Options

How To Generate Income On Tesla’s (TSLA) Plunge

Of all the selling going on in the stock market these days, no sector has been hit harder than tech. Although I believe the overall selling has been too harsh, the tech sector was certainly overvalued relative to other sectors.

Keep in mind, the tech sector has almost always been the biggest area of growth, so it does make sense to some extent that its companies would have the highest valuations. However, there were certainly some companies whose valuations were very difficult to justify.

Of all the ultra-pricey stocks out there, probably none was frothier than Tesla (NASDAQ: TSLA). Of course, Tesla has been a cult stock for some time, and its CEO Elon Musk could basically do no wrong. By the way, some people call TSLA an automotive stock, others an energy stock, but above all else, it’s a technology company.

Take a look at the chart of TSLA over the last 3 years. You can see the huge jump last year and the big selloff over the past week.

The selloff was sparked by production concerns over the company’s Model 3 automobile. The highly sought-after $35,000 electric vehicle is not being produced as fast as expected. There is real concern that buyers will walk away as they become frustrated with the wait time. TSLA has simply not been able to keep to their ambitious production schedule.

Between the tech selloff, the sky-high valuation, and the production issues, TSLA certainly has plenty of short-term bearish catalysts. Could we see a drop all the way to $200 or below in the next six months? At least one big options trader thinks it may be possible, but also is prepared if the stock goes right back up.

This trader sold a massive September straddle in TSLA at the 265 strike. Selling a straddle is when a trader sells a call and a put at the same strike in the same expiration. It’s a strategy used when the strategist believes a stock is going to be range-bound, or settle at or near a certain price at expiration.

In this case, the trader believes TSLA won’t be too far from $265 in September (right about the current price as of this writing). How can he or she be so sure? Well, in this case, the trader has a huge range to work with because the straddle was so expensive.

Selling the straddle generated a credit of $78! That means the stock would have to close lower than $187 or higher than $343 at September expiration to lose money. That’s a gigantic range, and any price in between those strikes means the trade is profitable. At max gain of $265 at expiration, the straddle seller – who sold 800 straddles – would make over $6 million.

So is this sort of trade you and I should do? Definitely not. We don’t want that kind of risk, or more importantly, the kind of margin necessary to hold a short straddle in our portfolio. Instead, we can generate decent income by selling put spreads in TSLA.

While TSLA has its share of problems, the company’s products are also extremely popular (and typically high quality). Elon Musk has always been successful at whatever large company he’s been behind (PayPal (NASDAQ: PYPL)Space X, SolarCity). As such, I believe there’s a floor on TSLA’s stock price, at least for the next several months.

The straddle seller is protected down to $187 and until September. Let’s say we wanted to cut some time off that and look at June options. Selling the 180-190 put spread in June (selling the 190 put, buying the 180 put to cap risk) would generate about $1.00 in income.

Now, you’d risk $900 for every $100 you generate with this type of trade, so you would only do this strategy if you feel TSLA isn’t going below $200 or so. Also, if TSLA does continue to drop, you’d want to roll or close your positon pretty quickly. However, if you are believer in TSLA, this is the sort of strategy you could use every 3 months to generate additional income in your portfolio.

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Source: Investors Alley 

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The 10 Worst Stocks to Buy for Q2

After a 14-month bull run, the stock market has seen a return in volatility of late — and a few big sell-offs. It’s clearly a more nervous market, and that means investors have to be more careful in choosing what stocks to buy.

That means sticking with quality stocks and avoiding those that can blow a hole in your portfolio. These 10 stocks all continue that level of risk.

In a bull market, in some cases those risks are worth taking. Ahead of what looks like a potentially dangerous second quarter, however, investors should steer clear of these 10 stocks.

Worst Stocks to Buy: Blue Apron (APRN)

Worst Stocks to Buy: Blue Apron (APRN)

Source: Shutterstock

Blue Apron Holdings Inc (NYSE:APRN) has been one of the worst IPOs in recent memory. At $2, APRN stock has lost 80% of its value from its IPO price in June. And bear in mind that the $10 price was well below the original range of $15-$17 per share.

All the way down, APRN has attracted buyers. The stock even posted a short-lived rally in December. But the fact remains that there’s basically no price where Blue Apron stock is cheap enough.

2018 numbers should be better in terms of both profitability and cash flow. But Blue Apron still expects to lose money even at the EBITDA line — and to burn cash. With debt coming due in August 2019, there’s a possibility that APRN could go to zero within eighteen months, as I argued last month.

Even if that worst-case scenario doesn’t play out, there’s little reason to chase APRN at these levels. Q1 results don’t look likely to be notably better, as the company still is working through the addition of a new distribution center in New Jersey. Competition is intense, with Walmart Inc(NYSE:WMT), Kroger Co (NYSE:KR) and even Weight Watchers International, Inc.(NYSE:WTW), among many others, entering the meal kit space.

$2-per-share might sound cheap, but APRN still is valued at nearly $400 million. And with a mid-term path toward zero, there’s no price cheap enough for Blue Apron stock.

Worst Stocks to Buy: Chipotle (CMG)

Worst Stocks to Buy: Chipotle (CMG)

Source: Shutterstock

There is a case to buy Chipotle Mexican Grill, Inc. (NYSE:CMG) at these levels. The impact of the company’s food safety issues is receding. A new CEO has sparked optimism, as Luke Lango argued last month. The company expects positive same-restaurant sales in 2018, and new stores will add to revenue growth.

But I’m not buying CMG, particularly with a quick and steep rebound after a disappointing Q4 earnings report in February. A new CEO can help, but his impact isn’t going to be seen in Q1. The entire restaurant industry looks rather weak, particularly for operators like CMG as opposed to franchisors like McDonald’s Corporation (NYSE:MCD) and Yum! Brands, Inc. (NYSE:YUM).

And CMG already is pricing in quite a bit of turnaround. The stock trades at over 50x 2017 EPS and 38x 2018 consensus. Those are huge multiples for a still-struggling company in this kind of market. And after the past few quarters, I certainly wouldn’t enjoy being long CMG ahead of Q1 earnings this month.

Worst Stocks to Buy: Fossil (FOSL)

Worst Stocks to Buy: Fossil (FOSL)

Source: Joe King via Flickr (Modified)

Fossil Group Inc (NASDAQ:FOSL) had one of the best first quarters in the entire market. A blowout Q4 report in February sent the stock up a stunning 88% in a single session.

But the optimism seen in February already has started to fade. FOSL stock has pulled back over 20% from post-earnings levels. And a short squeeze no doubt drove at least some of the gains: FOSL was the most heavily-shorted stock in the Russell 3000 ahead of earnings, according to Bloomberg.

There is some good news here. Strength in wearables led to the surprising Q4 results, as it offset weakness in traditional watches. FOSL stock still isn’t that expensive, trading at ~5x FY18 EV/EBITDA guidance and ~13x implied non-GAAP EPS.

Still, long-term challenges persist. Even with the strong Q4, full-year same-store sales still fell 6%. The optimism toward the wearables business may be premature. Apple Inc. (NASDAQ:AAPL) has had some success, but Fitbit Inc (NYSE:FIT) has struggled mightily.

Meanwhile, earnings multiples aren’t out of line for brick-and-mortar retail — and suggest a stabilization in profits. With Fossil still guiding for profits to decline in fiscal 2018, that seems premature. FOSL did squeeze the shorts, but lightning isn’t likely to strike twice in Q2.

Worst Stocks to Buy: Barrick Gold (ABX)

Worst Stocks to Buy: Barrick Gold (ABX)

Source: Shutterstock

Heading into Q2, I can see the case for Barrick Gold Corp (USA) (NYSE:ABX). Barrick was the world’s largest gold producer in 2017. Gold has risen for three straight quarters, and could rise more in Q2. More market volatility, geopolitical tension, or any macro concerns could stoke demand for gold as a “safe haven”. Meanwhile, ABX is bouncing off a multi-year low, and looks cheap at under 17x forward EPS.

But that’s kind of the point. Barrick hasn’t benefited from the recent spike. Gold is up 16% since the beginning of 2017. ABX is down 22%. Gold has risen nearly 50% over the past decade; ABX has declined 72%.

That problem isn’t going to change in 2018. Barrick’s disappointing production guidance helped send Barrick stock to that multi-year low. Goldcorp Inc. (USA) (NYSE:GG) is likely to take Barrick’s crown as the top gold producer. Issues in Zambia and a settlement in Tanzania provide further pressure.

Gold indeed may rise again in Q2 — and ABX may follow. But given the long history here and the slow pace of Barrick’s turnaround make it a poor choice to play a higher gold thesis. Investors would be much better off buying GG, Newmont Mining Corp (NYSE:MEM) — or gold itself.

Worst Stocks to Buy: Deutsche Bank (DB)

Worst Stocks to Buy: Deutsche Bank (DB)

Source: Metropolico.org via Flickr

The long-running turnaround at Deutsche Bank AG (ADR) (NYSE:DB) simply hasn’t taken. DB shares have bounced off a three-decade low reached in 2016. But a recent sell-off has pushed DB back below $14, with returns even from those lows barely over 20%. In the meantime, fellow investment banks like Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS) have soared.

The case for a long-term turnaround isn’t dead. There is some potential value in Deutsche Bank stock. But it’s highly unlikely investors will enjoy the next couple of months. The company already admitted that planned cost cuts would be delayed. Rumors are swirling around the future of CEO John Cryan — with reports suggesting multiple candidates already have turned the job down.

Deustche Bank looks like a mess, plain and simple. And with speculation likely to swirl throughout the quarter, and further hurt morale and the company’s competitive position, that mess isn’t getting fixed in the next three months.

Worst Stocks to Buy: Walt Disney Co (DIS)

Worst Stocks to Buy: Walt Disney Co (DIS)

Source: Richard Stephenson via Flickr (Modified)

The long-term case for Walt Disney Co (NYSE:DIS) remains up for debate. I remain skeptical toward DIS, largely due to the long-running (and very real) concerns surrounding the key ESPN unit.

The short-term case, however, looks outright bearish. Disney is trying to acquire assets from Twenty-First Century Fox Inc (NASDAQ:FOX, NASDAQ:FOXA) — a deal the market sees as necessary for Disney to build out its content empire. But Comcast Corporation(NASDAQ:CMCSA) is stepping in to bid for Sky PLC (ADR) (OTCMKTS:SKYAY), which Fox itself is trying to buy. And that deal potentially could wind up scuttling the entire Disney-Fox tie-up — or push Disney to up its bid.

There’s going to be a lot of speculation, and a lot of uncertainty, over Disney’s M&A over the next few months. And in this market, that’s probably not going to be a great thing for DIS stock. DIS already fell 6.6% in Q1, and between Fox and what looks like an accelerating trend toward cost-cutting, Q2 would be worse. There is value here, and the company’s new streaming service could drive growth in the future. But until then, and without a lower price, DIS looks likely to at best continue its range-bound trading of the last three years.

Worst Stocks to Buy: Under Armour (UA)

Worst Stocks to Buy: Under Armour (UA)

Source: Shutterstock

Under Armour Inc (NYSE:UAA, NYSE:UA) shareholders have received some good news of late. UAA stock has rallied 43% after hitting a four-year low in November.

But I continue to be skeptical about Under Armour’s prospects, even after a better Q4 result. And there’s a good chance that UAA could revisit the lows in the second quarter.

UAA stock remains dearly valued, at 57x-forward-earnings. Margin pressure continues. Analysts aren’t backing the stock, with the average target price of $14.28, 13% below the current price. Meanwhile, Nike Inc (NYSE:NKE) just posted a strong quarter and projected an inflection point in its North American business — the same business from which Under Armour is trying to take market share.

More broadly, UAA has teased investors before during its long decline from above $50 to under $12. The recent gains look like another head-fake that could reverse after the Q1 report a few weeks from now.

Worst Stocks to Buy: Box

Worst Stocks to Buy: Box

As far as high-growth tech stocks go, Box Inc (NYSE:BOX) doesn’t look that out of line from a valuation standpoint. FY19 (ending January) guidance suggests a 5x EV/revenue multiple. With high-flyers like Workday Inc (NASDAQ:WDAY) and Shopify Inc (NYSE:SHOP), among many others, trading at 8x-10x or higher, Box’s valuation isn’t that onerous.

Still, there’s an awful lot of reason for caution. The recent IPO of Dropbox Inc. (NASDAQ:DBX) could potentially steal investor attention, even though Dropbox is far more consumer-focused than business-centric Box. Q4 earnings in early March sent BOX stock plummeting, but the stock quickly reversed.

BOX stock doesn’t necessarily look like a short — less than 4% of shares outstanding are sold short at the moment — but it does look potentially dangerous ahead entering into Q2. Growth is solid, but not particularly impressive, with guidance suggesting a ~20% increase in FY19. Box isn’t close to profitability. Dropbox could soak up some of the attention and investor enthusiasm for the business model. If the market heads further south, BOX would seem to be a likely loser.

Worst Stocks to Buy: tronc (TRNC)

Worst Stocks to Buy: tronc (TRNC)

Source: Jason Eppink via Flickr(Modified)

Newspaper stocks like tronc Inc (NASDAQ:TRNC) actually haven’t done that badly of late. Certainly, they’ve performed better than investors might think given the clear secular pressure on print sales, and the difficulty in monetizing content.

Indeed, TRNC has gained 14% over the last year. Gannett Co Inc (NYSE:GCI) has risen 21%, plus 6% in dividends; New Media Investment Group Inc (NYSE:NEWM) has risen the same amount, with an even larger dividend.

But the gains in the sector seem likely to reverse — and TRNC might be most at risk. Here, too, Q4 earnings disappointed badly. Chairman Michael Ferro recently retired ahead of sexual harassment allegations. The sale of the Los Angeles Times brought in much-needed cash, but profits continue to decline even with tronc spending on additional acquisitions.

There is a case that newspaper companies can be classic “cigar butt” stocks, generating enough cash flow to make even a declining business worth buying. But tronc’s lack of shareholder returns undercuts that case, as does the loss of Ferro, who had driven the company’s strategy. TRNC has performed well of late, but its run may be coming to an end.

Worst Stocks to Buy: General Mills (GIS)

Worst Stocks to Buy: General Mills (GIS)

Source: Shutterstock

Some investors no doubt are going to take a chance on General Mills, Inc. (NYSE:GIS) after the company’s post-earnings plunge last month. GIS trades at a five-year low. It yields 4.3%. It’s a 90-year-old company with well-known brands and a long, profitable history. From a distance, General Mills stock at $45 might look like an opportunity.

However, I don’t think that’s the case, and I think it’s highly likely it gets worse for GIS before it gets better. I wrote after fiscal first-quarter earnings back in September that General Mills had lost investor trust when it came to both revenue and margins. Two quarters later, those problems are only more pressing — and General Mills has proven that it has little in the way of answers.

In a somewhat odd way, GIS is reminiscent of General Electric Company (NYSE:GE). In both cases, bulls focused on the history and the dividend, while glossing over near-term problems and reasonably significant debt levels.

I’m not sure GIS’ trend will be quite as bad as that of GE, which has lost half of its value in less than two years, or that a General Mills dividend cut is on the way. But the case of GE, the underlying problems in the business led to a long, slow decline as investors adjusted to the new reality. That’s a very real risk that a similar process will play out at GIS over the next few months.

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Source: Investors Alley

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Getting Light Speed Returns from One of the Best Technology Sectors

One of the best technology sectors right now has nothing to do with Apple, Google, or Facebook. It’s in the area of photonics. In simplest terms, photonics is the science of light.

I want you to think about it for a moment – think about how, since almost the birth of humankind, light and optics have been there. From primitive people’s fires to whale oil lamps to the electric light bulb to lasers – humankind’s progression has been marked by advancements in the harnessing of light.

Fleshing out the definition a bit, photonics is the technology of generating and harnessing light and other forms of radiant energy whose unit is the photon. Photonics involves cutting edge uses of lasers, optics, fiber optics, and electro-optical devices in a wide range of applications.

Photonics has taken its place alongside electronics as a critical and rapidly growing technology of the 21st century. The global photonics market is forecast to be a $720 billion market by 2020, growing at a compound annual growth rate of 35%.

Welcome to the Photonics Century

Photonics-based applications are today used in a wide range of industries from industrial automation to medical diagnostics to scientific research.

Lasers in particular are displacing conventional technologies because they can do many jobs faster, better and more economically. Finding ways to make products more efficiently is an absolute must for today’s manufacturers. That’s why I strongly believe photonics and lasers are a must own sector for you and all my other readers.

One sector where photonics has become crucial is communications. Coherent light beams (lasers) have a high bandwidth and can carry far more information than radio or microwave frequencies. Fiber optics allow light carrying data to be piped through cables, replacing old copper cables: an absolute necessity in today’s world of big data, cloud computing and video streaming.

Another way photonics has entered our everyday lives is solid state lighting. Light-emitting diodes (LEDs) are a high performance, low-cost, green alternative to incandescent light bulbs.

Then there is LiDAR (laser radar systems), which is used in the aerospace industry and is crucial for the future success of autonomous vehicles, those self-driving cars that are frequently in the news these days.

Photonics technology has become ubiquitous.

Photonics has also become a key component in many manufacturing processes. Think laser welding, drilling and cutting as well as all the precision measurements needed by manufacturers that is provided by lasers.

Lasers Evolution

That leads directly to my recommendation – IPG Photonics (Nasdaq: IPGP), a leading developer and manufacturer of high-performance fiber & diode lasers and amplifiers for a vast range of industries and applications. Its products are used in industries such as materials processing, communications, medical and biotechnology, science and entertainment. IPG Photonics has been in the Growth Stock Advisor portfolio since late last summer and it’s up nearly 60% for us and a wide path in front of it.

The evolution of lasers in manufacturing is a journey of over half a century. Its ready adoption by manufacturers is largely due to the fact that lasers convert common sources of energy into concentrated, directed beams of energy. To do this, a laser must have an energy source, a way of coupling that energy into the laser cavity, and a method of delivering the resulting laser beam to the workpiece.

The new fiber lasers developed by IPG are vastly superior to the old legacy industrial lasers in every facet of the process:

  • Energy Source: Instead of using energy sources like lamps or even chemical reactions, fiber lasers use long-lived semiconductor diode lasers that efficiently convert electricity into light. Not only is the energy conversion efficiency raised, but frequent servicing and sometimes environmentally-unfriendly consumables are eliminated.
  • Energy Coupling: Conventional laser optical cavities have bulky air or gas-filled spaces. Large cavities are necessary due to the inefficiency of gas lasing or the need to insert bulk optical elements within the cavity. Fiber lasers are very compact because they convert semiconductor diode energy into useful laser beams within a fiber no thicker than a human hair.
  • Laser Beam Delivery: Legacy lasers utilize complex optics to extract the laser beam and deliver it to the workpiece. External steering optics are often needed to deflect the laser output onto its target. In contrast, flexible optical fiber provides a built-in, ideal beam delivery system.
  • Mass Production Possible: Both key fiber laser elements – semiconductor diodes and optical fiber – can easily be mass produced. Quite a contrast from legacy lasers with their bulky hermetic laser cavities, their need for precision optical alignments and ultra-flat optical surfaces.

The change is, as the company says, akin to the replacement of vacuum tubes by transistors.

IPG offers, I believe, the best-in-class laser-based systems for high-precision welding, cutting, marking, drilling, cladding, and other processing of metal, ceramic, semiconductor and thin films for customers in automotive, aerospace, railway, energy, electronics, consumer and other industries.

Its range of laser products includes ytterbium, erbium, thulium as well as Raman and hybrid fiber-crystal lasers. All wattage ranges are there too: low (1 to 99 watts), medium (100 to 999 watts) and high (1,000+ watts) output power lasers in wavelengths from 0.3 to 4.5 microns. The lasers can be continuous wave (CW), quasi-continuous wave (QCW) or pulsed. The pulsed lasers are available in nanosecond, picosecond and femtosecond ranges.

Among the well-known companies using IPG products are: Boeing (NYSE: BA), Lockheed Martin (NYSE: LMT), KLA-Tencor (Nasdaq: KLAC), Toyota Motor (NYSE: TM), BMW AG (OTC: BMWYY) and Mitsubishi Electric (OTC: MIELY).

Additionally, the company recently purchased Innovative Laser Technologies (ILT). This firm has a proven track record producing leading-edge systems for medical device manufacturers, one of the fastest growing markets for fine welding and cutting applications. This will greatly aid IPG in its effort to penetrate the market for medical device applications.

Last May, IPG bought Menara Networks, which is an innovator in optical transmission modules and systems. This allows IPG to offer more integrated solutions for the telecommunications industry. In the first quarter of 2017, sales of its telecom products soared by 221% thanks to Menara.

IPG Growing Rapidly

Although both North American and European sales grew 20% in the quarter year-over-year fully 64% of IPG Photonics revenues come from the Asia-Pacific region, with another 25% coming from Europe, including Russia. Only 10.5% of its revenues come from North America.

China continues to be a driver of growth with year over year sales growth of 47% for the region and representing nearly 44% of total sales for the firm.

IPG Photonics Corporation reported Q4 2017 adjusted earnings of $1.86 per share beating the top end of estimates by $0.06. The figure was better than the guided range of $1.55-$1.80.

Management expects sales to come in a range of $330 to $355 million for the first quarter. Earnings are estimated for $1.62 to $1.87.

IPG’s Laser-Bright Future

Thanks to innovative product portfolio – last summer IPG unveiled the first 120 kilowatt industrial fiber laser – and large patent portfolio, I expect IPG Photonics to continue to outpace the other companies in the laser systems and components sector.

Another huge advantage over the competition is its vertically integrated business model, which allows it to control each and every part of its business from research and development to sales to after sales service. In this type of business, I want the company to continue to innovate.

So a purchase like that of OptiGrate, which help IPG develop new ultra-fast pulsed lasers, is what I want to see. I like the fact that IPG is moving into new end markets connected to 3D printing, defense electronics and micro-materials processing in addition to the aforementioned communications and medical sectors. This will only add to the momentum from trends such as the miniaturization of electronics and the move of the global auto industry toward the widespread adoption of fiber lasers.

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Source: Investors Alley 

Technology

3 Big Growth Tech Stocks That Wall Street Analysts Are (Still) In Love With

Source: Shutterstock

For the past decade, big growth tech stocks have led the way for this bull market. As the stock market has rallied, big growth tech stocks have rallied even more.

But recently, this trend seems to be reversing. Big growth tech stocks are now leading the market lower.

There are a few things at play here.

Facebook, Inc. (NASDAQ:FB) is coming under harsh criticism for its data selling practices. And it’s having widespread fallout throughout the whole tech sector, since essentially every tech company leverages consumer and user data to make business decisions.

Meanwhile, autonomous driving and artificial intelligence initiatives took a hit recently after an Uber self-driving car hit and killed someone in Tempe, Arizona. In the wake of that accident, Uber, NVIDIA Corporation (NASDAQ:NVDA), and others have suspended autonomous driving tests.

Overall, the near-term outlook for tech stocks is pretty cloudy. There seems to be a ton of headline risks from Facebook and Uber, while sentiment seems to have taken a sharp turn for the worse.

But are those headline risks creating an opportunity for long-term investors? If so, what names should you be buying?

Below, I’ve compiled a list of 3 big growth tech stocks that Wall Street analysts are still in love with, despite recent tech weakness. These are stocks with consensus strong buy ratings and price targets substantially above their current price.

Which stocks are they? Let’s find out.

Wall Street’s Favorite Big Growth Tech Stocks:

Facebook, Inc.’s (FB) Politics Are Bad for Business

Source: Shutterstock

#1 Facebook (FB)

The first stock on this list is the company which may have started this whole tech sell-off: social media giant Facebook Inc.

In the wake of a massive data leak that dates back to 2015 and has a political slant, FB stock has fallen nearly 20%. Investors are worried about regulation, and how that might affect Facebook’s business. They are also concerned that user privacy concerns will cause the “#deletefacebook” movement to gain serious traction, causing a drop in active users. If that happens, then advertisers could pull money from the platform, causing a drop in average revenue per user. A drop in active users and a drop in average revenue per user would have a catastrophic impact on Facebook’s financials.

But despite these investor concerns and the sharp drop in FB stock, Wall Street analysts remain resolute in their bullishness on Facebook. The average price target on FB stock, even after this whole data scandal, is $220. That would represent nearly 50% upside from current levels.

Specifically, RBC analyst Mark Mahaney said that Facebook remains the “Best Growth Story in Tech”. He also said that the “latest data controversies would have no material impact on the relevance and attractiveness of Facebook’s marketing platform”, while calling the risk-reward profile on FB stock “downright compelling”.

Wells Fargo, GBH Insights, Oppenheimer, Barron’s, Jefferies and others have all sounded a similar bullish tone on FB stock in the wake of the recent selloff.

All in all, it’s pretty clear that analysts are still in love with FB stock, even amid recent headline risks. The consensus from Wall Street’s analysts seems to be that user and advertiser churn will be mitigated as a result of this data leak, while regulation won’t be that severe. The stock now trades at a pretty cheap valuation relative to growth, and thus, the upside opportunity looks compelling.

Wall Street’s Favorite Big Growth Tech Stocks:

Why MU Stock Is Poised to Climb to $45 a Share

Source: Shutterstock

#2 Micron (MU)

The second stock on this list is red-hot chip-maker Micron Technology, Inc. (NASDAQ:MU).

MU stock has been on fire over the past 2 years, jumping from $10 to $60 as the supply/demand fundamentals in the company’s core DRAM and NAND markets have become exceptionally favorable. Put simply, the mainstream emergence of automation, AI, the Internet-of-Things (IoT), data centers, and cloud computing has created a surge in demand for MU’s chips. Considering many of these technologies are still in their early innings, demand should remain robust into the foreseeable future.

Meanwhile, supply is constrained due to limited chip production capacity against the backdrop of this demand surge. Big demand, short supply means huge profits for MU.

Investors are concerned that supply will ramp at any point now, and that this supply ramp will erode profits. This is a reasonable concern. It has happened time and time again in the cyclical semiconductor industry.

But analysts think that investors are under-estimating the strength and longevity of this current bull market in semiconductors. By and large, analysts expect favorable DRAM and NAND pricing to persist because, despite production capacity expansion, demand will continue to outstrip supply into the foreseeable future.

That is why the consensus analyst price target on MU stock is $67, roughly 30% above MU’s current levels. This is also why a flurry of firms, including Stifel, Mizuho and Cohen, upped their price targets on MU stock after the company’s recent blowout earnings report.

All in all, the Wall Street analyst thesis on MU stock remains bullish. Analysts think that big demand from emerging technologies like automation, AI, and IoT will persist into the foreseeable future. That demand will be so large that regardless of capacity expansion, demand will outstrip supply over the next several years. Consequently, MU’s profit margins should remain near historic highs. And MU stock should head to all-time highs.

Wall Street’s Favorite Big Growth Tech Stocks:

Source: Shutterstock

#3 Lam Research (LRCX)

The third stock on this list another semiconductor company, Lam Research Corporation(NASDAQ:LRCX).

LRCX is in the same DRAM and NAND worlds as MU. But instead of making the chips, Lam Research provides the equipment to companies like MU so that they can make the chips. Thus, MU is the chip-maker, and LRCX is the parts supplier.

Naturally, if the chip-maker is roaring higher thanks to a robust demand backdrop, the part supplier will also roar higher. That has happened. Over the past 2 years, LRCX has gone from $80 to $200.

Analysts think this run is far from over. The consensus analyst price target on LRCX stock is right around $265, implying more than 30% upside from current levels.

Specifically, Mizuho just initiated LRCX at a Buy rating. They slapped a $250 price target on the stock. Analysts at Mizuho believe that the best is yet to come from LRCX, citing acceleration in the hyper-growth China market.

Bank of America Merrill Lynch also recently initiated coverage on LRCX at a Buy Rating. They slapped a $305 price target on the stock. Analysts at BAML named LRCX a Top Pick due to the company’s exposure to the memory upcycle. They believe cloud computing and AI tailwinds will continue to produce strong operational results for LRCX.

Overall, the analyst sentiment on LRCX stock is quite bullish. Much like MU, LRCX is expected to benefit from emerging technology tailwinds over the next several years. Those tailwinds should prop up the numbers, which in turn, should prop up LRCX stock.

As of this writing, Luke Lango was long FB and MU. 

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Source: Investor Place

Cryptocurrency, Uncategorized

Crypto Infrastructure Build Continues Despite Pullback

Despite the recent pullback in crypto prices, amazing things are happening behind the scenes.

Blockchain entrepreneurs and coders are hard at work building the infrastructure necessary for a robust alternative financial system.

Today, we’re going to analyze important recent news items and breakthroughs.

Bitcoin currently maxes out at around seven transactions per second. The Lightning Network (LN) allows it to increase to thousands of transactions per second, with near-instant settlement. LN accomplishes this by taking transactions off the blockchain and settling them later in bulk.

This tech may allow bitcoin to compete with traditional payment processors such as Visa and PayPal. It will take time to perfect this new payment network, but LN has the potential to revolutionize how cryptocurrency is used. Many other coins have announced plans to build similar improvements.

Binance launched only last year, but it has become the highest-volume crypto exchange in the world, with trading volume of around $1.5 billion per day. Currently based in Hong Kong, Binance recently announced that it will be moving to Malta. The small Mediterranean island has crypto- and fintech-friendly laws.

Malta’s prime minister even personally welcomed Binance to Malta on Twitter.

Binance says the move will also allow it to add “fiat trading” to its platform by partnering with local banks. Currently, Binance is a “crypto only” exchange, but the addition of fiat trading will allow it to become a major on-ramp into the crypto market.

Cboe Global Markets, which trades bitcoin futures, sent a letter to the SEC encouraging it to allow the introduction of bitcoin ETFs.

At least six companies are attempting to get bitcoin funds approved, but so far the SEC has denied their applications.

The demand for a publicly traded bitcoin vehicle is certainly there, but the SEC has been twiddling its thumbs for a while now. Let’s see how long it can hold out against the pressure.

Adding ERC20 Support to Coinbase

Coinbase, the largest U.S. crypto exchange, has announced that it will be adding support for ERC20 tokens. In a blog post, Coinbase wrote, “This paves the way for supporting ERC20 assets across Coinbase products in the future, though we aren’t announcing support for any specific assets or features at this time.”

In essence, this means that Coinbase is planning to add more altcoins to its platform. This will drive more interest and altcoin buying. Now the speculation about which assets Coinbase will add next begins…

Bitfinex Announces Addition of New Fiat Pairs; Adds Support for British Pounds & Japanese Yen

Exchanges continue to offer new trading “pairs” in fiat currencies (dollar, euro, yen, etc.). Major player Bitfinex just added new fiat trading pairs for EOS, NEO, IOTA, bitcoin and Ethereum.

Fiat trading pairs are how money enters the crypto world, and it’s not easy to accomplish due to anti-money-laundering laws. More fiat trading pairs means more money entering the system.

Good investing,

Adam Sharp
Co-Founder, Early Investing

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Source: Adam Sharp

Growth Stocks

These 3 Fast-Growing Stocks Top Both Amazon and Netflix

Source: Shutterstock

Big growth stocks have performed quite well in this bull market. At the head of the big growth stockpile are Amazon.com, Inc. (NASDAQ:AMZN) and Netflix, Inc. (NASDAQ:NFLX). And it seems those two fast-growing stock behemoths get all the attention.

But this creates a problem. There’s huge demand for big growth stocks, and most of that demand is flowing into AMZN and NFLX. That means the long Amazon stock and long Netflix trades are quite crowded. Crowded trades can be dangerous trades because when the crowd turns against you, a lot of money exits the stock in a hurry. That is especially true if there is leverage involved.

Long story short, when crowded trades unwind, things can get ugly in a hurry.

That isn’t to say anything is wrong with AMZN or NFLX. Those are two great companies with winning stocks.

It is just to point out that long Amazon and long Netflix stock are crowded trades. So if you’re looking for more exposure to big growth, I wouldn’t go out and buy more AMZN or NFLX. I’d look for big growth elsewhere. In lesser-known names and in less-crowded trades.

Where would I start? Here. Below, I’ve comprised a list of my three favorite growth stocks that are growing faster than Amazon and Netflix.

Fast-Growing Stocks: Shopify Inc (SHOP)

Shopify Stock Could Flash a Perfect Buy Sign Soon

Source: Shopify via Flickr

My favorite growth stock in the market is Shopify Inc (NYSE:SHOP).

In many ways, Shopify reminds me of an early-stage Amazon. Shopify provides digital commerce cloud solutions to retailers of all shapes and sizes. In this sense, the company is a pure-play on the exact same secular trends that burst Amazon into the spotlight: digital commerce and cloud.

Shopify’s growth story may even be a little be sexier than an early-stage Amazon. Shopify is retailer-agnostic. They operate in the background. That means every retailer could use Shopify’s solutions to enhance their digital selling capabilities. Because of this, Shopify’s addressable market is larger than Amazon’s because Shopify serves all retailers, whereas Amazon serves Amazon (and Amazon accounts for less than half of all digital sales in the U.S., and presumably far less internationally).

This is why Shopify’s revenue growth last quarter (+71%) was nearly double Amazon’s revenue growth last quarter (+38%). Considering Shopify is providing solutions for essentially every player in the massive and secular growth e-commerce market, and that Shopify’s revenues were under $700 million last year, Shopify should be able to grow at a faster rate than Amazon into the foreseeable future.

Meanwhile, margins are roaring higher alongside revenue growth and the company is going from a money-losing operation to a money-making operation.

Sound familiar? This is Amazon all over again. Pure-play on digital commerce and cloud. Huge revenue growth. Massive addressable market. Strong margin ramp.

Consequently, if you’re looking for exposure to things AMZN has exposure to but don’t want to buy more Amazon stock, I’d recommend taking a look at SHOP. It could be a big winner over the next five to ten years.

Fast-Growing Stocks: Weibo Corp (ADR) (WB)

wb stock

Source: Shutterstock

If you’re looking for big growth, a good place to start is in China, where a recent boom in consumerism (and a lack of competition from U.S. firms) is creating massive growth opportunities for Chinese tech companies.

One of the fastest growing Chinese tech companies is social media giant Weibo Corp (ADR)(NASDAQ:WB). Weibo is often considered the Twitter Inc (NYSE:TWTR) of China, but they probably wouldn’t like that comparison. Weibo has more users than Twitter (392 million versus 330 million Twitter), is growing at a way faster rate (revenues +77% last quarter versus +2% for Twitter), and is more profitable (ebitda margins of roughly 43% last quarter versus 42% for Twitter).

The exciting thing about Weibo is that the company looks undervalued at the present moment.

If you think that the consumer landscape of China will start to look like the consumer landscape of America over the next several years (which is a realistic belief considering the evolution of the Chinese economy over the past several years), then Weibo’s users should be worth as much as Twitter’s users. But Twitter’s market cap is currently $23.5 billion, meaning each one of its 330 million monthly users is worth roughly $71. Weibo’s market cap is $27.4 billion, meaning each one of its 392 monthly users is worth roughly $70.

If Weibo keeps growing its user base at the current pace (+80 million year-over-year), then the company could have around 470 million monthly users by next year. At $71 per user, that implies $33.4 billion, roughly 20% above current levels.

Overall, Chinese tech stocks are a great place to look for growth outside of AMZN and NFLX. One of the biggest growers in that space is WB, and that stock looks materially undervalued relative to its U.S. comp.

Fast-Growing Stocks: Snap Inc (SNAP)

Source: Shutterstock

It seems you either love or hate Snap Inc (NYSE:SNAP). There really is no in between when it comes to the upstart social media company.

But the numbers are hard to argue. Snap’s revenue growth last quarter was 72%, by far and away the biggest market in the U.S. digital advertising quartet of Facebook Inc (NASDAQ:FB), Alphabet Inc (NASDAQ:GOOG), Twitter and Snap. User growth was 18%, again the best mark in the U.S. social media trio of Facebook, Twitter and Snap.

Bears will scream that growth should be bigger because Snap is smaller. Bulls will argue Snap is stealing market share away from Facebook, Google, and Twitter.

Market research seems to suggest the bulls are right here. According to eMarketer, Snap is chipping away at the digital advertising market dominance of Facebook and Google.

I don’t think that makes Facebook or Google any less attractive as investments. This chipping was inevitably going to happen, and the two still control 57% of the entire digital advertising market.

But I think it does make Snap more attractive as an investment. I continue to believe that Snap is morphing into a go-to digital advertising platform for small to medium-sized businesses that don’t necessarily need the max reach that Facebook and Google offer, but rather need the max engagement that Snapchat offers. This is a strong niche in the digital advertising world for Snap to operate in. As such, massive revenue growth rates in the 50%-plus range are here to stay.

If you’re looking for exposure to the high-growth digital advertising market, but don’t necessarily want to buy more FB or GOOG, SNAP should be on your radar.

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Source: Investor Place

Technology

Facebook, We Have a Problem

2018 was supposed to be the year that Mark Zuckerberg said he would “fix Facebook”. But it’s only three months into the new year and his task looks a lot tougher after the company went through one of the worst periods in its history in recent days with $75 billion wiped off its market value.

To be honest, I don’t know which is worse. . .the fact that an analytics firm used by Donald Trump’s presidential campaign improperly received data about 50 million users of the social network Facebook (Nasdaq: FB) or how poorly senior executives of the company handled the situation.

Natasha Lamb, managing partner at the impact investing firm Arjuna Capital, described what Facebook faces succinctly “[The revelations are] fundamentally troubling from the investor perspective, not only because the company has been so recalcitrant in its response. There are material risks here in terms of regulator risk, revenue risk and brand risk. There are also risks to our democracy.”

Facebook Folly Fallout

The fallout is just beginning as some high-profile people have begun to publicly withdraw from Facebook. Elon Musk deleted the Facebook pages of his companies Tesla and SpaceX and several major firms ‘temporarily’ paused their advertising on the social media site.

In addition, two class action lawsuits have already been initiated against Facebook. But that will pale in comparison to the legal woes it will face from governments on both sides of the Atlantic.

Here in the U.S., the Federal Trade Commission is looking into whether Facebook violated a 2011 privacy settlement, while the attorneys-general in both New York and Massachusetts have opened investigations.

If Facebook is found to have violated the FTC settlement, it would be costly for the company. It could face fines of $40,000 per affected user if it violated its 2011 consent agreement with the FTC, in which it was ordered to be more upfront with users about how their data were being shared. If found guilty, we are talking about over a trillion dollars in fines, folks.

The 2011 order followed complaints from the Electronic Privacy Information Center (Epic) and other consumer groups that Facebook user data were being shared with developers even though the company’s privacy settings said only friends would see the information. Interestingly, the president of Epic – Marc Rotenberg – said the recent revelations were “a clear violation” of the consent order and that the FTC should reopen its investigation (it subsequently has).

This only adds to the possible monetary penalties Facebook may face in the future. In May, the European Union will introduce stricter data protection rules that will put Facebook at risk of fines of up to 4% of global sales for violations. The EU is also considering an e-privacy directive, which if passed, would likely have an impact on Facebook’s business (targeted advertising) because it would significantly restrict the tracking of users’ behavior online.

Stay Away

So what does all of this mean for Facebook as an investment?

I know that most of the pundits on CNBC and elsewhere are telling you to buy it since it’s now ‘cheap’. And indeed the recent plunge has Facebook stock selling at the cheapest valuation since its IPO in 2012. Its one-year forward price-to-earnings ratio has fallen to just 18 times, its lowest ever as a public company and only slightly higher than that for the S&P 500 index.

But what these pundits are doing is “talking their book”. In other words, they already own it and are trying to entice others to buy Facebook.

I would stay far away. Even before its recent woes, Facebook was fighting against a poor public image – it wasn’t nicknamed ‘Fakebook’ randomly. And as Brian Wieser of Pivotal Research said in a recent note to clients, “Facebook is exhibiting signs of systematic mismanagement.”

And while this recent episode will lower trust among Facebook users, the company has already been losing the trust of advertisers. For example, in August 2016, it revealed that its metric for the average time users spent watching videos was overinflated by 60% to 80%.

However, Facebook’s problems should not stop you from investing in other technology stocks outside the social media sector. As editor of Growth Stock Advisor, I continued to be excited about technology sectors including robotics, photonics, semiconductors and ‘new energy’.

Earnings per share for the companies in the information technology sector of the S&P 500 grew 17% in 2017 over the previous year and are expected to rise 16% this year, according to FactSet. And among the larger names, there are quality companies like Microsoft, Intel and Amazon. These stocks are up 5.8%, 6.5% and 29% respectively year-to-date. So why bother with the problem child, Facebook?

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Source: Investors Alley 

Dividends

Bank $3,333 in Monthly Dividends with Rising Rates

The Fed funds rate is 0.25% higher now than it was this time last week. What does this mean for our income investments – especially our monthly dividend payers?

We’ll explore in a minute. First, let’s allow ourselves a moment to appreciate the attractiveness of meaningful monthly distributions.

Our bills arrive every 30 days. But most stocks only pay their dividends every 90. So why don’t we bridge the gap and line up our income with our expenses?

Electricity bill? No problem – got an emerging market bond distribution to cover that.

Cable? No hurry to cut the cord (and risk live sports) when we have a REIT stock that covers this month’s bill.

As I’ve written before, my 8 favorite monthly dividend payers combine to pay $3,333 every single month on a $500,000 portfolio. (From an average 8% yield, paid every 30 days.) And this is all pure dividend gravy – money we can spend without having to tap our capital.

But before we rush to our favorite stock screener and start plugging in “monthly payouts”, let’s be mindful of rising rates. Some every-30-day-payers are particularly good buys, but others should be avoided.

Two More Hikes Likely

We can’t always take the Federal Reserve’s comments at face value, but traders today are handicapping Fed Chair Jerome Powell at his word. The smart money is betting that Jerome & Co. hike twice more in 2018:

Current Bets: 2 More Hikes 

A 0.50% move doesn’t sound huge, but it’s big enough to bother regular vanilla bonds – and their proxies – when we’ve been living in a no-yield world. In fact, this has already happened to the most well-known monthly payer.

Stay Away (Still): O No

Realty Income (O) was the first firm to stake its claim as “the monthly dividend company.” In fact, it trademarked the phrase! And Realty Income has been a fantastic investment through the years. But there’s a problem with popularity – low yields:

The Bear Market in O’s Yield

The bright spot for income investors? The Big O is down 21% since I warned readers to avoid it. This price decline has been good for the stock’s yield, which is now above 5%:

It Was a Good Time to Avoid O

Five percent remains respectable today. It puts the stock’s payout on a perch just above the safest fixed income investments (like Treasuries).

But is 5%+ enough compensation given that O’s property holding are shakier than ever? I’m not sure. As a retail landlord, it’s a crapshoot every month as to which rents are going to get paid – and which tenants will succumb to “Death by Amazon.”

Instead of gambling on O, I’d prefer to bet on surer things – like bonds that will actually rise in value as rates continue to climb.

Buy Instead: Safe Floating Rate Bonds

Instead of investing in dicey retail strip malls, I prefer corporate debt. After all, the Fed is raising rates because the economy is rolling. That’s good for corporations’ balance sheets and their ability to repay their loans.

We need to pick the right companies, of course, to make sure you get paid back.  One monthly payer on the corporate side is the Market Vectors Investment Grade Floating Rate ETF (FLTR). This fund buys floating rate notes from businesses that are rated as investment grade by Moody’s, S&P, or Fitch.

So far, so good. Unfortunately it currently pays a paltry 1.9%:

FLTR: Slightly Better Than Your Mattress

And FLTR has delivered a total return to investors of just 9% since inception (nearly seven years ago). Yikes.

The best deals in the corporate bond market are actually just below the somewhat arbitrary investment grade cutoff. It’s where contrarian fund managers and investors like us capitalize on the fact that any pension funds, banks, and insurance companies are not allowed to invest in these “low quality” issues per their by-laws.

The result is a sweet spot of value, thanks to the lack of big money chasing these types of bonds.

Agencies’ ratings shortchange a lot of very good debt. You just have to pick and choose the quality companies with plenty of cash flow to service their debt obligations. Or those with enough assets to make their creditors whole no matter what happens.

My preferred way to invest in this market is with my favorite floating-rate bond fund that today pays 5.1% yearly (and has double-digit price upside potential, too.)

With a single-click of our mouse (or tap of our phone), we can hire the best (and most well connected) bond managers on the planet to build a portfolio for us. And we can even get them to work for us for free if we buy the fund today!

This ultimate rate-proof bond fund also pays a monthly dividend (again, good for 5.1% annually). And it delivers total returns between 10% and 15% yearly when the Fed is raising interest rates (as it is right now).

It’s one of 12 monthly payers in my “8% Monthly Payer Portfolio”. With just $500,000 invested, it’ll hand you a rock-solid $40,000-a-year income stream. That’s an 8% dividend yield … and it’s easily enough for most folks to retire on.

The best part is you won’t have to go back to “lumpy” quarterly payouts to do it! Of the 19 income studs in this unique portfolio, 12 pay dividends monthly, so you can look forward to the steady drip of $3,333 in income, month in and month out—give or take a couple hundred bucks – on every $500K in capital you’re able to invest.

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Source: Contrarian Outlook 

Options

Make 150% When The Markets Calm Down

Well this past week has certainly been interesting.  After a pretty terrible week for stocks, the Dow Jones Industrial Average is now down 5% for the year and the S&P 500 is down about 3%.  This certainly isn’t the year most investors expected, especially after the market reacted so positively to the reduction in corporate taxes.

I’ve said many times before that politics usually only has a very short-term impact on the stock market.  However, the rules change if politics end up impacting the economy, or the potential for the economy to grow.

Tax reform was generally viewed as a positive for the economy since companies planned on using tax savings to buy back shares (or possibly increase dividends).  On the other hand, the recent tariff announcements have had the opposite effect.

From a global perspective, tariffs are almost always a bad idea.  They can result in trade wars which end up raising prices for everyone involved (and for those not involved as well).  The steel and aluminum tariffs were already causing some issues in certain sectors.  Now, the introduction of new tariffs against China could create problems across a variety of industries.

The market clearly does not like the idea of a trade war.  I already mentioned how the major indexes are down.  Volatility is also way up, with the VIX (S&P 500 volatility index) up from a low of 17 last week to 25 on Friday’s close.

We barely even saw 15 in the VIX prior to this year.  Now, we’re experiencing higher-than-20 levels on a semi-regular basis.  It seems investors are really worried about a continued market correction.

Here’s the thing…

A trade war is a very bad thing for the economy – but it tends to take a while to have any impact.  Over the short-term, the panic selling we’ve been seeing doesn’t make any sense to me.  I think the selling is overdone and volatility is too high.

At least one big trader agrees with my sentiment.  This trader executed what’s called a risk reversal last week in iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX).  VXX is probably the most popular method for trading short-term volatility.

A risk-reversal is a synthetic method for getting long or short VXX stock.  In this case, the trader bought puts and sold calls at the same strike (47) in the same expiration (April).  This is the equivalent to going short VXX at that strike, except it expires in April.

With VXX at $47.75, the trader purchased the April 20th 47 puts while selling the 47 calls for a $0.65 credit.  To simply what can happen with this trade, basically above $48 in VXX loses $500,000 per dollar while below $47, it gains that amount per dollar.  It’s obviously quite risky, so the trader must have strong conviction that short-term volatility is dropping soon.

I agree that we should see a reversion in VXX in the coming weeks.  However, this trade is far too risky for my taste.  Instead, a basic put spread makes more sense to me.  For example, using the same April 20th expiration and the same starting strike, we can buy the 42-47 put spread for about $2.00 (with VXX around $49.50).

That means you’re buying the 47 strikes and selling the 42 strike.  Your max loss is just the $2 you spent, which also makes the breakeven point $45 in VXX.  If VXX goes to $42 or below by April expiration, you make $3.  That’s a 150% returns on an event which seems like it has a good chance of happening!

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Source: Investors Alley 

Uncategorized

The 6 Most Inexpensive Growth Stocks to Buy Now

Source: Shutterstock

In Warren Buffett’s 1992 letter to Berkshire Hathaway Inc. (NYSE:BRK.B) shareholders, Buffett touches upon a subject at odds with much of the investment industry:

“Most analysts feel they must choose between two approaches customarily thought to be in opposition: ‘value’ and ‘growth.’ Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing.

We view that as fuzzy thinking… In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value, constituting a variable whose importance can range from negligible to enormous and whose impact can be negative as well as positive.”

Many investors tend to categorize stocks into value and growth. However, the most successful investors view growth as simply one component of a company’s value as Mr. Buffett explains.

The future outlook for a company is an important aspect when you’re looking at buying a stock. And while value investors would argue that it’s the intrinsic value relative to the current trading price that matters the most, a more compelling investment thesis would be high growth potential at a cheap price.

Therefore, I used finbox.io’s stock screener to see if I could find high growth stocks trading below their intrinsic value.

Screening for Inexpensive Growth Stocks

The following are all the filters applied in this growth at a reasonable price stock screen:

The six stocks that stood out from the screen above are presented below.

Inexpensive Growth Stocks to Buy Now: Oasis Petroleum (OAS)

Oasis Petroleum Inc. (NYSE:OAS) is an exploration and production company.

The company’s total revenue stands at $1,248 million as of fiscal year ending December 2017. This is 81.8% higher than the $687 million achieved in fiscal year December 2012 and represents a five-year compounded annual growth rate (CAGR) of 12.7%.

Source: finbox.io

Analysts forecast that Oasis Petroleum’s total revenue will reach $3,012 million by fiscal year 2022 representing a five-year CAGR of 19.3%.

Source: finbox.io

Shares of the company are down -38.8% over the last year while the stock last traded at $8.00 as of Tuesday, March 20th. Three separate valuation analyses imply that there is 34.7% upside relative to its current trading price. Wall Street’s price target of $12.43 per share implies even further upside.

It’s also worth noting that illustrious money manager T Boone Pickens currently owns 331,541 shares of OAS which represents 1.0% of his stock portfolio. T. Boone Pickens is a legend in the American energy industry and has been labeled anywhere from a ‘wildcatter’ to a corporate raider. He clearly expects outsized returns from his investment in OAS.

Inexpensive Growth Stocks to Buy Now: Spirit Airlines (SAVE)

Spirit Airlines Incorporated (NYSE:SAVE) is a low-fare airline operating in North America.

The airline’s total revenue stands at $2,648 million as of fiscal year ending December 2017. This is 100.8% higher than the $1,318 million achieved in fiscal year December 2012. In addition, Spirit’s revenue growth has been fairly stable ranging from 8.4% to 25.5% over the last five years.

Source: finbox.io

Going forward, Wall Street is forecasting that Spirit’s total revenue will reach $4,508 million by fiscal year 2022 representing a five-year CAGR of 11.2%.

Source: finbox.io

Shares of Spirit Airlines are down -13.0% over the last year and finbox.io’s fair value estimate of $62.66 per share calculated from six cash flow models imply 41.1% upside. The average price target from 15 Wall Street analysts of $52.47 per share similarly imply upside.

Inexpensive Growth Stocks to Buy Now: Euronet (EEFT)

Euronet Worldwide, Inc. (NASDAQ:EEFT) provides electronic payment services to financial institutions and retailers worldwide.

The company’s total revenue stands at $2,252 million as of fiscal year ending December 2017. This is 77.7% higher than the $1,268 million achieved in fiscal year December 2012 and represents a five-year CAGR of 12.2%. Euronet Worldwide’s revenue growth has also steadily ranged from 6.5% to 17.8% over the last five fiscal years.

Source: finbox.io

Analysts are estimating that Euronet Worldwide’s total revenue will reach $3,869 million by fiscal year 2022 representing a five-year CAGR of 11.4%.

Applying these assumptions to 8 valuation models imply nice upside for shareholders.

Source: finbox.io

Euronet Worldwide’s stock currently trades at $86.43 per share as of Tuesday, up only 2.8% over the last year. However, finbox.io’s intrinsic value estimate suggests that shares could increase 34.1% going forward.

Furthermore, Joel Greenblatt is a notable investor in the company. His fund currently holds a position worth $9.0 million. Greenblatt is best known for a very specific style of value investing termed: Magic Formula Investing. The company clearly has the fundamental characteristics that make it a perfect fit within his magic formula.

Inexpensive Growth Stocks to Buy Now: Centene (CNC)

Centene Corp (NYSE:CNC) is a multi-national healthcare enterprise that acts as an intermediary between government and private health insurance programs.

The company’s total revenue stands at $48.3 billion as of its latest fiscal year. This is nearly 5x higher than the $8.1 billion achieved five years prior.

Source: finbox.io

Going forward, analysts are forecasting that Centene’s total revenue will reach $87.9 billion by fiscal year 2022 representing a five-year CAGR of 12.7%.

Source: finbox.io

Shares of the company are trading 54.2% higher year over year. But the stock price could end up trading another 31.6% higher in 2018 based on Centene’s future cash flow projections.

It’s worth noting that highly followed portfolio manager David Tepper currently holds a position in Centene worth $76.5 million. Tepper, founder and portfolio manager at Appaloosa Management, is widely known for having inspired what’s been dubbed the Tepper Rally of 2010. Through his macro view of the financial markets, Tepper was able to predict not only the stock market rally but the catalysts behind it which ultimately proved to be the Fed’s stimulus. Whatever the catalyst, Tepper is likely expecting a sizable rally in Centene’s stock price.

Inexpensive Growth Stocks to Buy Now: Equinix (EQIX)

Equinix Inc (NASDAQ:EQIX) connects businesses to their customers, employees and partners via data centers.

The company’s top-line reached $4,368 million as of its latest fiscal year, up 131.5% from fiscal year December 2012. Over that time period, Equinix’s revenue growth has ranged from 11.5% to 32.5%.

Source: finbox.io

Wall Street analysts estimate that Equinix’s total revenue will continue to grow at an annual rate of 10.1% over the next five years.

Source: finbox.io

Equinix’s stock currently trades at $414.48 per share as of Tuesday, up 9.4% over the last year. On a fundamental basis, the company’s stock is trading at a 7.0% discount to finbox.io’s intrinsic value estimate. However, the average price target from 22 Wall Street analysts of $507.23 implies 23.2% upside.

Inexpensive Growth Stocks to Buy Now: II-VI (IIVI)

II-VI, Inc. (NASDAQ:IIVI) is an electronics component manufacturer.

The company’s total revenue reached $972 million as of fiscal year ending June 2017. This is 88.2% higher than the $516 million achieved in fiscal year June 2012. II-VI’s top-line growth has ranged from 6.7% to 24.0% over the last five fiscal years.

Source: finbox.io

Going forward, Wall Street forecasts that II-VI’s total revenue will reach $1,839 million by fiscal year 2022 representing a five-year CAGR of 13.6%.

Source: finbox.io

Shares of the company are up 23.0% over the last year. The stock last traded at $47.25 as of March 20th and 8 separate valuation analyses imply that the stock is trading near its fair value. However, the average price target from nine Wall Street analysts implies 13.0% upside.

Inexpensive Growth Stocks to Buy Now: A Summary

While investors tend to categorize stocks into value and growth, some of the most successful investors view growth as simply one component of a company’s value. The companies above have positioned themselves so that double-digit growth appears to be a reasonable assumption for the foreseeable future. More importantly, this growth actually looks attractive relative to their current trading levels. As such, value and growth investors may want to take a closer look at these names.

In conclusion, the table below ranks all six stocks by their blended upside.

Source: finbox.io

Matt Hogan is a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock.

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