Many stock pickers will try to dig into every nook and cranny looking for hidden investment gems — companies that few have heard of yet, but that they think will eventually get the attention they deserve.
That’s all well and good, but don’t discount what’s staring you in the face, either.
Some of the top stocks on the market are the top companies on the market — firms that everyone knows about because they’re already among the best. Market share winners. Clear leaders in the space. Businesses that literally created the market for what they do.
“But there’s no growth at the top!” Not quite. Sure, that’s what people thought about Apple (AAPL) — long held by just about every money manager that could justify it within his strategy — for years. In 2012, the naysayers even looked to be right when Apple bombed … but the company righted the ship, and now AAPL sits 25% higher than its previous peaks.
So, what market-dominating stocks still belong in every portfolio?
We’ve put together a panel of 10 stock-picking experts to dole out 10 top stocks that they believe are already winning the game, but are positioned to generate even more returns going forward.
In no particular order …
Top Stocks #1: Procter & Gamble (PG)
Expert: Richard Band, Editor, Profitable Investing
If I had to name just one stock that could defy even a major bear market for the Dow, it would be Procter & Gamble (PG).
In April, the Cincinnati-based maker of Crest, Tide, Pampers and Gillette products boosted its dividend for the 59th year in a row. But that’s only the beginning of this stock’s appeal.
CEO A.G. Lafley, summoned out of retirement in 2013, has put the company on a “biggest loser” diet. PG will shed approximately half its brands (those with the lowest profit margins). When the process is complete (probably by the end of this summer), earnings should accelerate as the company pours cash, for innovation and marketing, into its strongest products.
Don’t fret media reports that PG is disposing some of its beauty businesses, including the recently reported $12 billion sale of the Max Factor, CoverGirl and Wella brands to Coty (COTY). These brands are valuable, but the competition is excruciating, and margins are under severe pressure. Either Lafley or his likely successor, David Taylor, will be able to put the company’s resources to better use.
Wall Streeters, notorious for their short attention spans, aren’t willing to sit still while Lafley’s highly professional team turns around this aircraft carrier. I’m in no rush, though. During my 42-year investing career, I’ve seen this consumer-goods giant reinvent itself three times — and steam onward to greater glory after each makeover.
Once PG completes the disposal of its low-margin businesses, the stock will take off. Meanwhile, you’re earning a sweet 3.4% cash yield, half again greater than an S&P index fund.
Top Stocks #2: Monster Beverage (MNST)
Expert: Louis Navellier, Editor, Blue Chip Growth
If you could own just one beverage company, I’d recommend Monster Beverage (MNST).
According to IBISWorld, energy drink companies have achieved double-digit growth for each of the past five years, making them the envy of the packaged beverage industry. And while privately held Red Bull GmbH is the global top seller, Monster Beverage is catching up quickly in the U.S. Monster Beverage currently produces seven of the top ten energy drink brands in the U.S. by sales.
And there’s one thing that Monster has that Red Bull doesn’t — a strategic partnership with Coca-Cola (KO). Last summer, Coca-Cola became Monster’s preferred distributor worldwide while also acquiring a 16.7% stake in Monster. Coca-Cola is transferring ownership of its energy drinks (including NOS — the country’s No. 3 energy drink brand — and Full Throttle) to Monster Beverage in exchange for Monster’s non-energy drinks.
Going forward, Monster Beverage will focus more on its core energy drink business, and it will benefit from Coca-Cola’s extensive distribution and bottling system. So there are opportunities for further growth, especially abroad.
For FY 2015, Monster Beverage is expected to see 16.4% annual sales growth and 18.4% earnings growth. With these growth prospects, I wouldn’t be surprised to see Coca-Cola completely take over Monster Beverage in the coming years.
Top Stocks #3: Nike (NKE)
Expert: Charles Payne, Editor, Smart Talk
Nike (NKE) is an iconic American brand. It’s the global leader in athletic footwear and apparel, and it also makes sports equipment. Everyone is very familiar with the swoosh, the company’s “Just Do It” slogan, its “Air” shoes, and its sponsorship of world famous athletes like Michael Jordan, LeBron James, Rory McIlroy and others.
The stock has done well, gaining nearly 40% during the past 12 months, including 8% so far in 2015 vs. a flat broader market.
But I see a lot more to come over the long term for several reasons:
- Management is just outstanding. Nike executes well and has an amazing ability to stay new, fresh and current.
- The company really has only one global competitor, Adidas, and is crushing it. Nike is also expanding its international presence.
- Nike’s brand has reached the level of a status symbol. Owning Nike merchandise is truly a symbol of Americanism — a tailwind the company should continue to ride for years to come.
Add it all up, and I expect growing consumerism around the world, superb management and product innovations (like wearables) to keep Nike moving higher over the long term.
Top Stocks #4: GoPro (GPRO)
Expert: Anthony Mirhaydari, Editor, Edge Letter
One of the hottest areas of growth right now is high-definition/4K vision systems and drones. It’s an emerging industry, with regulatory specifics, business models and market leaders still being established.
But it’s reached critical mass, establishing a new consumer goods category much like Apple, which largely ushered in the era of MP3 players (iPod) and smartphones (iPhone).
And that’s why I like GoPro (GPRO) so much: It’s a company that already cut its teeth putting cheap, durable and very capable action cameras into the hands of consumers … and that’s now preparing to launch its own lineup of drones.
How do I know drones are mainstream? Because Martha Stewart recent penned a love letter to her DJI Phantom drone in Time magazine, the arbiter of modern taste cooing in America’s mainstream periodical:
“In just a few minutes I was hooked. In near silence, the drone rose, hovered, and dove, silently and surreptitiously photographing us and the landscape around us.”
DJI is the current market leader, with revenues expected to hit $1 billion after eclipsing $500 million last year — four times what it did in 2013.
Grabbing a piece of that action could do big things for GPRO’s bottom line, which I expect given the popularity of GoPro’s HERO cameras with current drone users. Revenue has increased from $234 million in 2011 to $526 million in 2012 and $986 million in 2013. The company is on pace to reach $1.9 billion in revenues this year, followed by $2.26 billion in 2016, according to analyst estimates. Net income totaled $128 million last year, up from $61 million in 2013 and $32 million in 2012.
Simply returning to GoPro’s post-IPO high of $98.47, hit in October, would be worth a 67% move from here.
Top Stocks #5: Nestlé (NSRGY)
According to the U.N., the world’s happiest place is tiny, Alpine, landlocked Switzerland. The tiny mountain nation of Switzerland also packs a punch when it comes to producing multinational champions. Switzerland has the highest number of Fortune Global 500 companies per capita in the world (except tiny Luxembourg).
Nestlé (NSRGY) is one of Switzerland’s Fortune Global 500 companies and the largest food company in the world. Nestlé is a leader in infant nutrition, and got its start when Henri Nestlé developed the first baby formula to address the staggering 1-in-5 child mortality rate in Europe. Nestlé the company continued Henri Nestlé’s research, acidifying the milk in 1934 to kill germs that were prevalent before refrigeration became common.
Today, Nestlé is the world’s top seller of infant nutrition products.
All told, the best sellers at Nestlé are powdered and liquid beverages, milk products and ice cream, and prepared dishes and cooking aids. Famous brands like Cerelac, Gerber, Poland Spring, San Pellegrino, Perrier, Butterfinger, KitKat, Nescafe, Carnation, Nesquik, Maggi and around 2,000 more make up Nestlé’s product lines.
And despite Nestlé’s already impressive size and scale, the company continues to grow. Nestlé recorded sales of nearly $98 billion last year, representing organic growth of 4.5%. Moreover, NSRGY saw explosive growth of 8.9% in emerging markets, which made up a hefty 44% of Nestlé’s 2014 revenues.
Note: Nestlé is one of the recommendations in the Global Investment Strategy newsletter.
Top Stocks #6: Kinder Morgan Inc (KMI)
Expert: Charles Sizemore, Principal, Sizemore Capital
Oil and gas pipeline operator Kinder Morgan Inc (KMI) is an absolute no-brainer to own. I consider it a stock you can buy, drop in a drawer and not look at again for a decade or more.
Kinder Morgan owns and operates the largest network of oil and gas pipelines in North America spanning over 80,000 miles. Oil and gas prices rise — and fall — but Kinder Morgan’s pipelines continue to deliver the goods.
Why am I so bullish on Kinder Morgan? To start, it is run by one of the smartest men in the energy industry — Richard Kinder — who cobbled together his empire from spare parts left over from Enron.
Kinder’s interests also happen to be perfectly aligned with his shareholders. Kinder receives no salary for his work as chairman and CEO. His only compensation comes from the dividends he receives as a KMI shareholder, though as the owner of 244 million shares, Mr. Kinder is doing just fine. His dividend income is about $400 million per year … and naturally, he has every incentive to keep the dividend checks coming (and growing).
At today’s prices, Kinder Morgan sports a dividend yield of 4.8%, and management wrote last year that it expected to see dividend growth of at least 10% per year through 2020. Assuming you hold the stock through 2020, you’d be looking at 61% cumulative dividend growth.
There aren’t too many blue chips offering that kind of dividend growth these days.
Top Stocks #7: JPMorgan Chase (JPM)
Expert: Jim Woods, Editor-at-Large, Money Threats
One of the 10 stocks you have to own is also run by one of the bankers many people love to hate, and that is JPMorgan Chase (JPM) and its outspoken and often controversial CEO Jamie Dimon.
Dimon is the current poster boy for “evil” bankers, and his statements at shareholder meetings calling those who voted against JPM’s executive compensation plan as “irresponsible” and “lazy” don’t exactly give Dimon any diplomatic style points.
But I’m not investing for diplomacy, I’m investing for results — and results are what Dimon and company deliver.
JPM shares are at all-time highs thanks to a 9% run in 2015, and more than 20% in gains over the past year. Go back five years, and you’re looking at a return of roughly 80%.
That kind of stellar performance is likely to continue going forward, as improving economic data will likely prompt the Fed to finally issue its first interest-rate hike in more than seven years — possibly as soon as September.
Higher interest rates are good for banks as it means higher net interest margins. And higher net interest margins will allow Dimon and company to keep churning out big profits for shareholders.
Top Stocks #8: FireEye (FEYE)
Expert: Johnson Research Group
It’s almost unimaginable to not consider cybersecurity as one of the major fundamental driving forces for growth for the next year. The growing outbreak of cyber threats has companies, governments and individuals scrambling to answer the question “What protection is available?”
FireEye (FEYE) answers the question for all.
FEYE is forging itself as the leader and innovator in the cybersecurity world, specializing in threat prevention platforms that include network, email, mobile, content, analytics and forensics.
Wall Street is on the wrong side of the FEYE trade right now, as sentiment is relatively pessimistic for this all-star performer. Fear and pessimism toward FireEye built after shares dropped from $90 to $30 in 2014. During that period, analyst recommendations dropped and short interest rose. Currently, only 50% of the analysts covering FEYE have it ranked a “buy” — the rest believe it’s a “hold.”
However, with 2014’s ugly move behind it, the analysts are likely to pick up on FEYE’s rapid 68% move this year and start initiating upgrades to avoid looking like they’re behind (of course, they still are).
Bottom line, FEYE is now in our “Behavioral Valuation sweet spot” as strong technical and fundamental indications combine with FireEye’s scaling of the “Wall of Worry.” These situations often precede a feeding frenzy as the Street wakes up and realizes shares are well on their way to new highs.
FireEye should eclipse its all-time mark sometime during the next year as America’s cybersecurity issues continue to flare.
Top Stocks #9: Public Service Enterprise Group (PEG)
Expert: Hilary Kramer, Editor, GameChangers
Public Service Enterprise Group (PEG) is a lesser-known name, but as a utility, it still has its own level of dominance.
Public Service Enterprise Group is one of the 10 largest electric companies in the country and consists of a family of diversified energy businesses, each of which plays its own role in fueling New Jersey’s energy sources and economy.
Utilities have performed poorly so far this year, tanking lately as long-term interest rates climbed, and like the rest of the sector, PEG was hit hard by the selloff. But I see that as a buying opportunity.
PEG is currently trading about 13% off its January peak, and that has boosted its dividend yield to its current 3.6%. Meanwhile, the company has many future projects in the pipeline that should help grow earnings 3% to 5% per year, which will eventually translate into higher dividends.
Assuming interest rates stay well-behaved — at least in the near term — this stock is poised to rebound quite well over the next 12 months or so.
Top Stocks #10: Dot Hill Systems (HILL)
Expert: Rick Rouse, Momentum Trades
Dot Hill Systems (HILL), like Public Service Enterprise Group, isn’t terribly well-known compared to the Apples and Nestles of the world, but it’s still a big name in its space.
Dot Hill is in the business of data storage systems, both hardware and software, boasting customers across numerous industries — not just tech, but also telecoms and even energy firms.
HILL is playing in a big world. For 2015, the amount of total storage data is expected to reach over 5 zettabytes — double the number from three years ago. And demand is expected to double about every two years afterwards.
Even more compelling is the fact that 90% of the planet’s data is considered “unstructured.” The explosion in mobile devices and the “Internet of everything” will continue to grow and will only add to the increasing need for storage. As the world becomes more connected, mobile data traffic will continue to fuel the need for stored solutions.
And fundamentally, HILL produces. The company posted solid earnings in May, earning 6 cents per share that were triple the year-ago figure, on revenues that grew 23% to $60.3 million. Moreover, HILL has beat or matched earnings estimates for each of the past eight quarters.