Are you familiar with the Rule of 72? It’s the number of years it takes to double your money, arrived at by dividing 72 by the annual rate of return. For example, if you own a group of stocks that average an annual return of 12%, it would take them approximately six years to double in value.
According to Finviz.com, a total of six S&P 500 companies have doubled their money over the past year. If you widen the group to include companies not in the index with market caps above $2 billion, the number increases to 55.
The problem is those 55 stocks represent just 3.2% of the 1,743 companies with a market cap of $2 billion or more.
In other words, the odds that you will double your money with any mid- or large-cap stock over the next 12 months is slim to none.
Just the same, I thought it would be fun to come up with a list of seven stocks I think could double your money over the next year.
Stocks to Double Your Money: Weibo (WB)
It’s crazy to think how well shareholders in Weibo Corp (ADR) (NASDAQ:WB) have done since its IPO in April 2014 at $17 a share. WB stock is up 68% annually with 37% in calendar 2015, 108% in 2016 and 188% year to date through Nov. 24. Doubling in each of the past two years, Weibo’s going to need to keep the pedal to the metal if it wants to do it again over the next 12 months.
However, if there’s a Chinese stock that can do it, I wouldn’t bet against the micro-blogging social media platform.
A bargain hunter’s dream stock.
However, make no mistake. Weibo is the stock that drives Sina’s engine. If Weibo doesn’t move, Sina has no chance of doubling in value over the next 12 months.
Sina’s best chance of doubling in the next year happens if Weibo gets bought by one of a handful of large companies interested in the company, including Alibaba Group Holding Ltd (NYSE:BABA) which already owns over 31%.
Stocks to Double Your Money: KKR & Co. (KKR)
KKR & Co. L.P. (NYSE:KKR) is known primarily as a private equity firm co-founded by Co-CEOs Henry Kravis and George Roberts and made famous in Barbarians at the Gate, a book about the leveraged buyout of RJR Nabisco in 1988.
However, it does a lot more than just buy companies, leverage them with debt, and sell them off
In the nine-month period ended Sept. 30, it increased its revenue by 155% to $3.1 billion with 35% from management fees, another 41% from performance fees and the remaining 24% from investment income. The three segments were improving by 34%, 103%, and 378% respectively.
As a result of strong revenues and earnings year to date in 2017, KKRs book value per outstanding adjusted unit increased 13.6% to $13.80. In the past five years, it has increased by 41% from $9.82 in 2012.
“Continued strong operating fundamentals across the firm were evidenced by double-digit growth year-to-date across our Management Fees, Fee Related Earnings, Economic Net Income and Book Value,” said Henry R. Kravis and George R. Roberts about Q3 2017. “Additionally, with the closing of two new strategic investor partnerships in the quarter and continued fundraising momentum, our Assets Under Management and Fee Paying Assets Under Management have increased 17% and 22%, respectively, year-over-year.”
From an earnings perspective, KKR stock is reasonably cheap at 8.2 times forward earnings. Should it continue to grow its three main revenue streams in 2018, KKR stock doubling in price is very much in the cards.
Stocks to Double Your Money: New Oriental Education & Tech (EDU)
Chinese education stocks got hit recently by a report that newly NYSE-listed RYB Education Inc – ADR (NYSE:RYB), a business that focuses on early childhood education services, was allegedly abusing the school’s kindergarten students.
While New Oriental Education & Tech Grp (ADR) (NYSE:EDU) only dropped 2.7% on the news, its biggest business is after-school tutoring for some four million K-12 students in China. Given it’s the largest provider of private educational services in the country, it’s unlikely that it would risk such a prominent position by allowing these kinds of activities, but is something to be aware of as you study its business model.
In April, I called New Oriental one of the seven best Chinese stocks to buy on the country’s renewed growth. My opinion rested on the belief that the company is filling a significant need in China, where the competition for university admission is intense.
“Typically, a Chinese student spends 12 years studying and preparing for a two-day, very competitive life-determining exam called the ‘college entrance test,’” said New Oriental CFO Stephen Zhihui Yang speaking with the NYSE. “Even though we are the leader in this market we only have a one to two percent share, which is why we want to focus on it.”
It’s great to see the Chinese doing so well, and it all starts with education.
Stocks to Double Your Money: Mercadolibre (MELI)
At the time I was comparing MELI to Amazon.com, Inc. (NASDAQ:AMZN) although AMZN is different in that it owns a majority of its inventory whereas Mercadolibre acts like a middleman much like Alibaba’s e-commerce business — although that too is changing with all of Alibaba’s brick-and-mortar retail acquisitions and investments.
Although MELI has soared since May 2008, I believe that its best days are ahead of it for two reasons.
First, Latin America is recovering from its latest political crisis and is moving into growth mode with 2.4% and 2.7% GDP growth expected in 2018 and 2019 respectively.
Secondly, I see Alibaba or some other large e-commerce player acquiring Mercadolibre in the next 2-3 years, which should keep its stock moving higher — it’s up 73% year to date, better than Amazon, but trailing Alibaba.
Investors have been leery of Amazon’s bigger push into Brazil hurting Mercadolibre, but the reality is AMZN doesn’t do nearly as well outside the U.S. and given MELI is the established e-commerce heavyweight in Latin America, they might be more inclined to buy it than fight it.
Stocks to Double Your Money: Universal Display (OLED)
I was simply riding the coattails of Rob Citrone, head of Discovery Capital Management, a New York-based hedge fund that owned seven million shares at the time and was talking up Universal Display’s business. I just felt like he was right about the company’s potential and that’s exactly what’s happened.
Discovery no longer owns any shares in OLED, but that doesn’t mean you shouldn’t. Providing the displays for the iPhone X and moving into the lighting market, it’s no wonder it continues to exceed analyst expectations.
I don’t know why Discovery Capital sold its shares; the company’s growth story remains intact. Up 225% year to date, I see another double happening in 2018.
Stocks to Double Your Money: Jeld-Wen (JELD)
As I mentioned in the introduction, the odds of picking a stock that doubles over 52 weeks isn’t easy. The S&P 500 is up 20% over the past year and yet just six stocks have doubled in this period, or around 1%.
So, in order to be successful, I’ve got to throw out a couple of wildcards that investors wouldn’t expect.
For me, one of those is Jeld-Wen Holding Inc (NYSE:JELD), best known for manufacturing windows for new and existing homes.
JELD went public in January at $23 a share after being taken public by Onex Corporation (OTCMKTS:ONEXF), its Canadian private-equity owner who paid $871 million for 83% of the company with the founders hanging on to the remainder.
Its investment was worth $1.6 billion at the time of the IPO. Since then it has sold 36 million shares through two secondary offerings, the most recent at $33.75 a share in November. Its current stake is worth $1.3 billion after selling more than $1 billion of its holdings.
That’s a big six-year gain, but unlike a lot of IPOs sponsored by private-equity firms where only the PE-firm does well, I think JELD stock is just getting going.
Jeld-Wen’s third-quarter report beat analyst expectations and over the past three years, it’s dramatically improved profits while keeping its relatively in check.
As long as the economy remains healthy, JELD stock will continue to move higher.
Stocks to Double Your Money: Healthequity (HQY)
In early January I called Healthequity Inc (NASDAQ:HQY) one of seven stocks to sell before they implode. My rationale was that UnitedHealth Group Inc (NYSE:UNH) was a safer bet should health savings accounts (HSAs) lose their priority in a Donald Trump healthcare plan.
Of course, in hindsight, we know that Trump has so far been unable to deliver a new healthcare plan. Perhaps in 2018 that will change.
In the meantime, HQY stock is up 25% year to date compared to 34% for UNH. So, HQY didn’t implode, but at least I recommended a stock that has done better in 2017.
Where to for the future?
Its Q2 2017 report showed that Healthequity created 120,000 new HSAs in the second quarter, 40% higher than the same quarter a year earlier. On top of that revenues were up 29% to $56.9 million and adjusted EBITDA profits rose 30% to $23.9 million, a margin of 42%.
It now has 2.9 million HSAs open, 26% higher than a year earlier.
No longer does it look like HSAs are on the chopping block, which suggests the best could be yet to come for Healthequity shareholders.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.