If you’re like millions of other retail investors, you’ve got whiplash from the past few months. Markets fluctuated as traders assessed economic news, consumer sentiment and stock prices. While that’s brought many undervalued stocks back to where they arguably belong, just as many losers are spiking back into overvalued territory.
If you want to capture long-term upside and maintain a degree of stability, don’t flock to yesterday’s high-flying growth stocks. In a “higher for longer” era, financials are paramount, and unprofitable companies won’t retain recent gains for long. Instead, top stocks include those that have viable growth potential alongside financial standing to protect against temporary economic turbulence.
SharkNinja (NYSE:SN), a consumer discretionary stock, has entered into the public market since its late-summer listing.
The stock has been on a tear since then, nearly doubling since its debut. Sales have consistently increased by 20% annually since 2008 across various products, including vacuums and coffee makers.
This steady growth through very different economic cycles reflects SharkNinja’s appeal as an affordable luxury appliance manufacturer. Highlighting this success, the company’s latest financial report reveals a significant 34% growth in earnings and a 15% increase in sales year-over-year.
But SharkNinja’s genuine appeal as a top stock lies in its fundamental undervaluation. According to an analysis by Jefferies, SharkNinja’s fair per-share price stands at $67, suggesting a potential for a 55% increase.
Consensus among analysts is overwhelmingly positive, with all recommending a ‘Buy’ and an average price target around $60, indicating a 40% rise from the current levels. While the short-term outlook for SharkNinja appears bullish (especially amid the holiday shopping season), its long-term investment potential is anchored in its enduring market appeal.
Edison International (EIX)
This sets it apart from competitors and establishes it as one of today’s top stocks. Despite the recent downturn in renewable energy stocks, mainly due to increased interest rates and overall economic frugality, and the parallel struggles in the utility sector, these challenges present an ideal opportunity for long-term investment in EIX.
EIX distinguishes itself from typical utility stocks, which are often characterized by stable but limited growth within their specific markets. Edison International’s growth potential is anchored in two key factors.
First, its base in California, a state with the highest density of electric vehicles in the U.S., provides a significant market opportunity. Second, California’s ambitious goal to transition to net-zero emissions by 2045 positions EIX at the center of a transformative energy infrastructure overhaul.
Navigating through California’s stringent regulatory landscape, Edison International has emerged as a leading utility in the development of the future energy grid.
The company is engaged in introducing commercial and enterprise fleet electric vehicle charging solutions, demonstrating its capacity to create additional revenue streams in a traditionally low-margin industry. This strategic positioning underscores EIX’s potential as a robust long-term investment and top stock to buy today.
Berkshire Hathaway (BRK-A, BRK-B)
While vice-chair Charlie Munger’s death weighs heavily on the firm, its operational prowess will remain dynamic.
The company’s vast and diverse portfolio, covering over 50 businesses across industries, provides an integrated approach to building a varied investment portfolio. This eliminates the need for individually picking multiple stocks while avoiding management fees you’ll accrue with a fund-based strategy.
Investing in Berkshire Hathaway also means aligning with the investment wisdom of Warren Buffett, the “Oracle of Omaha.”
His strategic decisions, such as reducing investments in Chevron (NYSE:CVX) and other badly performing stocks to increase cash reserves, exemplify a careful rebalancing strategy. This approach aims to protect investments against economic downturns while preparing to capitalize on future opportunities when companies face challenges.
Choosing Berkshire Hathaway is essentially a way to leverage the acumen of one of the most successful investors in history. Warren Buffett’s track record and his team are unparalleled in the investment world. For those with a long-term perspective, few top stocks rival Berkshire Hathaway’s potential.
RTX Corp (RTX)
RTX Corp (NYSE:RTX) hit a stumbling block alongside the broad defense sector, falling about 20% since January. However, the past month has shown a promising shift as its shares began rebounding. This positive trend will likely continue on the heels of optimistic developments for this top stock.
Recently, RTX surpassed analyst forecasts, achieving earnings of $1.25 per share and generating a revenue of $18.95 billion. Further showcasing its fiscal robustness, RTX has authorized a substantial $10 billion for stock repurchases.
Significantly, the company has declared a dividend of $0.59 per share, resulting in a total yield of 5.49% when combined with the buyback program. This strong focus on enhancing shareholder value and its recent price dip positions RTX as a highly attractive defense stock. It stands out due to its financial resilience and evident undervaluation.
Morningstar values RTX’s fair share price at around $112, which is nearly 40% higher than its current trading price. Additionally, RTX’s extensive contractual engagements with the U.S. government provide a reliable outlook for future revenue and business cycles, offering investors a degree of predictability.
General Motors (GM)
General Motors (NYSE:GM) has faced challenges this year, yet these difficulties present a prime opportunity for long-term investors.
Currently, GM’s price-to-book ratio stands at a remarkably low 0.53, while its P/E ratio is just 4.06. That implies significant undervaluation for this top stock.
GM offers an attractive total yield of 6.60%, with a payout ratio of 5.06%. While some may view GM as a value trap because of ongoing labor issues, the company’s prospects for long-term growth are significant, especially in the EV sector.
Importantly, GM is actively working to lessen its dependency on China, which is a crucial consideration for many EV manufacturers. Recently, GM announced a collaborative effort with Niron Magnetics, a smaller startup.
This partnership aims to develop electric motor magnets that do not rely on rare earth elements, which are predominantly got from Chinese suppliers. This strategic move not only reduces dependence on China but also aligns with greater sustainability goals.
Murphy USA (MUSA)
Murphy USA (NYSE:MUSA), with its network of over 1,700 convenience stores, stands as a stable top stock.
Since its separation from Murphy Oil (NYSE:MUR) in 2013, the company has significantly enhanced shareholder value. That’s evidenced by the repurchase of over half of its outstanding shares.
Presently, Murphy USA is undergoing a strategic shift, moving from a primary focus on fuel to offering a broader range of food and beverage options in larger store formats.
The company’s exceptional growth trajectory is a key highlight. Its free cash flow per share has soared by more than 250% in recent years. This growth is further amplified by its aggressive share buyback program, which has quintupled its FCF per share.
Looking ahead, Murphy USA’s potential is even more promising. The U.S. convenience store market, largely dominated by single-store operators, presents ample opportunities for consolidation.
Murphy USA is adeptly navigating this landscape, expanding its network with new stores each year and renovating existing ones. The acquisition and integration of QuickChek stores will also bolster its growth trajectory.
Murphy USA’s low beta, solid financials, promising growth prospects, and modest dividend yield support its top stock status. These qualities make Murphy USA a reliable choice for a well-rounded portfolio.
The stock has seen a nearly 10% decline since January, presenting a buying opportunity for this top stock. Insiders echo this sentiment. Company board members purchased an impressive 6.6 million shares in the last quarter.
Following the investment decisions of well-informed insiders is often a wise strategy, particularly with Nike, where these individuals have an in-depth understanding of the company’s potential.
Nike’s CFO, Matthew Friend, reinforced this optimistic outlook in a recent earnings call. He highlighted the sustained strong consumer demand for Nike’s products and brand, even amidst broader economic uncertainties.
The upcoming holiday season poses a unique scenario, with the potential tension between tighter household budgets and traditional seasonal shopping habits. We don’t yet know how Nike will do this year compared to previous winter seasons. However, given the current share price and the company’s robust track record, Nike is one of the go-to top stocks for long-term growth.
On the date of publication, Jeremy Flint held a long position in SN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.