Blue-chip stocks — stocks that can safely anchor a portfolio, often pay a dividend, and tend to be household names — should be owned in one form or another by pretty much everyone who plays the stock market. If you generally believe in the long-term health of the global economy, then it wouldn’t make sense not to own a blue-chip stock or two.
If you think the world is generally headed to hell in a handbasket, then, well, you’ll probably want to stack up on dry goods and invest in an underground bunker.
While the hunt is always on for the best blue-chip stocks to buy now, the search gets a little more difficult when you try to predict the companies that will be blue-chip stocks tomorrow. It’s a little riskier than going with the tried-and-true names in the Dow Jones Industrial Average, but the potential rewards are absolutely staggering.
Below are five stocks that aren’t yet blue chips, but rather up-and-comers with the potential to be the stalwarts of tomorrow.
Blue-Chip Stocks of Tomorrow to Buy Today: FleetCor Technologies, Inc. (FLT)
Looking to invest in tomorrow’s Visa Inc (NYSE:V)? Aren’t we all! FleetCor Technologies, Inc. (NYSE:FLT) is a bit different than a traditional credit card company — it’s a “fuel cards” company specifically — but the business is expanding so rapidly that it may become a household name in the next 10 years.
Louis Navellier, Wall Street veteran and the editor of Blue Chip Growth, chose FLT stock as his entry for the 2014 InvestorPlace “Best Stocks for 2014” competition. While he didn’t win out, FleetCor stock still rallied 27% on the year, good enough for third place.
When making the pick in late 2013, Navellier reasoned that FLT — which offers its fuel cards to gas stations and owners of vehicle fleets and also does food and lodging cards — would benefit from a number of recent accretive and synergistic acquisitions.
That bent for acquisitions continued in 2014, when FleetCorp bought Comdata, the Canadian e-payments business that processes more than $54 billion in transactions annually. I expect we’ll all be hearing much more about FleetCor in the years ahead.
Blue-Chip Stocks of Tomorrow to Buy Today: WhiteWave Foods Co (WWAV)
Up more than 40% in the last year, Wall Street’s discovered WhiteWave Foods Co (NYSE:WWAV), the aptly named packaged food company that’s riding the wave of organic, natural foods.
Consumers have discovered WhiteWave Foods as well: revenue soared 35% last year and net income roared 41% higher. WWAV stock keeps notching all-time highs, and with a very real need for a fresh, specialized brand in the packaged food industry, I don’t expect WhiteWave to disappear overnight.
Traditional “Big Food” heavyweights like Campbell Soup Company (NYSE:CPB), Kellogg Company (NYSE:K) and ConAgra Foods Inc (NYSE:CAG) are feeling the heat from their new, organic competitors. Campbell’s CEO Denise Morrison candidly admitted the issue last month, attributing the company’s growth struggles to a “mounting distrust of so-called Big Food, the large food companies and legacy brands.”
Healthy food isn’t going away. Packaged food isn’t going away. And WhiteWave stock isn’t going away. I’m excited to see WWAV give a new meaning to the term “organic growth” in the coming years.
Blue-Chip Stocks of Tomorrow to Buy Today — Under Armour Inc (UA)
Plainly stated, Under Armour Inc (NYSE:UA) is the biggest threat to longtime athletic apparel leader Nike Inc (NYSE:NKE). Sure, Under Armour may already be a household name, but UA isn’t close to being a blue-chip stock yet. Don’t worry, just give it a few years.
The Baltimore-based Under Armour is clearly a growth story at current levels, and trading at a forward P/E around 55, value investors are likely to shy away from UA stock. I understand the hesitation; UA trades at all-time highs and a market pullback wouldn’t be the most shocking thing in the world. But I subscribe to Warren Buffett’s philosophy, namely, that it’s impossible to predict the short-term fluctuations of the market.
With that in mind: five, 10, 15 years out from now I think Under Armour will have proved itself a savvy investment. Its marketing blitz — which includes the biggest-ever college football sponsorship deal, a newly inked deal with boxing legend Muhammad Ali, and a new line of shoes from NBA MVP candidate Stephen Curry — is translating directly into revenue growth.
In 2014, Under Armour overtook adidas AG (ADR) (OTCMKTS:ADDYY) in the U.S. sportswear market for the first time. And guess what? Nike’s up next.
Blue-Chip Stocks of Tomorrow to Buy Today — Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA)
Beauty retailer Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) may seem like an unlikely blue-chip-in-the-making, but with the ambitions and track record Ulta’ shown thus far, you can quote me on this one.
You probably don’t realize it, but as of last week, ULTA stock has been an under-the-radar Wall Street all-star for years now. Over the last five years, it’s part of the elite group of names that have outperformed Apple Inc (NASDAQ:AAPL) stock — and in convincing fashion, to boot. ULTA gained 539% to Apple’s 306% gains over the same period.
While its stellar past performance sure doesn’t cement ULTA as a no-brainer today, the company continues to impress quarter after quarter. ULTA stock topped earnings-per-share estimates for a fifth straight quarter last week, and I expect more to come. I mentioned the company’s heady ambitions, something reflected in its goal to grow its store count by 100 per year over the next five years — a strategy that would result in 65% more locations than its current count of 774.
On Tuesday, ULTA’s board of directors approved a $100 million addition to the current buyback program in a move that should help investors sit pretty well into the future.
Blue-Chip Stocks of Tomorrow to Buy Today — Fortinet Inc (FTNT)
With a market cap under $6 billion, Fortinet Inc (NASDAQ:FTNT) is the smallest company on the list, so it would appear to be the least-likely blue-chip stock in the making. That may be true if not for the simple fact that FTNT specializes in a rapidly growing area of need: cybersecurity.
In naming his 5 Hot Tech Stocks to Buy Now on Tuesday, InvestorPlace Editor Jeff Reeves touted Fortinet’s solid reputation, robust balance sheet (no debt and $1 billion in cash), and proclivity for growth:
“…unlike some other stocks in the space, Fortinet has seen impressive top-line growth married with a comfortably profitable operation that isn’t in cash-burn mode. Fiscal 2014 revenue hit $770 million, up almost 80% from $433 million in fiscal 2011 — an impressive growth rate even as the company has been turning a profit for many years now.”
Increasingly, corporate America is in need of a cybersecurity solution as hackers go after supposedly secure, nonpublic data with verve. Its premier product, FortiGate, is a network security platform capable of preventing breaches for clients ranging from small businesses to data centers and Fortune 500 companies.
It has a long way to go before it’s a blue-chip stock, but with the wind at its sails, FTNT stock could eventually become a well-known pillar of the individual investor’s portfolio.
As of this writing John Divine owned shares of AAPL stock. You can follow him on Twitter at @divinebizkid or email him at firstname.lastname@example.org.