U.S. stock prices are at all-time highs. Nonetheless, the best investment opportunities are still out there.
Investing in the stock market isn’t easy with equity prices nearing new heights. However, there are still good investment opportunities if you know where to look. You just have to be willing to shift through more companies in order to find those with serious upside potential.
To get you started, I’ve identified three of my favorite stocks. These investment opportunities have what I like to call the ‘triple threat’—cheap share prices, big growth potential, and lots of near-term catalysts.
One Hot Investment Opportunity
Michael Kors Holdings Limited (NYSE/KORS)
Michael Kors Holdings Limited (NYSE/KORS) is a company with great growth potential, although markets weren’t so nice to it recently.
The U.S. fashion company reported disappointing earnings last month. Upon the earnings report, its stock price plunged nearly 24% in one day’s trading. Currently, Michael Kors’ share price sits at $47.27 a share. Over the past 12 months, the company’s stock price declined a drastic 46.6%.
Markets’ reaction on the earnings report puts Michael Kors in a very interesting position. The price-to-earnings ratio (P/E) is at 11.02 right now; significantly lower than the industry’s P/E of 30.1.
Earnings weren’t that disappointing in the last quarter. Revenue increased to $1.1 billion; a 17.8% increase from $917.5 million in the same quarter last year. Retail net sales also increased 14.9% year-over-year, thanks to 121 newly opened stores in the quarter. Net income was $182.6 million, or earnings of $0.90 per share—significantly better than the $161 million or $0.78 per share in the same period last year.
Things look pretty good for the entire year, too. Fiscal 2015’s total revenue increased to $4.4 billion from $3.3 billion in fiscal 2014. For fiscal 2016, the company is expecting total revenue to be between $4.7 and $4.8 billion. On a constant currency basis, Michael Kors expects its revenue to increase in the low- to mid-teen range.
Expenses are likely to go up significantly, mostly due to investments in online and physical stores, human resources, infrastructure, and distribution. However, even after the increase in expenses, the company still expects earnings per share (EPS) to be between $4.40 and $4.50 for fiscal 2016.
Not Every Watch Maker Will be Killed by the Apple Watch
Movado Group, Inc. (NYSE/MOV)
Another hot spot for potential growth is Movado Group, Inc. (NYSE/MOV), a watch-making company founded over a century ago.
Yes, I know, the Apple Watch is coming and the watch-making business will be hit badly. But Movado is not your average fashion accessory. Movado separates itself from its often-mentioned competitors Fossil Group, Inc. (NASDAQ/FOSL) and Guess? Inc. (NYSE/GES).
Most of Movado’s competitors, like the aforementioned ones, make watches that are no more than fashion accessories. You will not hear heartfelt praise on those fashion accessories from watch connoisseurs. Why do I mention this? Because fashion watches are getting hit badly from the incoming of wearable technology. Wearing an Apple Watch seems to be the new fashion; and traditional fashion watches are therefore struggling.
The reason why Movado will continue to strive is that it is actually a watch-making company, with the goal of craftsmanship and such in mind. It is not merely a maker of fashion accessories. Movado has the “cool factor” that separates itself from its more generic counterparts. This “cool factor” is partly from the company’s history, and partly from the design and execution of its products.
Since Apple’s announcement of the Apple Watch last September, Movado’s stock price is down 23% to $27.94, giving it a P/E ratio of 14.78. Since the market’s expectation of the impact of the Apple Watch on Movado is likely to be overestimated, Movado could experience solid growth once its next few reports come out.
This Underrated Industry is Poised to Soar
The Procter & Gamble Company (NYSE/PG)
My next pick on growth prospects is not what investors normally consider to be growth stocks. The sector I’m referring to is consumer staples. In particular, I am looking at The Procter & Gamble Company (NYSE/PG).
Procter & Gamble’s share price has come down quite a bit in the last few months. Moreover, just last week, Coty Inc. (NYSE/COTY) won the auction to acquire P&G’s beauty business for $12.0 billion. P&G’s strategy is to focus on fewer brands that are fast growing. If executed well, having fewer fast-growing brands could translate into substantial earnings improvement.
Part of the optimism on consumer staples comes from the decline in oil prices over the past year. Since last summer, consumers have saved quite a bit at the pump. Not until recently, most of those windfall savings have not been spent. When consumers finally take out the savings, they would likely spend more on staples as well as discretionary expenses.
Consumer staples also provide protection against potential downturns in the stock market. With NASDAQ just surpassing its all-time high in the tech bubble in 2000, there might be a point of correction in the near future for the U.S. stock market.
In theory, the nicest thing about consumer staples is that they are non-cyclical. This is because when the economy slows down and markets tumble, the demand for products made by consumer staple companies does not usually shrink. People still need to get groceries and use toothpaste, right? Indeed, the consumer staples sector has proven itself by being the best-performing sector of the S&P 500 in 2008 when markets crashed.
Also Read: Top Penny Stocks to Watch in 2015