With another disappointing session for the Dow Jones, investors are scrambling to find answers. Unfortunately, the markets aren’t providing many great signals, with a contentious midterm election coming up and geopolitical tensions rising everywhere. Still, you can try your hand at breakout stocks to buy, provided you know where you’re looking.
I can guess most people’s immediate reaction to that headline is: the benchmark indices are breaking down, so what’s this talk about breakout stocks? It’s a fair point. More than likely, President Donald Trump will face a split government, which may yield increased volatility in Washington. And in the Senate race, Republicans are leading by a smaller margin than Democrats in the House.
Just recently, Wall Street tumbled when Treasury Secretary Steven Mnuchin decided to withdraw from an investment conference with Saudi Arabia. The Middle Eastern nation is under heavy fire for allegedly murdering journalist Jamal Khashoggi in a Saudi consulate in Turkey. Khashoggi consistently criticized Saudi Crown Prince Mohammed bin Salman.
Naturally, several companies have tanked under the suddenly pressured environment. But in this fog, certain breakout stocks to buy have emerged. These names typically enjoy a robust underlining industry, and have therefore limited their volatility. Others have a newfound lifeline as the markets shift their perspective.
If anything, the existence of publicly traded organizations that go against the grain confirm that investors shouldn’t give in. Here are seven breakout stocks to buy that are “immune” to volatility.
Ollie’s Bargain Outlet (OLLI)
Among breakout stocks to buy, Ollie’s Bargain Outlet (NASDAQ:OLLI) is one of my favorites because of its stability. I’ve mentioned OLLI stock several times over the past few years, doing a more comprehensive write-up in June 2017. Since then, shares have jumped nearly 129%.
Even this year, OLLI stock is heading towards another remarkable performance, gaining over 68% since the January opener. Compare that to the Retail SPDR (NYSEARCA:XRT), which is only up 4%.
Of course, such a dramatic lift has investors worried about buying into a correction. So far this month, the bargain retailer is down 8%.
To allay those fears, consider that OLLI stock has jumped back from prior corrective phases with conviction. The most recent example is the slow patch the company experienced during the summer season before storming to record highs.
Ollie’s Bargain has a very simple but effective business plan: sell quality goods at a discounted price. No matter what shape the economy is in, everybody loves a bargain. And if we do head towards choppy waters, OLLI stock becomes even more compelling.
Five Below (FIVE)
Five Below (NASDAQ:FIVE) breaks the common stereotype that brick-and-mortar retailers are doomed, especially in this still resurgent economy. Indeed, FIVE stock is what I would consider one of the top breakout stocks to buy because it just doesn’t break down.
I got a first-hand experience of Five Below’s resilience. I covered FIVE stock shortly after the underlying firm’s first-quarter fiscal 2019 earnings report. At the time, I wrote that the discount retailer’s results were “very convincing.” Management delivered strong beats on both profitability and growth.
I also stated that “I’m not itching to dive in at this very moment.” I wanted to wait for a correction in FIVE stock, at which point I’d buy wholeheartedly. Well, we saw small dips but I didn’t get that massive drop I was hoping for.
Let my mistake be a free lesson for you: FIVE stock is the real deal. As I argued before, management not only executes their strategies, they know how to engage their core young audience. In my opinion, no one in the segment does it better.
Popular content-streaming company Netflix (NASDAQ:NFLX) has also won a rabid fanbase on Wall Street. Over the trailing-four-year period, NFLX stock has usually produced outstanding returns.
However, the company got its first taste of true disappointment over the summer. That was when Netflix disclosed its Q2 earnings results. While management delivered a beat on the bottom line, analysts were looking for continued momentum in subscriber growth. Unfortunately, the content streamer failed against both its internal target and the Street’s consensus. Subsequently, NFLX stock tanked.
However, for its Q3 earnings report, Netflix fired on all cylinders. Of course it did: the company rarely misses twice in a row. Not only was it a resounding beat, management gave the markets the sub growth they were looking for.
After Q3, NFLX stock skyrocketed double-digits, and then gave up most of the gains the next day. The back-and-forth makes no sense. Netflix is an incredibly relevant and popular service, and it should only increase its footprint as consumers cut the cord.
Activision Blizzard (ATVI)
Activision Blizzard (NASDAQ:ATVI) is a controversial pick for this list of breakout stocks to buy because it recently faltered badly. On the Thursday session, ATVI dropped more than 8% of market value.
The reason for the fallout isn’t entirely clear, which is why I think it’s a great contrarian idea. Activision enjoyed a record-busting debut for its latest Call of Duty title, Black Ops 4. Both avid gamers and industry experts heavily anticipated the release, which didn’t disappoint. The shoot-em-up game recorded $500 million in worldwide sales in its first three days.
So why did ATVI stock drop like a rock? Honestly, I’m not sure. The Motley Fool’s Dan Caplinger asserts that gaming insiders expected a much bigger sales haul. That doesn’t really jive with the consensus opinion.
Nevertheless, if that is the case, the markets are being irrational. Activision is one of the premiere players in a burgeoning industry. Plus, ATVI stock is still inside a defined bullish trend channel. If you got the nerve, I’d buy into this weakness.
Randgold Resources (GOLD)
Throughout most of this decade, hindsight tells us that Randgold Resources (NASDAQ:GOLD) was a “breakdown stock.” Once the Obama administration laid the groundwork for the current economic recovery, gold and precious metals lost their sheen. Even so far this year, GOLD is down 16% and the SPDR Gold Shares (NYSEARCA:GLD) is down 6%. However, in the last week of market uncertainty, it is up 5%.
But things change, and right now, GOLD stock is easily one of the best breakout stocks to buy. I say that because fear has rippled into the markets. As I mentioned earlier, the Trump administration has an ugly situation with the alleged Khashoggi murder. Saudi Arabia was always an unusual bedfellow for the U.S., but we do have a lucrative relationship with them.
That relationship is now tested, which will surely spark other diplomatic concerns. Such volatility is a net positive for GOLD stock.
Randgold Resources also specifically benefits from rising precious-metal prices due to its historical troubles with keeping overhead costs down. Meeting profitability targets now becomes easier should gold sustain its momentum. Therefore, look for GOLD stock as a high-probability contrarian idea.
Innovative Industrial Properties (IIPR)
If you’re looking for breakout stocks to buy — and you have a strong stomach — the cannabis sector is your ticket. However, so many companies in this industry have experienced bonkers numbers. For relatively more stable names, consider Innovative Industrial Properties (NYSE:IIPR).
As I mentioned in my very popular article, “30 Marijuana Stocks to Buy as the Future Turns Green,” IIPR stock owns the distinction as the first cannabis company listed on a major exchange. That right there puts IIPR on higher ground since the majority of marijuana-related investments trade on over-the-counter exchanges.
But the intriguing part about IIPR is that it’s a real estate investment trust focused on botany. The company has several greenhouses and production plants under its belt, with more virtually guaranteed to come.
Now, I usually don’t invest in REITs. But when I do, I prefer IIPR stock. This is a perfect business plan for a proven, viable market that will only get bigger.
General Finance (GFN)
When the economy and the markets were rocking and rolling, General Finance (NASDAQ:GFN) is a name I’d recommend without hesitation. GFN stock is enjoying a banner year, gaining nearly 110%.
That said, the weakness and vulnerabilities in the major indices represent some concern. At a time when the Dow Jones needed to reassert control, it did the exact opposite. Therefore, the message is that economy could hit some rough patches.
If so, that directly and negatively impacts GFN stock. General Finance specializes in mobile storage, liquid containment, and modular business space. Obviously, a strong, vibrant economy is necessary to keep the lights on.
But even if the markets take a hit, GFN stock is making a convincing case for itself. Management has delivered excellent growth after a few years of eroding sales. The company has also stabilized its free cash flow situation, providing confidence for prospective shareholders.
As of this writing, Josh Enomoto is long gold bullion.