There is still a lot of uncertainty in the markets, even as we get past a pretty solid start to Q3 earnings season.
These seven large-cap stocks — Incyte (INCY), Progressive (PGR), Hormel (HRL), Nike (NKE), Expedia (EXPE), Stanley Black & Decker (SWK) and Home Depot (HD) — are big enough to take the bumpy ride into 2016 without too much trouble. They will also continue on their growth paths regardless of any broader economic challenges.
What’s more, they’re very well positioned so that when things start to truly turn around their respective sectors, these are the stocks that will be benefit first, and strongly.
Its an eclectic mix, but one thing that unites them all is their focus on the U.S. market. Some have major markets outside the U.S., but all rely on a healthy U.S. consumer for a large share of their success.
And as U.S. economic fortunes grow, so will these companies’ bottom lines.
Large-Cap Stocks: Incyte (INCY)
Incyte (INCY) is working on a new generation oncology drug, used as part of certain cancer patients’ chemotherapy regimen.
The company is a growing niche player in the oncology and inflammation areas, using a unique targeted therapy that inhibits Janus Associated Kinases (JAK1 and JAK2) that allow cancer cells to reproduce.
Its current drug on the market is sold under the name Jakafi and is used to treat myeloproliferative neoplasms (MPNs), which represent a few different forms of blood cancers. There are approximately 300,000 people who have some form of MPNs in the U.S. today.
Recently INCY announced more exciting news regarding a Phase III study for its new drug baricitinib for rheumatoid arthritis (RA). The results show that the drug is more effective than AbbVie’s (ABBV) blockbuster Humira.
This could be a huge development for INCY. It’s working on this new drug with Eli Lilly (LLY). But on a larger scale, it proves that INCY’s focused work with JAK inhibitors could launch this company into the stratosphere.
Large-Cap Stocks: Progressive (PGR)
If you watch any television at all, you have seen your share of Progressive (PGR) commercials. PGR has been working hard to grab market share from its rivals for years now. And it’s succeeding.
PGR stock is up slightly after releasing mixed earnings on Friday. Earnings were off by a penny, but revenue was up 14% year-over-year.
PGR remains the top momentum stock of the insurance sector. The stock is outperforming its competitors over the long term, its quarterly earnings per share are rising consistently, and it’s providing increasingly bullish guidance.
From a momentum perspective, this is all very bullish.
From a fundamental perspective, being an insurer means sitting on a pile of cash. And much of that cash is sitting in U.S. Treasuries and blue-chip corporate bonds. So, when rates finally rise, the company stands to see a better return on its cash. Also, as U.S. consumers start to earn more, they’ll upgrade their cars, houses, ATVs, RVs, etc. — all good news for PGR stock.
Large-Cap Stocks: Hormel (HRL)
Hormel (HRL) may be known for its iconic Spam brand canned ham. But it is a far bigger empire than that these days.
And its diversification means the holiday season — when big meals, parties and just increased celebrating in general grow in frequency — will be big for HRL stock. And since Hormel has brands up and down the scale, there is a product at every price point for every consumer.
Hormel’s most recent acquisition of natural foods company Applegate is a prime example. This is an upscale producer of additive-free meats that were generally found only in health food stores and select grocery stores.
But now, with HRL’s powerful access to much broader markets where healthier foods are growing in demand, Applegate brand meats can reach more consumers at a lower price point since it can now produce in larger quantities.
This is just one example of how this company has continued to find ways to adapt and thrive since 1891.
Large-Cap Stocks: Nike (NKE)
Nike (NKE) has become the Rodney Dangerfield of the athletic market: It just can’t get any respect.
This massive blue-chip consumer stock continues to knock earnings out of the park — even in a slow-growth world, it’s finding ways to gain market share and grow revenues — but analysts continue to be obsessed with its small competitor Under Armour (UA).
The logic seems to be, “If NKE is doing this well, imagine how well UA will do; buy UA.” But don’t fight the tape … just buy NKE.
How well is it doing? Last month’s earnings release for FY2016 were impressive: China growth was up 22% after currency adjustments. were only expecting about 15% growth.
NKE trounced earnings expectations as well. And best of all, margins continue to rise. That means NKE was able to raise prices and sell more goods in weak global markets: Excluding currency effects, revenues were up 9% in the U.S., 14% in Western Europe and 26% more in Central Europe.
Large-Cap Stocks: Expedia (EXPE)
Expedia (EXPE) is all about rising economic expectations. The company recently finished its acquisition of Orbitz to further secure its place as one of the largest travel companies in the world. It now has operations in more than 31 countries.
The travel business is directly related to the ability for companies and individuals to be able to afford traveling. Affordability has been a challenge in the business sector because, with the growing access to bandwidth, global meeting are possible without anyone ever leaving their office.
But EXPE is particularly well suited for the new challenges, since it gets a piece of the action on every transaction, just like the old school human travel agents did. Volume is what it’s all about in the online travel business, and EXPE has been one of the big dogs since its acquisition strategy commenced in 2013.
Since then, EXPE has acquired Trivago, Auto Escape, Wotif, Travelocity and Orbitz for a total of about $3.2 billion. EXPE stock has reflected the company’s ambitions, up 70% in the past year
Large-Cap Stocks: Stanley Black & Decker (SWK)
Stanley Black & Decker (SWK) is one of those rare companies that has such longevity and stability, it’s hard to imagine. So here are two simple stats to put this company in perspective relative to other publicly traded companies:
SWK has paid a dividend for 139 years.
SWK has increased its dividend every year for the past 48 years.
What started as Frederick Stanley’s local hardware store in New Britain, Connecticut has now grown to be a globally diversified tools and storage solutions empire.
One of the biggest moves in recent years was its acquisition of the legendary Black & Decker. This move consolidated its products and reputation for quality U.S.-made tools (although manufacturing has moved abroad in recent years).
One unique aspect to SWK’s tool business is the fact it maintains and grows market share with very little advertising. Much of this is because tools remain something that is passed from one generation to another, or DIY homeowners see what the pros are using and then buy the same tools. With its stable of household names this is a great advantage.
Large-Cap Stocks: Home Depot (HD)
The next logical iteration of SWK is Home Depot (HD), a store that is essentially a clearing house for home and commercial projects.
This is practically the perfect environment for HD. Low interest rates and slow growth mean many homeowners are refinancing and remodeling or simply choosing to do work on their house on their own.
Either way, the tradespeople and do-it-yourself types are rolling into HD to get their supplies. One key indicator underscores the fact that this bullish trend is already underway: Transactions greater than $900 account for more than 20% of HD revenues.
HD stock is up 16% this year and kicks off a solid 1.9% dividend at these prices.
While conditions are attractive for HD now, they’ll only improve as the U.S. — and global — economy grows. Even if rates rise, homeowners still have the cash to upgrade their homes (and tools and gardens).
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.
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