8 'runaway' stock winners can't be stopped
Stocks have steamed higher this year. But some winners are running away with a head of steam that just dares doubters to stand in the way.
There are eight stocks in the Standard & Poor's 500, including cosmetics seller ULTA Salon (ULTA), Facebook (FB) and Martin Marietta Materials (MLM) that are up big this year and aren't showing any signs of losing their momentum, according to a Paste BN analysis of data from S&P Global Market Intelligence. All of these stocks are up 20% or more this year, expected by analysts to rise 10% or more over the next 18 months and are seen posting higher profits and revenues this year and next.
"In this environment, investors are looking for continuous growth and are willing to pay for that," says Ron Josey, analyst at JMP Securities addressing Facebook specifically.
These stocks highlight the tireless power the market has despite some serious risks. Presidential debates loom, as does the distinct possibility that the Federal Reserve Bank might hike short-term interest rates this year. The S&P 500 is up 6% this year already, despite pockets of weakness, including companies that sell items consumers can put off buying, like jewelry and travel.
That's why the winners in this leg of the bull are all that more important. ULTA Salon continues to be a looker. The stock is up 28% this year already to $237.57, and analysts think it could be worth 23% more in 18 months. It's not just speculation. Analysts expect both revenue and adjusted earnings per share to rise more than 20% this year and see earnings rising another 24% next year. ULTA is positioned well in the cosmetics industry, which is growing, in addition to taking market share from department stores, says Simeon Siegel, analyst at Nomura. "ULTA is taking (market) share of a growing pie, two nice recipes of success," he says, as the company not only benefits from a growing market but also claiming a bigger slice.
Facebook, too, is a source of strength that investors are gravitating to. Shares of the No. 1 social networking firm are up 23% this year to $128. But unlike many other big tech stocks that are up so much that analysts don't see much upside left, analysts think Facebook could be worth 21% more in 18 months. That's all due to the company's impressive revenue and earnings growth. Earnings are expected to rise 72% this year and 28% next year, says S&P Global. "They keep the numbers moving in the right direction," Josey says.
Expectations have much to do with these stocks' mojo. Fidelity National, a company that provides technology services to the insurance and real estate industries, has seen its shares soar 27% this year to $77.18, largely because the stock closed near annual lows last year, says Pete Heckmann, analyst at Avondale Partners. Investors have turned positive on the stock since the consulting business ended up being stronger this year than many last year feared it would be. Adjusted earnings are expected to be 19% higher this year.
Clearly the market faces hurdles. Analysts' earnings estimates have proved overly optimistic for the market, as S&P 500 profits are seen falling 0.7% in the third quarter. Back at the start of the year, earnings were expected to grow 9% in the quarter.
But for now, it's hard to argue with a speeding locomotive.
RUNAWAY STOCK WINNERS
S&P 500 stocks that are up 20% or more this year, expected to rise another 10% or more and have earnings and revenue growth expected the next two years:
Company, symbol, YTD stock Ch. %, Upside to target %
ULTA Salon, Cosmetics & Fragrance, ULTA, 28.4%, 23.0%
Facebook, FB, 22.6%, 21.4%
Fidelity National Information Services, FIS, 27.4%, 14.2%
Martin Marietta Materials, MLM, 32.9%, 14.1%
Boston Scientific, BSX, 28.3%, 13.3%
Digital Realty Trust, DLR, 29.6%, 11.9%
Masco, MAS, 21.8%, 11.8%
Applied Materials, AMAT, 60.1%, 10.6%
Source: S&P Global Market Intelligence, Paste BN