Low tech companies with explosive growth

 

You’ll always find many of the most rapidly rising stocks on the market represent exciting, rapidly growing high-tech companies. When a company creates a significant technology breakthrough, particularly when it is a disruptive technology, its value can rise arbitrarily quickly and to heights unlimited. Such rises are based on the assumption that the company will win out against competitors (and competitive technologies) to become one of those seemingly eternal technology giants that are laying the groundwork for the utopia (or dystopia) to come.

Ah, but what about the others? What makes a company grow at an explosive while using technology available to everyone, or barely using technology at all that didn’t already exist decades ago? Whether it be visionary management, creativity, organization, of financial acumen, the company’s strength, if not based on technology, has the profound advantage of not being vulnerable to technology. The companies on today’s list are doing well, and they stand to do even better over the rest of 2018. What’s more, they won’t lose their value if Facebook (FB), Alphabet (GOOGL), some upstart company in China, or a recently formed consortium of independent runaway AIs announces that it has made a breakthrough that will make microprocessors, the Internet, or human beings obsolete forever.

Remember to treat these ideas as just that, ideas, and do your own research before making any investment decision.

SkyWest (SKYW)

Airlines have a curious relationship with the price of oil, which is to say that it’s more complicated than the simple oil rises/profits fall relationship one might assume. Jet fuel is a special product, and its availability has as much to do with local and global refining capacity as it does with oil itself. Airlines just pass fuel costs directly to consumers anyway, and as they do it en masse, consumers don’t really have the option of defecting.

Institutional investors have been lightening their positions in SKYW along with other airline stocks so this could be a buying opportunity, also by selling smaller planes and buying larger ones, SkyWest has been making efforts to expand its already impressive profit margin of 13.39%. All the company’s value ratios look good, especially the PEG ratio of 0.71–that’s a measure of current value vs projected growth, and what it tells you here, by being so low, is that this company’s future is not only bright, it’s cheap.

Chart courtesy of www.stockcharts.com

JB Hunt (JBHT)

It’s a go-to bootstrap success story: in 1961, Johnnie Bryan Hunt started a rice hull transportation company with five trucks and seven refrigerated trailers (known within-industry as “reefers”) and grew it into what is today one of the biggest transportation companies in the US. Transportation stocks have reliably demonstrated the “Trump bump,” as they get their money from other businesses, not consumers, so policies that benefit businesses add to their bottom line, even in cases when, such as now, consumers have no more spending power as a result. The company has robust earnings and revenue growth, along with appealing valuations, and the timing is good, as prices have been held lower in the industry by fears of a trade war which will almost certainly never come.

Chart courtesy of www.stockcharts.com

LKQ (LKQ)

LKQ is among the biggest suppliers of alternative vehicle parts, including replacement parts and systems as well as specialty parts and systems. It is a great business that can thrive in multiple economic conditions, and as a result, LKQ’s revenue has been rising rapidly in recent years, both organically and through acquisition. With earnings expected to rise by 35% next year, LKQ shares look very strong, especially considering that you can pick them up today for just $37.59, down from $43.47 back in January.

Chart courtesy of www.stockcharts.com

Stanley Black & Decker (SWK)

I went long on SWK, the legendary tool, storage, and security company, about eight months ago and remain long today. I treat this as one of those stocks I’ll probably leave to my heirs, so to me it is nothing more than short-term blip that shares of SWK dipped last week after the company reported earnings, beat estimates for both earnings and revenue in the first quarter, but also lowered guidance for the remainder of 2018. The company lowered its 2018 guidance by about 6%, and over the course of the week, shares fell 10%. My SWK buy, though still very much in the green, is not making me look like a genius at this moment, but I’ve no doubt that I, along with anyone who jumps onboard now, will have the last laugh.

Chart courtesy of www.stockcharts.com

Ulta Beauty (ULTA)

Ulta Beauty is beauty retailer, the largest chain in the US dedicated to salon services. No one is warier than I of specialty retailers, as we have seen time and time again that they are not immune from, that they are, in fact, extremely vulnerable to, intrusion from online retailers. There may be exceptions, however, and ULTA is currently my favorite candidate. Why? Well, consider that Ulta operates full service salons in all of its stores. It’s not only a hit with consumers, it’s a gambit for which online competitors can offer no possible answer. It’s not a possible exception, it’s an inarguable exception. Now add the fact that earnings per share have risen by 2000% 0over the past ten years, and join me while we kick ourselves for not having spotted this one earlier.

Chart courtesy of www.stockcharts.com

Symbols: JBHT LKQ SKYW SWK ULTA
Julian Close

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.

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