in.
Now, those investors who know the AT&T story well likely know the first quarter’s top line was unusually weaker than the year-earlier quarter’s revenue tally, with the organization struggling to win new market share (one of the downsides of being so big is that you often compete against yourself).
But this is AT&T. It finds a way. Some of the ways it’s positioning for near-term growth is developing an impressive connected-car business, gearing up to dominate the advent of 5G connectivity, and of course, jockeying to consummate the acquisition of Time Warner Inc. (TWX), which will open up a whole new world of media content.
T shares are down 10% year-to-date, but once the market starts to connect the dots, that’s apt to change.
Last but not least, put Discovery Communications Inc. (DISCA) on your list of stocks to buy before we get too deep into the second half of the year.
This is the same company that owns and operates The Discovery Channel, but that’s hardly all it does. Discovery Communications also owns TLC, Animal Planet, American History Channel, Eurosport and others.
What makes the stock so compelling isn’t the deep base of content the organization brings to the table though. It’s the company’s CEO, David Zaslav.
Zaslav has his finger on the exact pulse of where the telecom business is going … to a model that leans on the so-called “quad play” where television, internet, phone and wireless service all work in perfect harmony. Rather than responding to it, Zaslav is making sure his company leads that charge.
His insight hasn’t helped DISCA stock much this year; it’s down about 6% since the end of December. The company’s on the right track, though, and won’t be allowed to linger too long at its trailing P/E of 13.5.
This article is from James Brumley of InvestorPlace. As of this writing, James Brumley was long T.
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