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Top Penny Stocks To Watch For 2019

Stocks opened higher on Monday ahead of what is sure to be another busy week for investors, as they assess some major economic indicators. Furthermore, with many more big-names set to report their quarterly earnings this week, it’s time to take a look at a few stocks investors might want to buy.

Investors have started to react to news that capital spending seems to be booming. Credit Suisse estimated that the amount of money companies spent on big-ticket items surge 20% in the first quarter, which would mark the biggest quarterly growth rate since 2011. Some of the biggest spenders so far include tech giants Google parent Alphabet (GOOGL) and Facebook (FB) .

Moving on, titans from Disney (DIS) to Nvidia (NVDA) are set to report their quarterly earnings results this week. With that said, investors need to hunt for companies that are set to report better-than-expected quarterly earnings results while market uncertainty remains.    

Luckily, Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to surprise, in one way or the other. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Today, we are giving our readers a free look at three of these strong stocks ahead of their upcoming earnings reports. Check them out now:

Top Penny Stocks To Watch For 2019: MGM Growth Properties LLC(MGP)

One of the best stocks of the last decade has delivered eye-popping total returns of 1,311% with a relatively simple business model — and one that has mostly remained out of sight. MGP Ingredients operates as a contract distiller for premium brands large (Diageo) and small (various regional labels). In other words, it’s in the business of making whiskeys, gins, and vodkas.

After shares rose 54% in 2017, there’s still plenty to like about the company. I actually encouraged investors to sell the stock in late October, but it has gained 47% since then. Oops. After reading through the full-year 2017 earnings report, it’s clear that the business has earned its premium valuation. Can I change my wager, Mr. Dealer?

Last year MGP Ingredients grew year-over-year revenue 9.2%, boosted its gross margin to 21.9% from 20.5%, and converted a record 12% of sales into net income. Importantly, premium beverage alcohol sales — the highest margin product — jumped over 18% in the year-over-year comparison. While primarily a distiller, the company has worked to diversify its business over the years by vertically integrating operations, which means it sells agricultural byproducts leftover from the upstream distilling process for both animal feed and human food ingredients. 

Those provide important sources of value, but they’ll be taking a backseat to premium alcohols in 2018 and 2019 when more valuable aged whiskey products will be leaving the warehouse. The expected result: MGP Ingredients thinks operating income will grow 10% to 15% in 2018, and another 15% to 20% in 2019. 

Throw in projects that add value without showing up on financial statements, such as sourcing 100% renewable energy and ditching single-use plastic consumables at its operating assets, and investors can find a lot to like about this whiskey stock. It remains a buy for the foreseeable future.

Top Penny Stocks To Watch For 2019: Polo Ralph Lauren Corporation(RL)

Moving on, Ralph Lauren is another famous name in retail that has outperformed the S&P 500 by a wide margin. The stock has soared 59% over the last year and has also climbed 5.6% over the last 12 weeks. Ralph Lauren’s quarterly revenues are expected to dip by 4.7% to hit $1.49 billion. At the other end of the income statement, RL is also projected to experience a decline from the prior-year period.

Our current estimates are calling for Ralph Lauren’s quarterly earnings to slip by 3.4% to hit $0.86 per share. However, the company is currently a Zacks Rank #2 (Buy) and rocks an earnings ESP of 2.92%, mostly because its bottom line estimates have climbed recently. RL’s Most Accurate Estimate comes in at $0.88 per share, which is 2 cents above our current consensus estimate. This means that the upscale fashion giant could impress investors with a bottom line beat that might send its stock up, at least in the near-term. Ralph Lauren is set to report its quarterly results before the opening bell on Wednesday, May 23.

Top Penny Stocks To Watch For 2019: Boeing Company (BA)

Boeing Co (NYSE:BA) went from a frustratingly stubborn stock to one that couldn’t be stopped. Consider that BA stock was flat from January 2014 through October 2016, almost a three-year lull. However, shares then exploded 90% in 2017.

So what now?

It obviously wouldn’t be surprising to see Boeing stock settle down and consolidate a bit. Even bouncing between $300 and $360 for a few quarters would represent a relatively healthy consolidation period.

I like BA for its intense earnings growth, commitment to capital return and huge free-cash flow. It’s not the cheapest stock in the world anymore, but valuation and consolidation aren’t enough of a reason to sell the stock.

Shares still look great in the short-term, as our chart shows. Poking through resistance with plenty of support nearby, BA stock could retest its old highs if these patterns hold steady. It’s got bullish momentum and isn’t overbought yet either.

Top Penny Stocks To Watch For 2019: Best Buy Co., Inc.(BBY)

Things have gone remarkably well for Best Buy lately, especially considering how vulnerable investors thought the retailer was to "showrooming," or the shopper habit of examining products at brick-and-mortar stores before ordering them at lower prices from online rivals.

A couple looking at TVs in an electronic store

IMAGE SOURCE: GETTY IMAGES.

Best Buy made the appropriate changes to adjust to that trend, and its strategic initiatives are clearly working. Comps gains sped up to a 6% pace in fiscal 2018 from a flat result in the prior year even as profitability held steady. CEO Hubert Joly and his team are expecting comps gains to slow back down to about 2% in fiscal 2019, and earnings will also be hurt by more investments in its growth initiatives. However, Best Buy’s strong financial position should allow it to navigate this tricky retail environment better than most of its rivals, and that’s great news for its shareholders.

Top Penny Stocks To Watch For 2019: Repligen Corporation(RGEN)

Repligen lives in the biopharma sector, but it doesn’t bother with the usual regulatory headaches. That’s because the company supplies processing equipment and consumables required to test and manufacture biologic drugs, rather than develop therapeutics in risky clinical trials. That simple hack allows it to piggyback on the overall growth of biopharma without the commensurate risks.

It’s been a great business strategy so far. Shares are up 600% in the last 10 years, although a market cap of $1.6 billion hints that there’s plenty of room for expansion for the bioprocessing leader.

In 2017, Repligen reported total revenue of $141 million. That’s hardly a drop in the biopharma bucket, but it amounted to an impressive 35% jump from the prior year. Management sees much of the same in the year ahead, thanks largely to a recent acquisition. The bioprocess leader expects total sales of $180 million to $186 million at gross margin of up to 56.5% in 2018. That could deliver adjusted net income of up to $32 million this year, compared to just $27 million last year. 

Just as in prior years, acquisitions and organic growth should continue to power the business higher for the foreseeable future. Repligen is also perfectly positioned to exploit the shift toward single-use processing equipment, which allows biologic drug manufacturers to greatly reduce contamination risks and downtime while improving margins and production volumes.

Case in point: The company recently announced the first and only commercially available single-use purification column suited for commercial biologics production. Products like that may go largely unnoticed by investors, but they could very well end up being a game-changer for customers. 

A sand timer and columns of coins.

Top 10 Small Cap Stocks To Watch Right Now

With the new inflation numbers coming in under expectations, that’s a bullish sign that the Federal Reserve won’t be adding more hikes to interest rates, at least for now.

Slower inflation is a good sign since it means that the transition from a cool economy to a hot one isn’t happening too quickly. It’s transitioning over time, and that’s bullish for consumer stocks since a fast rise in prices means consumers will slow spending or choose value brands over name brands.

As 2018 started, it looked like the economy was heading down the first drop on a roller coaster, gather enormous speed from nearly a dead start. That hurt some stocks as the markets worried that inflation would hit hard and fast, hurting the consumer’s spending power in the process.

Now that this scenario isn’t coming to pass, I wanted to highlight seven consumer goods stocks that will rise again.

Top 10 Small Cap Stocks To Watch Right Now: Activision Blizzard, Inc(ATVI)

ATVI is the ticker symbol. Activision Blizzard is, for me anyway, the worldwide leader. There’s some good competition [Electronic Arts and others] in interactive entertainment.

Now, the company’s not as dominant in China as some very large Chinese companies, so you and I could debate who the real worldwide leader is. The good news is with a stock like NetEase, which is a big Chinese video game maker and one of those conglomerates, we own that one, too. I like to think that we’ve got this industry cornered, but I love the future of interactive entertainment, whether it’s playing digital card games like Hearthstone, which I do almost every day, even though it’s in its fourth or fifth year. I love Hearthstone to great games like Overwatch, which has been a huge hit and is the big e-sport of choice with clubs these days.

You might be following the The Overwatch League, some of you. Cities in the U.S. and abroad paying tens of millions of dollars to have the rights to have a team that’s competing in Overwatch. So, e-sports is a big part of Activision Blizzard. Starcraft. Warcraft. World of Warcraft. The list goes on of this company’s properties. Love Activision Blizzard. Bobby Kotick, the CEO. I’ve talked about him before on this show. He’s a brilliant asset allocator. He’s not even a video gamer.

He also, by the way, had a cameo appearance in one of my favorite films, Moneyball, when Bill James’s great story and Michael Lewis’s non-fiction book was turned into a movie with Brad Pitt. You’ll see Bobby Kotick playing the owner of the Oakland A’s in an early scene in that movie. A little trivia tip for Activision Blizzard fans. 

Top 10 Small Cap Stocks To Watch Right Now: Centene Corporation(CNC)

Centene Corp (NYSE:CNC) operates as a diversified and multi-national healthcare enterprise that provides programs and services to under-insured and uninsured individuals in the United States.

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.

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%.

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.

Top 10 Small Cap Stocks To Watch Right Now: ARMO BioSciences, Inc.(ARMO)

ARMO BioSciences stock skyrocketed 78% this week. The biotech announced on Thursday that it was being acquired by Eli Lilly (NYSE:LLY) for $1.6 billion. What’s especially notable about this acquisition is that ARMO conducted its initial public offering (IPO) less than four months ago. 

What made ARMO so attractive to Lilly? The small biotech’s lead product candidate, AM0010, also known as pegilodecakin. AM0010 a long-acting form of recombinant human Interleukin 10 (IL-10) that stimulates white blood cells called CD8+ T cells. These T cells recognize and kill cancer cells. The drug is currently being evaluated in a phase 3 study for treating pancreatic cancer and in earlier-stage studies targeting other types of cancer.

Lilly saw AM0010 as a great addition to its current oncology lineup, which includes Cyramza, Verzenio, and three pipeline candidates in phase 2 clinical studies. The acquisition is expected to close by the end of the second quarter. 

Top 10 Small Cap Stocks To Watch Right Now: Adobe Systems Incorporated(ADBE)

Adobe has been selling software used to create digital content for nearly four decades, so you’d be forgiven for assuming that this company has morphed into a slow-moving giant. Amazingly, that’s not the case at all. Adobe posted revenue and adjusted EPS growth of 24% and 65%, respectively, last quarter. Those spectacular results weren’t a one-off fluke, either; the company has been a growing like a weed ever since CEO Shantanu Narayen made the bold decision a few years back to transition to a cloud-based business model. 

While the transition was met with harsh criticism when it was announced it has paid off brilliantly for long-term investors. Adobe’s stock has steadily marched higher since 2013, including a 70% jump in 2017 alone. All told, shareholders have enjoyed a 417% jump in the last five years.

But can the good times continue? I believe that the answer is yes. Adobe’s software lineup is led by design necessities like Photoshop, Illustrator, and InDesign, and their continued popularity drove the company’s Digital Media segment to 28% growth in the first quarter. Even better, these products are typically sold through the cloud on a subscription basis, which means consistent and steady income. Adobe makes 86% of its revenue through subscriptions (a figure that’s still growing), and subscription-based revenue increased 30% in the first quarter. Selling products this way also gives Adobe a better look into how its customers are using the software, which means a better experience over time. Meanwhile, the company is also plowing its R&D dollars to build out its presence in fast-growing areas such as virtual reality and digital advertising. When combined, market watchers believe that sustained double-digit revenue and profit growth is achievable. I happily concur with that assessment.

The only downside here is that the tremendous run has pushed the company’s valuation up so high that shares currently trade for more than 30 times next year’s earnings estimates. While that might seem like too high of a price to pay I don’t think its outrageous given the company’s projected profit growth rate of 26% over the next five years. Mix in a cash-heavy balance sheet and a dominant competitive position and I think that Adobe is a fantastic business that is currently trading at a fair price. If you haven’t bought shares yet, consider it today.

Top 10 Small Cap Stocks To Watch Right Now: Best Buy Co., Inc.(BBY)

Shares of Best Buy are up 55% over the last year and have also climbed 7.4% in the last four weeks. The big-box electronics retailer is expected to see its Q1 revenues pop by 2.8% to hit $8.77 billion, based on our Zacks Consensus Estimates. Meanwhile, Best Buy’s earnings are projected to surge by 25% to touch $0.75 per share.

Best Buy’s Most Accurate Estimate—the representation of the most recent analyst sentiment—calls for quarterly earnings of $0.76 per share, which is 1 cent better than our current consensus estimate. The company is also currently a Zacks Rank #2 (Buy) and sports an Earnings ESP of 2.01%. Therefore, investors can consider BBY as a stock that could top quarterly earnings estimates when it reports its Q1 financial results before the market opens on Thursday, May 24.