Although time in the market usually beats out attempting to time the market, sometimes, you just want breakout stocks; that is, publicly traded securities that stand poised for imminent upside rewards. While it’s not possible to predict these developments with regularity – despite what YouTube luminaries might say – a few signs suggest that certain intriguing assets may jump higher soon.
Such indicators may take the form of an enticing technical (chart) pattern. Others might give off fundamental signals such as an unusually discounted price relative to core financial data points. As well, outside fundamentals – such as an underappreciated narrative – could augur well for breakout stocks.
Again, it’s not a perfect science – indeed, it’s not a science at all. Still, intriguing developments suggest that market gamblers should be on the lookout for these breakout stocks to buy.
On paper, AutoNation (NYSE:AN) probably wouldn’t register as most people’s idea about breakout stocks. Rather, they might see AutoNation as a breakdown stock. Due to soaring inflation (relative to historical norms) along with seemingly ever-rising interest rates, the current juncture doesn’t necessarily support car purchases. However, given the record age of vehicles on U.S. roadways, it might be the car itself that dictates the decision.
In other words, mechanical failures might force consumers’ hands. As well, such failures might accelerate. With an increasing number of major enterprises putting an end to remote operations, the stressful morning commute might return. Naturally, this circumstance will impose more wear and tear on vehicles, cynically bolstering AutoNation as one of the breakout stocks.
Moreover, the technical profile for AN stock entices. After skyrocketing from the 2020 doldrums, from late 2021 till now, AN entered a consolidation phase. Some technical analysts might interpret this pattern as a bullish flag; that is, a consolidation pattern before a major swing higher.
Murphy USA (MUSA)
At a quick glance, Murphy USA (NYSE:MUSA) already ranks among breakout stocks. For instance, in the trailing year, MUSA gained over 38% of equity value. With so much upside performance baked into the books, it appears unlikely that MUSA can continue rising. However, in the trailing six months, shares declined by more than 3%. This might indicate a consolidation pattern before another big breakout move.
That’s the technical argument. On the fundamental side, the aforementioned end to remote work could become contagious. After all, during a rough economic cycle, employers no longer have to play ball. It’s either coming back to the office or joining the ranks of the unemployed. Presumably, most folks will choose the former. And that would directly translate to higher traffic volumes.
Logically, as a hydrocarbon specialist in the downstream segment of the value chain, Murphy USA should benefit. Thus, it’s one of the breakout stocks to buy.
Thor Industries (THO)
Back during the worst of the coronavirus pandemic, Thor Industries (NYSE:THO) enjoyed significant upside thanks to its core business. Specializing in the manufacturing of recreational vehicles, Thor’s products enabled (rich) people to vacation while maintaining social distancing. Besides, during a pandemic, you don’t want to be cramped into an airplane with hundreds of strangers.
However, with the fading of Covid-19 (or at least fears of the SARS-CoV-2 virus), Thor lost its upside momentum. In the trailing year, THO dipped nearly 3%. However, since the January opener, THO gained a very robust 19%. Could this be an underappreciated example of breakout stocks?
It very well might be. Objectively, THO represents a significantly undervalued business. Currently, the market prices THO at 4.78 times trailing earnings. In contrast, the sector median stands at 16.16 times. Also, shares trade at 0.32 times sales, whereas the underlying industry’s price-to-sales ratio is 0.76 times. Since this discount might not last, THO deserves consideration for breakout stocks to buy.
Discover Financial (DFS)
Looking at Discover Financial (NYSE:DFS) from above, the financial services firm presents a mixed bag. On one hand, Discover’s issuance of debt through its namesake credit card may help embattled households make ends meet. But on the other hand, households shouldn’t mess with consumer debt if they don’t have to. Besides, Americans already suffer from record credit-card debt.
Still, DFS may represent one of the breakout stocks to buy. From a financial perspective, Discover also features an objectively undervalued investment profile. Presently, the market prices shares at a trailing multiple of 7.2. In contrast, the sector median stands at 13.36 times. Also, the company enjoys a profitable business venture. Notably, its return on equity pings at 31.61%, ranking above 93% of the competition.
Not surprisingly, DFS stock suffered in 2022 due to various macroeconomic headwinds impacting the market. However, since the January opener, DFS gained 15% of its equity value. And this brings up the technical argument for breakout stocks: Discover could be consolidating before a major move higher. Fundamentally, the acceleration of money velocity indicates that spending is up. Therefore, DFS booming wouldn’t be out of the question.
Regional Management (RM)
Another potential candidate for breakout stocks that doesn’t immediately capture confidence is Regional Management (NYSE:RM). A diversified consumer finance company, Regional provides installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders.
To be sure, it’s an intriguing and important social service. Unfortunately, the macro headwinds that originated since the Covid-19 crisis don’t particularly bode well for RM stock. Further, shares plunged over 37% in equity value in the trailing year. Again, it’s just not generating much confidence.
Nevertheless, Gurufocus.com notes that Regional’s free cash flow discount stands at 95%. As well, the company features an objectively undervalued profile. Currently, RM trades at 4.65 times trailing earnings and 6.31 times forward earnings. Both stats rank below their respective industry median levels.
Finally, after such a sharp loss throughout last year, it appears recently that RM hit bottom in December. Since the start of the new year, RM gained nearly 13%. Thus, it’s one of the potential breakout stocks to keep on your radar.
A holding company for truckload and less-than-truckload freight, freight brokerage, household goods moving, and transportation management companies, ArcBest (NASDAQ:ARCB) didn’t enjoy the best of performances last year amid hefty macroeconomic pressures. Still, it appears poised to make up for the lost time. Since the Jan. opener, ARCB gained over 19% of its equity value.
Despite the already robust performance, ArcBest may still be one of the breakout stocks to consider. It’s possible that from the summer of 2021 to the present time, ARCB may be charting a bullish pennant formation. A key characteristic is that the price action appears to have narrowed recently, implying a soon-to-be breakout move.
Financially, according to Gurufocus.com, ArcBest trades at a 74% discount to FCF and a 48% discount to trailing earnings. As well, the market prices ARCB at a forward multiple of 7.9. In contrast, the sector median pings at 12.8 times. So, despite the macro challenges, investors should closely monitor ARCB as one of the breakout stocks.
NuScale Power (SMR)
For NuScale Power (NYSE:SMR), it’s difficult to make the argument that the nuclear energy specialist represents one of the breakout stocks based on underlying financial metrics. Right now, the company’s strongest attribute in this department centers on its balance sheet. Featuring zero debt, NuScale benefits from flexibility that so many other enterprises lack. Objectively, though, it’s way overpriced based on sales and book value.
Nevertheless, the technical profile undergirding SMR stock entices contrarians. Shares appear to have hit a bottom near mid-December last year. Also, SMR appears to be printing a pattern of higher lows since May 2022. After spiking to an all-time high of over $15 per share, the bulls may be creeping back into NuScale’s narrative. Better yet, they’d be justified in doing so.
As I’ve mentioned many times before, NuScale specializes in small modular reactors (SMRs). These represent small-footprint nuclear facilities that offer greater structural flexibility, allowing production closer to sources of demand. Combined with excellent safety protocols, SMRs may change the game, making it one of the breakout stocks to gamble on.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.