It’s no secret that the market has been strong in recent years, but it doesn’t do investors any good to look backwards and applaud their gains. Instead, savvy investors are always thinking a few steps ahead — which is why the main question on your mind should be “What’s next?”
The answer: As we enter a late-stage bull market, investors need to get more picky than they were during the early stages of this momentum.
The tide isn’t going to keep lifting all boats higher, which is why it’s time to take a step back and lean on the basics as you pick out new stocks to buy.
While you should still be hunting for game-changing picks, fundamentals like earnings and revenue growth, debt, earnings and more all matter far more in a late-stage bull market.
With that in mind, what are some smart stocks to buy? Here are three to consider.
Stocks to Buy: Facebook Stock (NASDAQ:FB)
Facebook (NASDAQ:FB) is the first (and likely most familiar) name on our list of stocks to buy. Shares of FB stock are up an impressive 24% over the last year — five percentage points better than the broader Nasdaq — but the stock hasn’t really blown anyone away so far in 2015 in particular.
That makes it a good time to get in.
Facebook stock sports a forward P/E of around 30, which is right on par with the earnings growth it is slated to post each year over the next half-decade. Plus, when it comes to stocks to buy, FB is an ideal hybrid: It’s an up-and-coming tech name, but it now has a proven track record. For example, the company posted earnings beats in each of the last four quarters — beats that were 31%, 8%, 10% and 5% higher than analyst expectations.
Momentum continues to be on Facebook stock’s side too; earnings estimates for the current quarter are moving in the right direction, while the company continues to make headlines thanks to new features like Instant Articles. All in all, it’s far less speculative than tech names like Yelp Inc (NYSE:YELP) or LinkedIn Corp (NYSE:LNKD) — which recently dropped dramatically post-earnings — but it has far more upside than some stodgy tech giant. That makes FB a good stock to buy in a late-stage bull market.
Stocks to Buy: Hexcel Corporation (NYSE:HXL)
Next up, we have a company that’s likely not as much of your daily routine as Facebook is, but that should still be part of your late-stage bull market portfolio. That company is a composites company called Hexcel Corporation (NYSE:HXL). It develops, manufactures and markets lightweight, structural materials, including carbon fibers, specialty reinforcements, prepregs and more.
Why should you care? Well, the aerospace industry is a great play if you’re looking for reliability and growth … and composites are the cornerstone of that industry. Plus, composites also have a leading role in other major industries such as alternative energy devices and luxury goods.
So far, Hexcel has proven itself a smart pick; shares of HXL stock are up almost 20% in 2015 alone … and it looks to be just getting started. The company is still slated for long-term double-digit earnings growth and currently trades at a relatively reasonable price at forward P/E of 18 — not bad for a stock in the middle of a late-stage bull market.
Stocks to Buy: Healthcare Services Group Inc. (HCSG)
Last but not least on our list of stocks to buy, we have another mega-trend play. Between an aging country and increased healthcare spending, Healthcare Services Group (NASDAQ:HCSG) is sitting pretty with lots of growth potential and a reasonable price tag — part of the reason it’s on my buy list.
A quick glance at the chart shows HCSF stock chugging steadily higher since 2010, but taking a slight breather lately. That means only one thing: If you’re not already in, take this opportunity.
For more background on the last pick for our list of stocks to buy, Healthcare Services Group does exactly what its name implies: offers services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of the healthcare industry, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States.
Over the past five years, earnings growth has averaged double-digits per year … and things are expected to get even sweeter. Over the next five years, the company should grow its income by almost 20% per year. And for the cherry on top, consider this: The median analyst price target is $36 — nearly 20% higher than the current stock price. If you’re sitting on the sidelines, get in the game now … or you’ll be kicking yourself later.
Hilary Kramer is the editor of GameChangers, Value Authority, Absolute Capital Return, Breakout Stocks Under $10 and High Octane Trader.
