Bob Harris
1
All posts from Bob Harris
Bob Harris in Bob Harris,

5 Stocks to Make You Rich

Investors dream of owning stocks that will make them rich—companies with game-changing technology, a miracle drug or a service that will prove so popular for such a long time that it catapults the company into prominence and its stock into the stratosphere. But finding and holding on to those companies is no easy feat. Buying growth stocks is a bit like riding a bucking bronco, says Mike Lippert, manager of the Baron Opportunity fund. The ride, while rewarding, is both rocky and treacherous.

Lately, investors have lost their appetite for growth stocks, especially those with ultra-high valuation measures. The selloff gives contrarian investors more-attractive entry points. The five stocks we feature are suitable only if you have the stomach for a lot of volatility and can handle big losses. And if you do, it’s best to buy at least a few of them—if not all.


Facebook

Headquarters: Menlo Park, Cal.

Share price: $58.02 

52-week range: $22.67-$72.59 

Market capitalization: $148.9 billion 

Annual sales: $8.9 billion 

Estimated earnings growth:62.5% in 2014, 28.0% in 2015 

After stumbling in its first year as a public company, Facebook (FB) has come back with a vengeance.

It earned $1.5 billion in 2013, and growth in the first three months of 2014 was spectacular: Earnings surged 193% from the same period a year earlier, and sales jumped 72%. One key is that advertising revenue has risen sharply thanks to a revamp that makes ads a more prominent part of Facebook news feeds. Sterne Agee analyst Arvind Bhatia thinks the company will continue to exceed analysts’ estimates by boosting user engagement and using firms it has purchased or intends to acquire—such as Instagram and WhatsApp—to stimulate growth in mobile advertising. Although the stock, at 39 times estimated year-ahead earnings, looks expensive, the potential growth justifies the price.

Amber Road

Headquarters: East Rutherford, N.J.

Share price: $12.00

52-week range: $11.90 - $17.90* 

Market capitalization: $298.7 million 

Annual sales: $53 million

Estimated earnings growth: Not meaningful (company losing money)

Named after the ancient trade routes that carried precious cargo between the Baltic and Mediterranean seas, Amber Road (AMBR) helps importers and exporters negotiate the cacophony of tariffs and trade restrictions that can hamper their ability to get products to market.

Operating in 125 countries, the company uses cloud-based technology to update its customers on rapidly changing rules and regulations and to ensure the ideal routing for their goods. Amber Road isn’t yet profitable. But that’s because the company has been grappling with the substantial upfront costs of investigating trade rules and putting the results into their system. Analyst Brendan Barnicle, of Pacific Crest Securities, says that the proceeds from Amber Road’s initial public offering in March gave the company enough cash to finance the marketing and sales initiatives necessary to win new business and make better use of all that infrastructure. The demand for global trade logistics is great, he adds, so he expects rapid growth in revenues and, once the company turns profitable, in earnings as well. Analysts on average see revenues growing by 19.4% this year 17.4% in 2015.

Motorcar Parts of America

Headquarters: Torrance, Cal.

Share price: $25.40

52-week range: $5.75-$29.29 

Market capitalization: $379.6 million 

Annual sales: $406.2 million

Estimated earnings growth:261.2% in the March 2015 fiscal year, 21.9% in the March 2016 fiscal year 

Unlike all the other companies on our list, Motorcar (MPAA) is a turnaround play rather than a pure growth stock.

The auto-parts maker’s earnings tanked the past couple of years after the acquisition of Fenwick Automotive in 2011. Fenwick, which rebuilds old car parts, turned out to be a bust. But Motorcar Parts has split off Fenwick’s assets and debts, and Fenwick is now liquidating through Chapter 7 of the federal bankruptcy code. The separation eliminated a drag on profits and allowed Motorcar to focus on its rapidly growing parts business. The increasing propensity of drivers to hang on to their cars, combined with severe winter weather, which has been tough on electrical systems and gears, has revved up sales. But because of the company’s past problems, investors are underestimating its earnings potential, says Michelle Stevens, portfolio manager of the Baird SmallCap Value fund.


Navigator Holdings

Headquarters: London

Share price: $25.35 

52-week range: $19.48 to $60.00* 

Market capitalization: 1.4 billion 

Annual sales: $261.8 million

Estimated earnings growth: 25% in 2014.

Companies drilling for oil and gas in U.S. and Canadian shale formations have found a mother lode of other liquefied petroleum products, such as propane, butane and ethane. The domestic market for these fracking byproducts is glutted, but the fuels are in high demand in Europe and Asia, where they sell for two to three times the domestic price.

Navigator (NVGS) owns refrigerated shipping vessels that can transport propane and butane overseas. The company has been growing at a blistering pace, with sales soaring 62% and profits increasing 34% in 2013. Eight new ships are set to come on line in the next two years, bringing the number of ships in Navigator’s fleet to 31. In addition, the company, which is registered in the Marshall Islands but has its executive offices in London, recently struck a deal to buy ships that transport ethane. The combination of surging propane, butane and ethane supplies and the tapping of the previously ignored market for ethane is likely to fuel Navigator’s earnings for years to come, says Stevens.

Priceline

Headquarters: Norwalk, Conn.

Share price: $1,137.16 

52-week range: $784.32 to $1,378.96 

Market capitalization: $59.6 billion

Annual sales: $7.1 billion

Estimated earnings growth:25.2% in 2014, 22.8% in 2015. 

Priceline (PCLN) has already made patient, long-term investors rich, soaring from a split-adjusted $6.50 in December 2000 to its lofty four-figure price today.

But Joe Fath, manager of the T. Rowe Price Growth Stock fund, thinks the company is just getting started. The travel Web site, which competes with the likes of Orbitz and Expedia, has the most durable business model of all its competitors, Fath says. And it’s in the midst of a virtuous cycle: As it signs up an increasing number of hoteliers in the U.S., Asia and Europe, it brings more customers to its sites, which include Booking.com, Rentalcars.com and Agoda, a Japanese-language site. Visitors book more reservations, which makes the sites more valuable to hoteliers, customers and stockholders. Priceline’s success in the U.S. is impressive, says Fath, but rapid overseas growth is the key to further earnings gains and additional share-price appreciation.


Source: http://www.kiplinger.com/