If there’s a bigger IPO story in 2019 than Beyond Meat (NASDAQ:BYND), I’d love to know what it is.
Beyond Meat stock gained 163% in its first day of trading May 2. Through June 27, it’s up 542%, trading at more than six times its IPO price of $25. It doesn’t get much better than an annualized total return of 3,200%.
In early June, InvestorPlace contributor Luce Emerson suggested investors ought to take profits on Beyond Meat stock. At the time it was trading around $140; it has since added another 13% over three weeks.
It can’t keep going higher, can it? I’ve been on the plant-based foods bandwagon for a while, so I believe that anything is possible.
Last October, I recommended Tyson Foods (NYSE:TSN) in large part because of its investment in Beyond Meat. Tyson sold its stake in April before the IPO because it planned to create its own plant-based protein products, putting it in direct competition with Beyond Meat.
However, as much as I believe in plant-based foods, Beyond Meat stock is ridiculously expensive.
Therefore, I thought I would recommend seven of the best stocks to buy for the same price as one share of Beyond Meat stock. Here’s what I’ve found.
Best Stocks to Buy: Cactus (WHD)
I had never heard of Cactus (NYSE:WHD) until reading an article about the maker of oil-drilling equipment a few days ago. However, I wanted to recommend one stock from seven different sectors and it seemed like a solid pick from the basic materials sector.
As I write this, WHD is trading around $33, about 22% off its 52-week high of $40.97.
Cactus reported its 2019 first-quarter results in early May. They were very positive, with sales up 13.6% on a sequential basis from the fourth quarter to $158.9 million. On the bottom line, adjusted net income rose 9% on a sequential basis to $36.9 million.
On a year-over-year basis, revenues and adjusted net income increased by 38% and 43%, respectively.
More importantly, Cactus saw revenue growth across all three of its operating segments, a positive sign considering rig counts continue to decline.
Cactus has $88 million in cash, no long-term debt, and all of its revolving credit facility available. The company expects to spend up to $65 million in fiscal 2019 on capital expenditures, which means free cash flow could go over $100 million on the year.
Trading at a forward P/E of 14, Cactus is a diamond in the rough.
Ever since the owner of Kate Spade and Stuart Weitzman announced in 2017 that it was changing its corporate name from Coach to Tapestry (NYSE:TPR), its stock has been on a downward spiral, trading about 23% lower than two years ago.
If you look at its most recent earnings report from early May, Tapestry’s business isn’t doing that badly, with overall revenue of $1.33 billion in the third quarter, $10 million higher than a year earlier, and non-GAAP operating income of $141 million, $43 million lower than a year earlier.
Through the first nine months of 2019, however, Tapestry had an operating profit of $725 million on $4.51 billion in sales for an operating margin of 16.1%, considerably higher than its operating margin in the third quarter.
Happy that it’s on target to meet its financial goals in 2019, Tapestry’s board’s approved a $1 billion share repurchase program to buy back its stock. Given TPR stock is down almost 7% year to date through June 26 and its free cash flow of $747 million over the trailing 12 months is higher than it’s been in some time, now is an excellent time to reduce the share count.
If not for Kate Spade’s poor performance, TPR stock would be much higher. In my opinion, it’s an underappreciated consumer goods stock, ready to move higher.
Tanger Factory Outlet Centers (SKT)
The past five years have not been kind to Tanger Factory Outlet Centers (NYSE:SKT). The retail REIT has an annualized total return of -8.8%, considerably worse than its retail REIT peers, who’re up 2.5% over the same period.
In September 2017, I recommended Dividend Aristocrats, suggesting that a low stock price combined with a high occupancy rate should provide REIT investors with both income and growth. At the time of my recommendation, it was trading around $24. Down 33% in the 22 months since, I’m suggesting doubling down isn’t the worst idea in the world. Here’s why:
Tanger’s first-quarter results saw its occupancy rate drop by 50 basis points to 95.4%. That’s only 70 basis points lower than where it was September 2017.
In Q1 2019, Tanger sold four non-core outlet centers for gross proceeds of $130.5 million. The four centers accounted for 5.1% of the REITs 2019 portfolio net operating income (NOI). The four centers averaged 24 years of age and didn’t fit the company’s plans for future growth.
If you consider that almost every financial metric of the four centers sold wasn’t nearly in line with its other 40, the fact that it has been proactive about under-performing assets is a good sign.
For the year, Tanger expects its funds from operations (FFO) to be at least $2.22. Trading at 7.1 times FFO, SKT stock is an excellent value at current prices.
Petmed Express (PETS)
You might be wondering why I keep recommending value stocks.
When you get a stock like Beyond Meat that’s trading at 80 times sales, in a market that’s also reasonably expensive, the only way to get seven stocks to buy for less than $158 is by considering some of the value plays that are out there.
Petmed Express (NASDAQ:PETS) is one such stock, trading within 5% of its 52-week low and valued at only 1.2 times sales. It’s the antithesis of Beyond Meat.
On June 20, PETS hit a four-year low on fears the online pet pharmacy would be unable to compete with Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT), who announced in May that it would open 100 veterinary clinics over the next 12 months as well as Walmart Pet RX, an online pharmacy, to save pet owners money on their prescriptions.
In fiscal 2019, PetMed’s revenues grew by 3.5% to $283.4 million with a profit of $37.7 million, 1.2% higher than a year earlier. CEO Menderes Akdag admitted the market has become more competitive in recent years. To fight off the competition, PETS stock is maintaining low prices, increasing advertising, and investing in its e-commerce business.
With no debt, $100 million in cash, and almost $45 million in free cash flow, a private equity buyer has to be interested in taking it private.
Captain Chesley “Sully” Sullenberger appeared before a congressional panel June 19 arguing that all pilots should get new flight simulator training before returning the grounded Boeing 737 MAX to service.
While Sullenberger believes simulator training is necessary, Boeing thinks differently: they believe a one-hour computer-based course educating pilots on the updates to the MCAS software used in the 737 is all that’s required to get them up to speed.
If you own CAE (NYSE:CAE) stock, you’re likely hoping that the Federal Aviation Administration listens to Sullenberger and not Boeing (NYSE:BA), because it could mean more revenue for the Montreal-based company that specializes in full-flight simulators.
CAE got its start in 1947 under the name Canadian Aviation Electronics. Initially, CAE repaired and overhauled military aircraft. Today, it trains more than 220,000 civil and defense crew members around the world.
CAE reported its Q4 and 2019 results in May. On the top line, it had annual sales of C$3.3 billion, 17% higher than a year earlier. On the bottom line, adjusted net income was C$335.2 million, 13% higher than in 2017. Over the past year, CAE’s civil aviation business sold 78 full-flight simulators as well as booking $2.8 billion in future orders for training and simulators.
As commercial air flight becomes more popular outside North America, CAE’s global presence will continue to grow.
If you’ve owned Fastenal (NASDAQ:FAST) stock over the past few years, you’re probably pleased about its performance. Up 16% on an annualized basis over the past 10 years, the distributor of industrial and construction products continues to change with the times.
One of the distributor’s newer growth initiatives are the industrial vending devices it introduced in 2008. FAST offers 23 different versions to customers, each device generating from $1,500 to $3,000 per month.
At the end of the first quarter, Fastenal had 83,410 industrial devices in the field, a ratio of 27 vending devices to one in-market location, which is defined as both public branch locations and Onsite locations at a customer’s facility. The number of Fastenal’s industrial vending machines grew by 13.4% in the first quarter.
In terms of profits, Fastenal made $194.1 million in the first quarter, 11.4% higher than its profit a year earlier. Due to fewer shares outstanding as a result of share repurchases, the company’s earnings per share increased by 11.9% in the first quarter.
Although FAST stock’s gross profit margin was 100 basis points lower in the first quarter at 47.7%, its operating margin was 20%, 20 basis points higher than a year earlier.
Trading at a forward P/E of 21.2, Fastenal stock is currently valued at less than its 5-year historical average P/E of 25.3.
I continue to see solid growth at Fastenal.
Norwegian browser Opera (NASDAQ:OPRA) went public in July 2018 at $12 a share. Almost a year later, it’s trading below its IPO price, but well above its 52-week low of $5.31 that it hit in December.
Up 87% year-to-date through June 26, if you bought earlier this year, you made a smart purchase.
Does it have more gas in the tank? I think it does.
On June 26, Opera released an iOS version of its web browser, to add to the Android and PC versions that already exist. Opera’s browser includes a crypto wallet that allows users to “seamlessly interact with the next generation of Web 3 applications on the Ethereum blockchain,” stated the company press release.
With Opera’s browser, getting into using cryptocurrencies just became that much easier.
Opera also launched Opera News in January 2017 as part of its mobile browsers. Two-and-a-half years later, Opera News has reached 150 million monthly active users, almost twice as large as Apple News.
On May 22, Opera announced its first-quarter results. Revenues were up, while profits were down. In 2019, it expects revenues to be at least $230 million (34% growth) with adjusted EBITDA of between $30 million and $45 million. As Opera News continues to gain traction, profits in 2020 and beyond will continue to grow.
Opera is the sleeper stock of the seven.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.