When investors search for stocks to buy, they often look at the tech sector. While tech stocks have long held the fascination of investors, many other industries offer opportunity as well.
Additionally, tech does not operate in a vacuum. Its innovations can perpetuate ideas that bring growth and profits to other industries. For these reasons, stocks to buy continue to emerge in many diverse sectors.
Hence, when looking for stocks to buy, prospective buyers should look to not only these sectors but some of their stocks as well. With the following stocks, investors can find the diversity that strengthens their portfolios as well as the potential gains that bring high returns.
Consumer Discretionary: Walt Disney Co. (DIS)
Although Disney (NYSE:DIS) has existed for decades, it could again become one of the better stocks to buy in the consumer discretionary sector. DIS stock has a plan for bouncing back from the cable-cutting trend that has plagued the company in recent years.
It will soon introduce its own streaming service, removing its programming from the Netflix (NASDAQ:NFLX) platform. With its ownership of its classic Disney movies as well as Lucasfilm, Marvel, Pixar, and other media franchises, DIS stock remains the king of content. Its place in content has become further strengthened with its purchase of assets from Twenty-First Century Fox (NASDAQ:FOXA).
Moreover, the stock has appeared to recover from the disappointment at its Lucasfilm division regarding Solo: A Star Wars Story. DIS stock currently trades at around $116 per share, near its current 52-week high.
Despite this higher price, the P/E ratio stands at 14.7. Also, analysts predict profits will grow by 21.6% this year and at about a 10% annual rate on average for the next five years. Given this growth along with its solid position with regards to media content and theme parks, investors should continue to do well by buying DIS stock.
Energy: BP (BP)
The Deepwater Horizon explosion from 2010 loomed over BP (NYSE:BP) for years and kept it off of many stocks to buy lists. However, with this tragedy well behind the company, investors might want to again consider BP stock.
At current prices, BP stock trades at a forward P/E ratio of about 11. Despite this low multiple, the company appears poised for high growth. After years of declining profits, analysts predict a net income increase of 88.7% this year. They predict that will slow to 8.5% this year. Still, they believe growth will continue in the years to come.
Investors will also reap a huge benefit while they wait. The company pays its stockholders $2.44 per share in annual dividends. This takes the yield to about 5.9%. While not a dividend aristocrat, BP maintained this payout throughout the oil price decline between 2014 and 2016. Dividend increases resumed this year as well, indicating a higher degree of confidence. With the generous dividends and Deepwater Horizon years in the past, BP stock appears positioned to give investors dividend growth and some long-awaited stock price appreciation.
Financials: Pinnacle Financial Partners (PNFP)
Pinnacle Financial (NASDAQ:PNFP) has become one of the financial stocks to buy as it continues to grow into one of the more significant regional banks in the Southeast. Founded in 2000 by a group of Nashville businessmen, Pinnacle has grown into a $4.1 billion bank with 115 branches across four states.
Also, PNFP and its peers should benefit from rising interest rates. Analysts predict profit growth for the year will come to 48%. Over the next five years, they forecast average annual profit growth of 32.2%.
This growth has not yet shown up in the valuations. The forward P/E ratio stands at about 11.2. This comes in well below the average P/E over the previous five years of 21.2.
Struggles in 2018 likely explain much of the discrepancy. The stock has fallen 25% from its 52-week high due to analyst downgrades. However, after prices collapsed in October, the stock appears to have recovered somewhat. The stock has risen by over 6% since hitting its 52-week low on October 24th. Still, with the low P/E ratio and continuing growth throughout the Southeast, PNFP stock should continue delivering increasing returns for years to come.
Healthcare: Teladoc Health (TDOC)
Teladoc Health (NYSE:TDOC) continues to bolster its dominance of the emerging telehealth sector. The online healthcare provider continues to dominate its niche. It has also made key acquisitions to enhance its reach and improve the quality of care. In 2017, it acquired Best Doctors to improve its diagnostic capabilities. It also bought Advance Medical to provide telehealth services outside of the U.S.
Thanks to these efforts, it can deliver consultations 24 hours per day through the convenience of one’s laptop or smartphone. This includes not only regular office visits, but also consultations in specialties such as behavioral health and dermatology. It also provides this service at a much lower cost than comparable, in-person visits. Though other companies compete in this space, TDOC stock remains the only equity trading on a major index in the telehealth sector.
To be sure, as a $4.7 billion company with $414.2 million in expected annual revenue, TDOC stock remains expensive. Even with a long-term annual growth rate of 20% per year predicted, profits will likely not appear until at least 2021.
However, telehealth accounts for fewer than 1% of office visits now. Analysts expect that to grow as high as 30% in a few years. With this growth and Teladoc’s dominance in this industry, TDOC should become one of the more lucrative health stocks to buy.
Industrials: Spirit Airlines (SAVE)
Spirit Airlines (NYSE:SAVE) continues to gain market share at home and more markets abroad. The ultra-low-fare air carrier attracts business with its low-cost, no-frills approach. Moreover, Spirit appears to be bringing the more change to the industry than any company has since Southwest Airlines (NYSE:LUV).
Like Southwest, Spirit Airlines only flies one type of aircraft as of now. However, SAVE is also looking to acquire regional jets to serve smaller markets. Such a move could bring lower fares and massive increases in traffic to these markets. If this occurred, Spirit would become the leader using this so-called “Southwest effect.”
SAVE stock also leads the industry in growth. Analysts expect 11.7% profit growth for the current year. This comes despite Spirit having to give its pilots a considerable pay increase. Without the specter of a pilot’s strike hanging over the company, analysts predict 22.3% profit growth next year.
With more markets in South America and its prospects to change the industry at home, SAVE stock appears poised to fly ahead of many other stocks to buy.
Real Estate: Sabra Health Care REIT (SBRA)
Sabra (NASDAQ:SBRA) has become placed in an ideal position for both its business and its investors. An estimated 10,000 baby boomers per day continue to age into Medicare. As such, the demand for healthcare-related real estate continues to grow.
Sabra exists as a real estate investment trust (REIT) focusing primarily on skilled nursing facilities. However, the company owns specialty hospitals and senior living facilities as well. The peak year of age-ins occurs in 2022. Also, the last of the baby boomers do not become Medicare eligible until 2029, so this trend will continue for years to come.
The most noticeable benefit to owning SBRA stock comes from its dividend. Its annual payout of $1.80 per share takes its yield to about 8.1%. This dividend has risen every year since the company introduced it in 2011. Moreover, its REIT status requires the company to pay out at least 90% of its net income in dividends. With its continued profit growth, these increases appear poised to continue.
Despite this payout, the stock has remained reasonably priced with its P/E ratio of about 11.6. Through its history, the company has benefitted shareholders mostly through dividends. SBRA stock trades about one-third below levels seen in 2015. However, SBRA has risen over 40% from its lows. With continued profit growth, SBRA stock may become one of the stocks to buy for more than just its dividend.
Utilities: NRG Energy (NRG)
Lately, NRG Energy (NYSE:NRG) makes the stocks to buy list for behaving more like a tech stock than a utility stock. The company provides electricity to over two million homes and businesses in both Texas and the Northeast. One expects companies like NRG to pay a high dividend and see slow growth.
However, NRG seems to employ a different focus. The company embarked on a three-year transformation plan starting in 2017 focused on margin expansion. It has begun by selling its renewables platform. This increased its cash position by $1.3 billion and wiped out $6.7 billion in company debt.
The cash did not go to a dividend, as this payout has shrunk for years. Yields now stand at just over 0.3%. Instead, much of the cash has gone to share buybacks.
This may pay off as Wall Street forecasts the company will earn $2.95 per share this year. This comes in 272% higher than last year, when the company reported a net income of 87 cents per share. They also expect outsized growth next year, as analysts forecast a consensus profit of $4.46 per share for NRG stock in 2019. This would take the forward P/E ratio to just over 8.5. With a low multiple and massive profit growth expected for at least the next year, NRG should lead the utility sector for the foreseeable future.
As of this writing, Will Healy is long TDOC stock. You can follow Will on Twitter at @HealyWriting.
