It’s essential to have a solid base of blue-chip stocks that can ride through the the market’s storms without the drama you see in many ‘pure’ growth stocks.
And we have more than a few examples of these stocks in our Blue Chip Growth Portfolio, including AmerisourceBergen Corp. (NYSE:ABC), Kroger Co (NYSE:KR) and Southwest Airlines Co (NYSE:LUV).
We’re heading into a dicey earnings season, and as you well know, investors will punish stocks for missing their numbers and punish them even more if they provide disappointing guidance moving forward.
That’s why we looked not only to sector leaders but companies that know how to weather the short term, with our eyes fixed on the long term. In many businesses that’s what separates the winners from the losers, especially in low-margin businesses with volatile input pricing like two of our picks.
But first, let’s look at three companies that have done well by us since we added them to the portfolio almost two years ago and still have growth ahead.
3 Oldies but Goodies: AmerisourceBergen Corp. (NYSE:ABC)
AmerisourceBergen Corp. (NYSE:ABC) distributes name brand, generic and over-the-counter drugs to healthcare providers as well as pharmacies throughout the country. AmerisourceBergen works every side of the supply chain and even assist with inventory management and reimbursement services.
And if you’ve been to the pharmacy since the Affordable Care Act has been fully enacted, you know that pharmacies have been hit from all sides in sorting out what insurance covers and what it doesn’t at this point.
ABC has returned over 100% in the past two years (in May), which is certainly impressive.
But the thing is, the upside is just beginning. As the traditional healthcare model transitions, it’s companies like ABC and the services it provides that will become increasingly valuable.
3 Oldies but Goodies: Kroger Co (NYSE:KR)
Kroger Co (NYSE:KR) is in the sweet spot for keeping its business booming during this slow economic recovery.
Working class and price-sensitive consumers continue to spend frugally, and KR is built to take advantage of shoppers looking for a deal. Few grocery store businesses have better margins in this classically low-margin business.
KR has been a Blue Chip Portfolio resident since August 2013, and it’s returned a solid 98% in the past 20 months.
Aside from being one of the nation’s largest retail grocery chains, Kroger also owns 1,200 gas stations, 800 convenience stores, over 300 jewelry stores and 37 food processing facilities.
A few weeks ago, KR trounced Q4 earnings expectations. Net earnings jumped 22.7% compared to the year ago quarter. Over the same period, total sales climbed 9%, ahead of the consensus estimate. And excluding fuel sales, total sales jumped 14.2% over last year.
And since it only operates in the U.S., KR isn’t effected by the stronger dollar.
3 Oldies but Goodies: Southwest Airlines Co (NYSE:LUV)
Southwest Airlines Co (NYSE:LUV) is our other low-margin winner.
It’s always found a way to keep the profits rolling in, regardless of what the economy has thrown at it. Plus, up to now it’s been a strictly U.S.-based carrier, so Southwest Airlines hasn’t had to contend with the strong dollar impacting international revenue.
LUV stock has been on a tear for quite a while — we’ve held Southwest Airlines since May 2013, and LUV is up nearly 225%.
Low fuel costs will certainly help the bottom line and expand margins. Add that to increased passenger and cargo loads and you have a very bullish picture.
And LUV’s acquisition of AirTran has opened up international markets, which should help grow its core business. Now Southwest Airlines’ planes will fly to Mexico, Central America and the Caribbean, where it will be an important player for cost-conscious travelers.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
