According to Finviz.com yesterday, 119 S&P 500 stocks were trading within 5% of their 52-week high. While I won’t go through all 119 to list stocks reaching record highs, I will deliver three possibilities.
On Jan. 4, 2022, the index hit an all-time high of 4,818.62. It’s currently trading at 4,367.36, or 9.3% below its all-time high. With the index up 14.3% year-to-date, the odds aren’t good for it to reach a new high before the end of the year.
Why’s that, you ask?
Well, if it hit 4,818.63 on Dec. 31 and stayed there to the close, it would finish the year up 25.5%. The index has beaten that return on four occasions since 2000, a success rate of 17%. Two of those occurred in the past five years. If you believe in regression to the mean, it seems unlikely.
However, not wanting to be a party pooper, I will assume that the good times will continue through the remainder of 2023. With that in mind, I’m looking to invest in high-performing stocks to keep the ball rolling higher over the next six months and into 2024.
Here are my three possibilities.
Linde (LIN)
Linde (NYSE:LIN) plays an important part in global business, manufacturing and distributing industrial gases such as oxygen, nitrogen, nitrogen helium, hydrogen, and many others. It’s hard to think of an industry that isn’t aided in some fashion by its work.
Its stock has been on a run the past five years, up 136%, more than double the S&P’s Top 50. Year-to-date, it’s once again outpacing the index.
When you’re a $182 billion market-capitalization stock, you can afford to meet your customers where they work. As a result, Linde will build a gas plant on your property if the need for its industrial gases is significant, say for 10 or 20 years. The best part: the contracts come with price escalators to ensure inflation doesn’t take a bite out of profits.
The Americas account for 46% of its revenue, with the rest of the world accounting for 54%. Its top three markets by sales are manufacturing (22%), chemicals and energy (22%), and metals and mining (14%).
Green hydrogen has become a big deal with the world transitioning from fossil fuels to renewable energy sources. Linde expects this market for the company will grow to $50 billion worldwide over the next decade, with a whopping 60% generated in the U.S.
Based on a trailing, 12-month free cash flow of $5.42 billion and a market cap of $182.4 billion, it has a free cash flow yield of 3.0%.
While it’s not cheap (I consider anything below 4% to be relatively expensive), there’s no question it has delivered for shareholders over the long haul because the need for its products will continue to persist.
Darden Restaurants (DRI)
Darden Restaurants (NYSE:DRI) is up 41% over the past year. It’s trading within 4.1% of its 52-week and all-time high of $168.98. The stock fell on June 22 after the restaurant operator reported a few weak spots in its lineup, especially in fine dining.
However, as iCapital Chief Strategist Anastasia Amoroso told Yahoo Finance, the consumer is in fine shape.
“But when I look, Julie [Yahoo Finance host Julie Hyman], to a point to the big macro picture, what I see is the consumer that has a job and is getting paid more for that job. 3.5% unemployment rate, 4.4% year-over-year wage growth. And, by the way, when you take inflation into account, that means that actually in real terms wages ever so slightly are going up,” Amoroso said on June 22.
Despite the same-store sales miss for Olive Garden — they were 4.4% compared to a 5% estimate — they were still very positive. Add in the same-store sales growth of 7.1% for LongHorn Steakhouse, and the recent purchase of Ruth’s Chris Steak House, and you’ve got the ingredients for a long run-up of its share price.
Of the 29 analysts covering its stock, 19 rate it overweight or an outright buy, with a target price of $173.
Monster Beverage (MNST)
You often hear stories of people who’ve become wealthy investing with Warren Buffett. The same isn’t true for Monster Beverage (NASDAQ:MNST), but it should be. The energy drink company consistently shows up on lists of the top-performing stocks of the past “x” number of years.
U.S. News & World Report listed the 10 best-performing stocks of the past 30 years in May. Monster Beverage was number one, with a cumulative return of 213,088%. A $10,000 bet in 1992 was worth $21.3 million as of August 2022. It’s up another 31% in the past year, adding to its lead.
On May 5, Monster hit a 52-week high of $60.47. That also happens to be its all-time high. It’s currently trading at $59.69, 1.3% below its all-time high.
Monster Beverage generates a lot of free cash. In January 2022, it acquired CANarchy Craft Brewery Collective LLC. Its beer brands include Cigar City, Oskar Blues, Deep Ellum, and others. It paid $330 million, about one-third of its annual free cash flow.
“This transaction provides us with a springboard from which to enter the alcoholic beverage sector,” said Monster’s Vice Chairman and Co-Chief Executive Officer Hilton Schlosberg at the time.
In Q1 2023, its Alcohol Brands segment, which holds the CANarchy assets, had revenue of $46.3 million, up from $15.2 million a year earlier. It’s currently not generating positive operating income. Give it time.
Monster is a profit machine.
On the date of publication, Will Ashworth 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 PublishingGuidelines.
