The stock market has risen throughout the year, battling another wave of the pandemic to carve a new all-time high over the past month. The next few months could be more complicated, with labor shortages and supply chain issues causing serious problems for businesses large and small.
For long-term investors more concerned with the next few years than the months ahead, five of our Motley Fool contributors focused on five stocks that can deliver solid returns. Here’s what you need to know about Digital real estate trust (NYSE: DLR), SSR Mines (NASDAQ: SSRM), Intelligence (NASDAQ: INTC), Intuitive surgery (NASDAQ: ISRG), and GXO logistics (NYSE: GXO).
Another type of technological stock
Matt Frankel, CFP (Digital Realty Trust): The Digital Realty Trust did not have a good September as stocks fell more than 10% despite the lack of company-specific news. But I think it might be a great time to add some stock from this long-term winner, who delivered five times the total return of the S&P 500 since its IPO in 2004.
Digital Realty is a data center operator, and if you’re not familiar with the name, think of data centers as the physical âhomesâ of the Internet. All the data flowing in the cloud has to reside somewhere, and that’s where these specially designed facilities come in.
The need for safe and reliable places to host servers and network equipment is likely to grow rapidly in the future. For example, the artificial intelligence (AI) market is expected to grow to around six times its current size by 2025, and autonomous vehicles, augmented reality, and other high-data devices are expected to grow at similar rates. And the gradual roll-out of 5G technology in the United States and abroad will facilitate the flow of increasingly large volumes of data around the world.
In the meantime, Digital Realty pays a dividend yield of 3.2%, and the company has increased the payout at an annualized rate of 10% since its IPO. There are few stocks on the market that offer this combination of income, growth and reliability.
Add sparkle to your portfolio
Sean Williams (SSR Mining): With a suddenly turbulent market, the ongoing pandemic, and higher inflation emerging, I think October is the perfect month to envision an industry that is home to a large number of heavily discounted value stocks. This is why SSR Mining Gold Stock is my best buy this month.
SSR Mining’s buying thesis boils down to macroeconomic and company-specific factors. At the macro level, favorable winds for physical gold are about as strong as they have ever been. Historically low bond yields make it difficult to earn secure income above inflation. Meanwhile, rapidly rising inflation threatens to eat away at the dollar’s purchasing power. All of this indicates that investors are seeking the safety of physical gold as a store of value. A higher spot price of gold will increase SSR’s sales, cash flow and profitability.
As for the company, SSR Mining completed a peer-to-peer merger with Turkey’s Alacer Gold last year. This brought SSR’s three production assets together under the same umbrella as Copler’s low-cost mine in Turkey and effectively doubled production. Production is expected to be between 700,000 ounces of gold equivalent (GEO) and 800,000 GEO over the next five years, with the company claiming $ 450 million in annual free cash flow in 2021 and 2022.
I have been a long-time shareholder of SSR Mining and what really stood out to me was the careful management of the balance sheet. While most gold stocks erode net debt positions, SSR sits on a net cash position of over $ 500 million. This allowed the company to initiate a quarterly dividend (1.4% yield) and a $ 150 million share buyback program this year.
And there is also insane value. SSR Mining can be bought for less than nine times the Wall Street earnings consensus for 2021 and 2022, and less than five times the projected cash flow per share. In over a decade of tracking mining stocks, I have come to the conclusion that a multiple of 10 times cash flow represents fair value. This shows how inexpensive SSR Mining is, compared to its expected cash flow.
Bet big on manufacturing
Tim green (Intel): Very few semiconductor companies now manufacture their own chips. Instead of constantly shoveling billions of dollars into state-of-the-art microchip manufacturing plants (fabs) and expensive equipment, chip companies rely on foundries like Taiwan Semiconductor Manufacturing company (TSMC) to make their designs a reality.
Manufacturing chips for other companies has become an extremely profitable business, especially for TSMC. TSMC controls more than half of the foundry market and tech giants like Apple, Qualcomm, and NVIDIA depend on it for their products.
Although Intel uses third-party foundries for some of its chips, the US chip giant is not giving up manufacturing. Intel has instead doubled its manufacturing. The company is investing $ 20 billion in new plants in Arizona and up to $ 95 billion over the decade in plants in Europe. Intel will also look to make acquisitions to accelerate its manufacturing push.
All of this spending will support Intel’s own products as well as its nascent foundry business. Intel aims to provide an alternative to TSMC, with the added benefit of manufacturing capacity outside of Taiwan. With strained relations between the United States and China, much of the semiconductor industry dependent on TSMC appears to be in a fragile state.
Intel’s manufacturing ambitions will take years to pay off, and profits will be under pressure as the company catches up. It will look like the wrong strategy until it isn’t. Intel spent years rolling as TSMC gained a manufacturing advantage and as Advanced micro-systems risen from the dead. Those days at Intel are over.
An obvious healthcare stock to buy
Keith Speights (intuitive surgery): I see Intuitive Surgical as an obvious healthcare stock to buy in October. There are two attributes that Intuitive possesses that make it such a good choice – its strong gap and its excellent growth prospects.
Intuitive Surgical pioneered robotic surgical systems over two decades ago. Today it has more than 6,300 systems installed worldwide. Over 8.5 million procedures have been performed with its robotic technology.
Other companies have entered the market in recent years. None of them, however, can come close to Intuitive Surgical’s history. And competitors will find it difficult to dislodge Intuitive from existing customers after investing in implementing the company’s robotic systems and training their staff.
I am very excited about the growth prospects of Intuitive Surgical. The company estimates that around 6 million procedures are performed each year for which its current systems could be used without obtaining additional regulatory clearances. This is five times the number of procedures performed with Intuitive systems last year.
But Intuitive is investing heavily in innovation to expand the types of surgeries where robotic assistance could be useful. He estimates that the new products and authorizations could expand the addressable market to nearly 20 million procedures per year.
In the short term, the Intuitive Surgical share price could be volatile if COVID-19 delays elective surgeries. However, the company is poised to be a big winner in the long run. Intuitive Surgical is one of a handful of stocks that I will never sell because of its attractive outlook.
The solution to stagnant supply chain
Jeremy Bowman (GXO Logistics): Companies Nike To Sherwin-Williams complain that their businesses are affected by challenges in the global supply chain, including delays at ports, factory closures due to COVID-19, higher prices and labor shortages .
GXO Logistics cannot solve all of these issues, but there is a lot that it can do to alleviate the supply chain issues that many businesses are experiencing around the world. GXO, which separated from XPO Logistics in August, is the world’s largest pure play contract logistics company. The company has nearly 1,000 warehouses and helps customers speed shipments, process returns, and increase efficiency through automation.
With the rise of e-commerce and the compression of the global supply chain, businesses are likely to seek out the kind of solutions GXO can deliver, bringing them closer to their customers and delivering faster delivery speeds.
GXO has yet to report profit as a stand-alone business, but the company is targeting 10% revenue growth and 17% growth in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in 2022, and these predictions predate recent port delays and other supply chain challenges, which should benefit the business in the long run.
At the same time, GXO is also expected to make acquisitions to consolidate its leadership in a highly fragmented industry, following in the footsteps of its former parent company XPO Logistics. The opportunity ahead of GXO was already enticing, leading to the spin-off, and with the world’s largest companies desperate for supply chain solutions, GXO is ready to answer the call.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.[ad_2]