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Top Small Cap Stocks To Watch For 2019

Energy is an absolutely fascinating industry to follow right now. On one side, you have oil and gas companies selling at incredibly low valuations, despite the fact that oil prices are above $70 a barrel. On the other side, you have renewable-energy companies with a multitrillion-dollar growth highway ahead of them. 

With these interesting trends emerging, there’s no doubt that investors are looking at this industry. To help investors start their search for great energy investments, we asked three of our investing contributors to each highlight a stock they see as a great buy now. Here’s why they picked these stocks.

Top Small Cap Stocks To Watch For 2019: Vertex Pharmaceuticals Incorporated(VRTX)

Fast-Growing Stocks to Buy: Vertex (VRTX)

Source: Shutterstock

 

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is one of the leading pharmaceuticals firms when it comes to treating cystic fibrosis (CF).

That may not seem like much of a franchise given all the other more compelling diseases out there, but VRTX has built a $41 billion market cap in the sector and most of its competitors are looking for other places to find an opening.

That is a big deal for pharma companies that usually are strong until patents run down or generics start eating into margins.

Not so with VRTX. Its Q4 numbers came in stronger than expected and Q1 is also coming in bullish, as new approvals keep rolling in for next-generation CF drugs … and it has plenty more in the pipeline to keep this growth going.

Top Small Cap Stocks To Watch For 2019: SunPower Corporation(SPWR)

Despite record solar power capacity additions in the United States and globally, many companies in the solar industry have struggled to turn a profit in recent years. That’s because solar panel and cell manufacturers have been adapting to new market realities, and transforming themselves into stronger and leaner businesses has not come cheap. But while the last few years have been painful, it’s possible investors will be able to look back on them as a crucial turning point for sustainable long-term growth. SunPower might be the most likely solar manufacturer to follow that trajectory.

Management has said the business should return to profitability by the end of 2018. That would be a welcome reprieve for shareholders, as financial flexibility could improve quickly from there. That’s because SunPower recently acquired SolarWorld Americas in a move that will give the high-efficiency solar panel manufacturer a production base in the United States. That could prove valuable from a political standpoint in the near term and from a growth standpoint in the longer term.

As SunPower CEO Tom Werner told The Motley Fool’s Travis Hoium, the deal aligned the company’s strategy with the Trump administration’s aim to bolster U.S. manufacturing. The goodwill motion could make it easier to receive an exemption from tariffs imposed on imported solar panels and solar cells SolarWorld produces abroad (products that don’t have domestic competition anyway). That alone would provide an additional $50 million in adjusted earnings before interest, taxes, depreciation, and amortization in the second half of 2018 and an additional $100 million in adjusted EBITDA in each full year thereafter.

It could also set the stage for SunPower to earn a sweet subsidy package if it builds a new manufacturing facility in the United States — something it will need to do to keep pace with industry demand while simultaneously appeasing the current administration. In other words, if management executes on a growth strategy that hinges on profitable (and possibly "fast tracked") manufacturing expansion in the United States, then this $1.1 billion company could be at the beginning of an awesome long-term growth trajectory.

Top Small Cap Stocks To Watch For 2019: First Solar, Inc.(FSLR)

The most successful American solar panel manufacturer isn’t resting on its laurels. First Solar (NASDAQ: FSLR) weathered industry headwinds in recent years while continuing to plan for the future. That includes boosting total annual manufacturing capacity to 5,700 MW by 2020. Better yet, most of that will comprise its next-generation Series 6 panels, which are more efficient and should be accompanied by lower installation costs.

First Solar ended 2017 with nearly $2.3 billion in cash and an order backlog that should keep production facilities operating at full tilt through the end of the decade. The investment in growing manufacturing capacity will transition the company to rely more heavily on panel sales, rather than revenue generated from developing power systems. That will result in relatively flat revenue growth in the next few years, although management expects higher margins with the new sales mix. Either way, healthy levels of operating cash flow — which totaled $1.3 billion in 2017 — are here to stay.

Top Small Cap Stocks To Watch For 2019: SolarEdge Technologies, Inc.(SEDG)

 In stark contrast to other energy sources, solar power is inherently dependent on external technologies to reach its full potential. For instance, to maximize efficiency and produce closer to their full installed capacity, solar panels require converters, inverters, and energy storage. That’s what makes SolarEdge Technologies an intriguing investment in the renewables space.

The company sells power optimizers, inverters, and software solutions that combine to create the "brains" of a rooftop solar installation. By simplifying the setup and optimizing power output, SolarEdge Technologies can add significant value to investments in solar hardware — and it shows in the company’s recent earnings.

In 2017, the niche hardware manufacturer delivered $607 million in revenue at 35% gross margin and grew operating income 28% compared to 2016. The business offers a rare combination of growth and profits, but even Wall Street was caught off guard by management’s 2018 outlook. SolarEdge Technologies expects to report year-over-year revenue growth of 78% in the first quarter of this year.

While the stock has been on an absolute tear lately — posting year-to-date returns of 43% — the company is well-positioned to grow in lockstep with the broader solar industry. Considering the perennial double-digit growth rates of installations, there’s no telling where this $2.4 billion company could end up in the long term.

Top Small Cap Stocks To Watch For 2019: International Business Machines Corporation(IBM)

IBM investors have missed out on the raging bull market in technology stocks. While the Nasdaq 100 index has more than doubled over the past five years, shares of IBM have shed about 25% of their value. A half-decade of slumping revenue kept many investors away from the century-old tech giant.

That decline is now over, with IBM reporting revenue growth in the fourth quarter of 2017 and expecting growth to continue this year. The actions that the company has taken over the past five years or so, including investing in growth businesses like cloud computing and artificial intelligence, are starting to show tangible results. Growth businesses generated $36.5 billion of revenue last year, up 11%, while the cloud business grew by 24% to $17 billion.

A technology company doesn’t survive for more than a century without building up a track record of transformation. IBM’s latest turnaround isn’t its first, and it won’t be its last. This ability to adapt is a key reason to buy and hold the stock.

For dividend investors, another reason to buy and hold the stock is a world-class dividend. IBM’s current quarterly payout of $1.50 per share works out to a yield of 3.8%, and the company is widely expected to raise that dividend this month, making it 23 years in row. IBM has paid a quarterly dividend without interruption since 1916, through the Great Depression, two World Wars, and its near-collapse in the 1990s.

Dividend investors looking for a high yield and decades of consistency could do a lot worse than IBM.

Top 10 Oil Stocks To Watch Right Now

The stock market is up about 30% over the last three years, which has fueled solid financial returns for most investors. A few investments have done far better than that, though, thanks to sharply improving operating results that consistently trounced expectations.

Below, we’ll look at three of these standout performers with an eye toward whether any of them represent solid buys today.

Top 10 Oil Stocks To Watch Right Now: Spectra Energy Partners, LP(SEP)

Spectra Energy Partners, LP (NYSE:SEP) is one of the largest energy master limited partnerships (MLPs) in the country, boasting more than 15,000 miles of transmission pipelines, 170 billion cubic feet of nat-gas storage and about 5.6 million barrels of crude oil storage, according to its own most recent data.

Spectra also is one of the more prolific payout raisers in energy.

The company has raised its distribution by about 50% over the past five years, which is plenty respectable. But Spectra has done it in style, announcing its 41st consecutive quarterly increase to its distribution in February.

Top 10 Oil Stocks To Watch Right Now: SolarEdge Technologies, Inc.(SEDG)

By focusing on panel sales, First Solar is opening the door for customers to choose inverters and other components required for a solar power system from external manufacturers. That has created a huge opportunity for solar component manufacturer SolarEdge Technologies (NASDAQ: SEDG). While it doesn’t produce its own panels, the company isn’t having any trouble cashing in on its niche in the industry.

Last year SolarEdge Technologies generated 35% gross margins and delivered operating income of $91 million. That’s an impressive level of profitability for total sales of $607 million. But it’s about to get even better. The company expects first-quarter 2018 revenue to jump 78% compared to the year-ago period, which easily outpaces the 24% top line growth from 2016 to 2017. Investors shouldn’t expect increases such as that every quarter, but this stock certainly offers a rare opportunity to capture above average growth and profitability. 

Top 10 Oil Stocks To Watch Right Now: Kinder Morgan, Inc.(KMI)

Kinder Morgan Inc (NYSE:KMI) increased its quarterly dividend by 60%, raising its payment to 20 cents per share from 12.5 cents. Shareholders of record as of April 30 will receive dividends from the midstream energy company on May 15. Therefore, the company’s shares trade ex-dividend on April 27.
KMI Dividend Yield: 4.84%

Top 10 Oil Stocks To Watch Right Now: Salesforce.com Inc(CRM)

Salesforce.com, inc. (NASDAQ:CRM) has tripled since mid-2013, but its gains over the past 16 months have been truly impressive. Shares have quietly rallied 81% over that period, forming quite the uptrend in CRM.

This is one of my favorite names, because despite its $90 billion market cap, it still flies under the radar. Alphabet Inc (NASDAQ:GOOGL), Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT) get all the credit for their cloud businesses.

Despite CRM still churning out incredible growth, it seems to be much less discussed than it was a few years ago. That’s not stopping the analysts, though. They expect annual revenue of about 20% for the next four years. On the earnings front, estimates call for almost 60% growth this year and another 26% growth next year.

While CRM is pretty expensive on an earnings basis, its sales-based valuation is actually pretty reasonable versus its peers. CRM has better growth than most of its large cap competition and far superior financials and cash flow compared to its smaller competition. It’s in a real sweet spot right now. Lastly, the company has a very long runway for growth — as seen by the long-term revenue predictions — giving investors confidence to buy the stock today.

Investors could easily draw an uptrend line on CRM’s chart to highlight the stock’s robust rally. But just look at the 100-day moving average instead. All three major moving averages are trending higher, but each time Salesforce pulls back to the 100-day, CRM has an intense bounce.

Top 10 Oil Stocks To Watch Right Now: Cypress Semiconductor Corporation(CY)

Cypress Semiconductor is a leading provider of high-performance digital and mixed-signal integrated circuits, and after shelling out $550 million for Broadcom’s Internet of Things business, its “WICED” platform is now one of the largest IoT portfolios in the industry. CY is currently a Zacks Rank #1 (Strong Buy) and is expected to witness EPS growth of 40% this fiscal year. The stock is also trading at an attractive 11.9x forward 12-month earnings. Meanwhile, CY sports a PEG of just 0.7, so investors know they are getting a great price for the company’s projected earnings growth.

Top 10 Safest Stocks For 2019

Gold rose above last week’s closing level of $1,347.90 an ounce in Monday’s trading as threats of “actual wars” pushed the price of the yellow metal.

Prices had earlier touched a five-week high in March 2018 as threats of a trade war between the United States and China weighed on the dollar and equities. On Jan 25, spot gold touched a high of $1,366 an ounce. Gold value has increased more than 2% in 2018 so far, after recording a healthy 12% gain last year.

As markets remain skeptical in the face of the ongoing geopolitical tensions, prices are expected to move northward.

Top 10 Safest Stocks For 2019: Retail Opportunity Investments Corp.(ROIC)

While many investors grapple with uncertainty surrounding the state of the retail industry, Retail Opportunity Investments has been busy carving out its own sustainable niche. This real estate investment trust (REIT) focuses on buying and revitalizing grocery-anchored retail properties in mid- to high-income areas in the Western United States. Their necessity-based nature means those properties have proven largely immune to broader retail-industry struggles, enabling the company to maintain healthy lease rates (above 97% for the past 15 quarters), and giving it pricing power for base rents (up 21.6% and 8.3% on new and renewed leases last quarter, respectively).

Perhaps best of all for prospective buyers of the stock, Retail Opportunity Investments has pulled back around 13% over the past year even as the company continues to steadily build its portfolioand demonstrate its relative strength. With shares now trading at a reasonable 14.5 times this year’s expected funds from operations, and with a dividend yielding around 4.6% annually as of this writing, I think Retail Opportunity Investments is easily one of the market’s most promising retail stocks today.

Top 10 Safest Stocks For 2019: Xcerra Corporation(XCRA)

Little-Known Stocks to Buy: Xcerra (XCRA)

Source: Shutterstock

 

Xcerra Corp (NASDAQ:XCRA) is fundamentally in the business of making and operating semiconductor testing equipment.

While this has been a traditionally cyclical market, the fact is, now that more and more “dumb” devices are now becoming “smart,” chipmakers are able to create longer tails on their chip production. That makes the lag between new generations of chips shorter and provides more stability for companies like XCRA.

Also, since there are growing uses for chips, XCRA is in a much better position than big chipmakers since they are constantly under pressure to innovate to keep up with current technological demands, whereas XCRA simply needs to make sure its diagnostic and performance equipment can deliver the results clients are looking for.

Up  38% this year, and sporting a $745 million market cap, this one could be moving up to the mid-cap sector pretty soon.

Top 10 Safest Stocks For 2019: Euronet Worldwide Inc.(EEFT)

Euronet Worldwide (NASDAQ:EEFT) provides payment and transaction processing and distribution solutions 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.

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.

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.

Top 10 Safest Stocks For 2019: SolarEdge Technologies, Inc.(SEDG)

Solaredge Technologies also reported on its latest quarterly earnings results.

For its first quarter, the solar energy products provider announced revenue of $209.9 million, which was ahead of the $205 million that analysts were calling for in their consensus estimate.

Solaredge Technologies also impressed in its earnings call as the company reported adjusted earnings of 87 cents per share. Wall Street was calling for adjusted earnings of 80 cents per share.

For its second quarter, the company is calling for revenue in the range of $220 million to $230 million, ahead of analysts’ forecast of $208 million. Solaredge Technologies also announced that it is entering the multibillion-dollar market for uninterruptible power supplies as it will acquire Gamatronic Electronic Industries.

SEDG stock soared 16.5% during regular trading hours and fell 0.2% after hours.

Top 10 Safest Stocks For 2019: Tesla Motors, Inc.(TSLA)

Shopify stock is up more than four times in value over less than three years since coming public. And yet, over the course of those three years, the company’s losses have doubled (from $19 million in 2015 to $40 million last year), and its rate of cash burn, — less than $1 million in 2015 — has swelled to more than $12 million burnt over the past 12 months.

So why is Shopify stock so popular? Sales growth appears to be investors’ primary motivator. In 2015, Shopify took in $205 million in revenue — up more than eight times from the $24 million in sales booked in 2012. Last year, Shopify’s sales had swelled to more than $673 million, another three-fold increase — close to a 100% annualized growth rate.

Is there any other company we know about that can match that kind of performance? Actually, there is: Tesla.

Like Shopify, Elon Musk’s electric car company, Tesla, has posted astounding sales growth off of a very small base. It may be hard to recall today, but as recently as 2011, Tesla had only sold 1,500 or so cars since its creation. Even today, with more than 250,000 cars sold, Tesla’s entire "lifetime achievement" is fewer cars than GM sells in a month. Growing off its exceedingly small base, finviz.com calculates that Tesla’s sales have grown at a very Shopify-like growth rate of 95%, annualized.

Granted, Tesla still isn’t profitable. Then again, neither is Shopify, and that doesn’t seem to be slowing down its stock growth. And like Shopify, Tesla is expected to turn profitable as early as 2020. If you’re looking for a rocket stock that could put Shopify’s returns to shame, look no further than Tesla.

 

A red Tesla Model S.