Sometimes the best stock to buy is one that has performed well recently. The logic is that winners tend to keep on winning, so buying a stock on the ascent can potentially increase your odds of success.
Skyworks Solutions (NASDAQ:SWKS), Regeneron Pharmaceuticals (NASDAQ:REGN), and Paypal Holdings (NASDAQ:PYPL) have all gained at least 22% since the start of the year and are currently trading near 52-week highs. Here’s why investors can expect the good times to continue.
Riding the IoT wave
The Internet of Things (IoT) promises to be one of the biggest trends in tech over the coming years. If estimates are to be believed, the number of devices that are going to connect to the internet over the next few years is going to explode. That news bodes well for Skyworks Solutions. The specialty semiconductor manufacturer is the go-to supplier for electronic manufacturers when they want to create a device that connects to the internet. This includes everyone from small manufacturers all the way to up industry giants like Apple, Alphabet, and Samsung.
While servicing the biggest electronic brands on Earth does have its drawbacks, Skyworks has greatly benefited from the rapid adoption of smartphones over the last few years. Sales more than doubled between 2012 and 2016, which helped to drive a 350% increase in profits. Skyworks happily used its newfound wealth to reward shareholders with stock buybacks and a recently initiated dividend. Long-term shareholders have been treated to extraordinary gains.
Looking ahead, the growth in IoT devices and the 5G rollout promise to be big catalysts to drive Skyworks’ next phase of growth. That enthusiasm has pushed Skyworks’ shares within shouting distance of their all-time high. Despite the gains, Skyworks stock is only trading for about 15 times forward earnings. That could prove to be a cheap price tag for a company that is projected to grow profits in excess of 16% annually over the next five years.
New drugs to the rescue
While Regeneron Pharmaceuticals has been a winner for long-term investors, 2016 didn’t give shareholders a lot of reasons to celebrate. Between Elyea’s slowing sales growth and a number of clinical, regulatory, and legal setbacks, shareholders have to endure a miserable 29% slide.
Thankfully, shares have been on an upswing in 2017, gaining more than 22% since early January. The jump is partially attributable to better-than-expected sales growth for Eylea. In the first quarter, Eylea’s global sales increased 12% thanks to surging demand overseas, which puts the drug on pace to crank out more than $5.4 billion in revenue this year. The biotech giant also got a double-dose of good news from regulators, too. A few months back the FDA gave the green light to Dupixent, a drug that it developed with its partner Sanofi as a treatment for atopic dermatitis. In addition, just a few weeks ago the two companies also got the thumbs-up on Kevzara, its rheumatoid arthritis drug that was denied last year. Both these drugs are aimed at treating huge markets and certainly hold blockbuster potential, so it is easy to understand why investors are excited.
All told, market watchers expect that Regeneron’s new crop of drugs will help to drive profit growth in excess of 19% annually over the next five years. That’s an attractive growth rate for a company that trades around 29 times forward earnings.
Paving the way toward a cashless future
More transactions are occurring online as more consumers embrace the benefits of e-commerce. That’s great news for PayPal since its payment solution is accepted all over the web. Given that backdrop, it isn’t hard to figure out why the company’s flourishing and why traders have bid up its stock price by more than 29% since the start of the year.
While that tailwind on its own is a great reason to invest in PayPal, the company isn’t resting on its laurels. Instead, PayPal is also focused on becoming a big player in the in-store payment experience, too. Last year, the company signed deals with MasterCard, Visa, and Discover Financial Services that greatly expanded its offline presence. When combined with the company’s recent decision to enable its popular Venmo service to allow users make payment in stores, the company’s offline future is looking bright.
When combined, Wall Street believes that these initiatives will allow PayPal’s profits to grow in excess of 17% annually over the next five years. That’s quite fast for a company that is trading around 25 times forward earnings. Those numbers suggest that PayPal’s stock could still be a bargain — even after the recent run-up.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Brian Feroldi owns shares of Alphabet (A shares), Alphabet (C shares), Apple, Mastercard, Regeneron Pharmaceuticals, and Visa. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Mastercard, PayPal Holdings, Skyworks Solutions, and Visa. The Motley Fool has the following options: short November 2017 $95 calls on Skyworks Solutions and short November 2017 $92 puts on Skyworks Solutions. The Motley Fool has a disclosure policy.