Buying and holding growth stocks is a great way to predictably generate wealth over the long term. But not all growth stocks are created equal; the very best have unique characteristics that set them apart — and set up investors for years of success.
So we asked three top Motley Fool investors to each discuss a growth stock that successful investors can appreciate. Read on to learn why they like these stocks.
Top Penny Stocks To Own For 2019: Marathon Oil Corporation(MRO)
Marathon Oil has spent most of 2018 finishing its portfolio cleanup plan. Not only did the company receive the final payment from last year’s sale of its oil-sands position, but it also sold its Libya subsidiary. Those deals brought in $1.2 billion in cash, boosting the company’s balance to a healthy $1.6 billion. That level should continue rising this year since the company can balance its budget at $50 oil, putting it on pace to generate $500 million in excess cash if crude averages $60 a barrel — and even more at current prices. Marathon hasn’t yet decided what it plans to do with the money, other than investing some of it in buying land in an emerging shale play in Louisiana, though the company said that it could start returning some of it to shareholders later this year via a stock repurchase program.
Top Penny Stocks To Own For 2019: Zillow Group, Inc.(ZG)
Shares of Zillow Group have climbed nearly 50% so far in 2018 as of this writing. After all, with Premier Agent revenue expected to arrive at just above $900 million this year — still a small fraction of the roughly $12 billion that real estate agents spend each year advertising their listings — Zillow enjoys a long runway for growth from its core business. And that’s not to mention the supplemental growth of its smaller rentals, mortgages, and other real estate services segments.
But two developments have actually tempered the stock’s growth in recent months, giving investors a much better chance to step in and participate in its longer-term gains.
First, in April Zillow pulled back hard after the company announced it would accelerate its home-flipping initiatives with the the expansion of Zillow Instant Offers. As part of that effort, Zillow expects to hold around 300 to 1,000 homes for resale by the end of 2018 — a capital-intensive effort that some investors worried would come at the expense of its current core Premier Agent business. Sure enough, though Zillow has assured agents the program actually encourages sellers to use an agent regardless of whether they accept Zillow’s offer for their home, Instant Offers has certainly ruffled some feathers in its early stages. Once real estate industry professionals realize Zillow still has their best interests at heart, however, I think the program should prove to be an astute move to drive incremental revenue and profits for the company.
Second, late last month, Zillow stock pulled back again when it announced plans to raise as much as $725 million in net proceeds from a combination of offering new stock and debt. As I subsequently pointed out, however, I think Zillow could use the cash to potentially acquire one of its largest competitors, further solidifying its industry leadership as more people inevitably flock to online real estate platforms.
Top Penny Stocks To Own For 2019: Markel Corporation(MKL)
In order to be a truly successful investor, you need to have the patience to buy and hold shares of great companies for the long term. And it’s hard to think of a business that fills that mold better than Markel.
There’s a reason they call this specialty insurance and financial holding company a "mini-Berkshire Hathaway." Markel follows the formula that Warren Buffett used to make Berkshire a household name — that is, with its core insurance operations, its long-term-oriented investment portfolio, and its diversified group of noninsurance, noninvesting businesses acquired and held under the Markel Ventures segment.
As per usual, last quarter demonstrated the effectiveness of this three-tiered approach for generating shareholder value. Even as Markel’s investments endured stock market volatility at the start of this year, Markel was able to lean on its profitable insurance business and growth (both organic and acquisitive) at Ventures to offset that temporary weakness. Thus, Markel’s book value per share still climbed more than 8% year over year to roughly $671. So even with Markel stock having more than doubled over the past five years, shares still trade at around 1.6 times book value — a reasonable premium for this high-quality company. And I think long-term investors who buy now can still enjoy market-beating returns for decades to come.
Top Penny Stocks To Own For 2019: Noble Energy Inc.(NBL)
Like most of the other oil producers on this list, Noble Energy put the finishing touches on its portfolio cleanup by selling several assets, including its position in the Gulf of Mexico. That gave the company the money to pay down some debt as well as repurchase shares, as it announced a $750 million buyback program. That authorization is part of a plan to return $1.3 billion in cash to investors by the end of 2020, which also includes the company’s dividend. However, with Noble Energy basing that plan on $50 oil, it will likely be able to return even more cash to investors in the coming years, given where crude prices are these days.