Five stocks everyone should own

 

There is never such a thing as a “sure bet” when it comes to investing, but there are always some stocks that tend to stand out from the pack, and are stocks that investors should not overlook.

When looking for stocks with the best possible chance of trending higher, there are several things that you want to pay attention to. You want to make sure that the underlying business is a leader in its respective field, it needs to be growing, it should have good barriers of entry, and most importantly it needs to trade at an attractive valuation.

If you can find a stock that has all of the above characteristics, you are left with a stock that is too good to overlook.

Make no mistake about it, there is no guarantees on Wall Street. Even a stock that has everything in place to move higher can quickly reverse course in the wake of just one bad news report. We never want to insinuate that a stock is guaranteed to go higher, but with a little planning and research, we are able to stack the deck in our favor.

With the overall market trading near record highs, a lot of investors are worried about whether or not the market has the strength to build on its recent gains, but with the following five stocks you can put yourself in a good position to extend your recent market gains.

Regions Financial

The financial sector has eased after posting major gains during the final months of 2016, but conditions remain positive for the sector moving forward, and investors should not overlook the potential that regional banks have at this point. Regional bank Regions Financial (RF) reported better than expected earnings in April, and analysts see the company growing its earnings by 12.6% during the current year, and by an additional 13.3% in 2018. Rising interest rates should provide a major boost to bank stocks, as they will be able to widen the spread on the money they borrow from the Federal Reserve and the money they lend out to their customers. President Trump has also pledge to ease regulations on the sector that were put in place during the financial crisis, which should allow for additional earnings growth. RF has a low valuation, with a P/E of 15.6, which combined with the company’s growth estimates suggests the stock has significant upside potential. RF trades at $14.24, and analysts have an average price target of $15.10 on the stock.

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Chart courtesy of www.stockcharts.com

Microsoft

Wall Street turned against Microsoft (MSFT) a few years ago as the company was unable to break into the smartphone market, but the company made a strong move into cloud computing, which has driven growth, and brought enthusiasm back into the stock. MSFT reported better than expected earnings in late-April, with profit rising from $0.62 to $0.73 year over year. Analysts see earnings continuing to rise, forecasting earnings growth of 8.6% during the current year, and 9.6% in 2018. The stock has a P/E of 30.2, which is not too high to prevent more upside as the company continues to increase its earnings power. Cloud computing has become a huge driver of growth for the companies that have emerged as leaders in the sector, and with Microsoft second only to Amazon.com (AMZN) the future is bright for the company. MSFT trades at $68.50, and analysts have an average price target of $70.88 on the stock.

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Chart courtesy of www.stockcharts.com

Wal-Mart

In recent years, a large portion of the retail sector has fallen victim to the “Amazon effect”, so it is understandable why some investors are worried about buying stock in brick-and-mortar retailers at this time. Amazon.com (AMZN) has totally shaken up the retail sector, but one retailer that has managed to fight back is Wal-Mart (WMT). Two years ago, when Wal-Mart announced plans to boost spending on its e-commerce business, and to boost the minimum wage for its employees, Wall Street turned against the stock. The move was understandable, since at the time no retailer had managed to successfully combat Amazon, but the investments have begun to pay off, and Wal-Mart’s focus on growing its e-commerce business is working. Last quarter Wal-Mart announced that online sales rose by 69% year over year. The retail sector is moving online, and now that Wal-Mart has begun to prove its ability to compete online, the future is bright. The company is not only experiencing growth online, but in its stores as well. Comparable same store sales growth was up 1.4%, as its investments in its employees has started to result in a better customer experience. Earnings are forecast to grow a modest 0.5% in 2017, but are expected to rise 5.5% in 2018.

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Chart courtesy of www.stockcharts.com

General Dynamics

Given the current state of the world, it would be crazy to overlook the defense sector. With tensions rising around North Korea, growing terrorists threats, and President Trump’s pledge to significantly boost military spending, defense contractors like General Dynamics (GD) should remain attractive for years to come. The company has a solid earnings track record, and in April it reported first-quarter profit of $2.48 per share, well above the consensus $2.32. Quarterly profits rose 6.0% year over year, and analysts forecast full year earnings growth of 13.4%, and growth of 8.4% in 2018.

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Chart courtesy of www.stockcharts.com

Dycom Industries

There is a lot of enthusiasm around construction stocks at this point in time. One of President Trump’s biggest campaign promises was to rebuild America through increased spending on infrastructure, and another pledge was to build a wall on the Mexican border. Both promises would lead to significant earnings growth for construction companies such as Dycom Industries (DY), which is a highly diversified construction play. The company is involved in engineering, construction, maintenance, and installation services. The stock has soared since the election, and shares are currently trading just shy of its record high. DY has a P/E of 22.4, which is very favorable when you consider that analysts forecast earnings growth of 21.4% in 2017, and an additional 17.5% in 2018.

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Chart courtesy of www.stockcharts.com

Symbols: DY GD MSFT RF WMT
Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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