Most stocks tend to fall and flow with business cycles, but some of the best growth stocks are companies that are well established to follow the trend over the years and take advantage of changing conditions.
Technology stocks often take top priority when investors think of companies capable of driving a wave of change, but there are times when aging industrial firms have the opportunity to jump in on a unstoppable trend.
This is why we believe XPO Logistics (NYSE: XPO), NIO (NYSE: NIO)and General dynamics (NYSE: GD) are three stocks that are well positioned to capitalize on long-term trends.
Deliver a changing retail landscape
Lou Whiteman (XPO Logistics): E-commerce occupied an increasing share of the total retail spending pie even before the pandemic, but COVID-19 was only accelerating the trend. According to U.S. Census Bureau data, more than $ 200 billion was spent on US retail e-commerce sales in the second quarter, up 31.8% from the previous quarter.
However, e-commerce only accounted for 16% of total retail sales in the quarter. Growth may slow a bit when the pandemic ends, but retail seems destined to continue to move to online sales, and that will create demand for more warehouses and shipping capacity.
XPO Logistics is well-positioned to accommodate growing shipping needs. The company’s XPO Direct service is a technology platform designed to help retailers compete better with scale. Amazon by providing a logistics product set. The company expects Direct to become a $ 1 billion business by 2022, with the opportunity to grow further from there.
XPO thrived its e-commerce muscle in the just-finished third quarter, delivering results that easily outstripped expectations thanks to strong growth in delivery and supply chain management at the end of the year. end. After the pandemic, it seems likely that many retailers will seek to outsource more of their warehouse operations and fulfillment instead of taking on complex in-house chores, providing new opportunities for companies such as XPO.
E-commerce has been a fast-paced trend even before the pandemic, and XPO offers plenty of reasons for investors to get excited. The COVID-19 just stresses the importance of online retail and the shipping capacity needed to function. Growth will continue well into 2020.
Here’s how to invest in China’s electric car boom
John Rosevear (NIO): NIO shares soared in 2020 as the company went from a quasi-collapsed startup trying to survive into a steady, fast-growing carmaker with big plans and ample cash. ample to sponsor them.
But that could just be the start of an impressive long-term growth story.
The NIO is in an interesting position. The electric vehicle market in China is expected to fully explode in the next decade, and this has been considered a top “trendy” brand.
While NIO isn’t the biggest electric vehicle maker in China – and probably won’t – their high-end tech cars exist in a sweet spot in the marketplace where customers are available. willing to pay for features and buy NIO has so far been able to offer. That premium concentration (and growing credibility with the premium consumer) means the chances of getting a profit and having good margins after that are pretty strong.
NIO will report third quarter results on November 17th. They should be pretty good: Sales are up more than 150% in the third quarter and the company now has a lot of cash in the bank after a series of calls. capital at the beginning of the year. . I hope that CEO William Bin Li will share details about the next phase of the company’s growth plan in the earnings call, and that could be a catalyst in the short term for stocks. .
It is true that stocks look expensive given NIO’s current revenues. But what if you think of the NIO as an alternative to home-grown Chinese TeslaThat is an increasingly plausible way to describe a company, when a company’s profit – and its share price – can be more profitable from here.
The US-China rivalry did not cool down, but also heated up
Smith is rich (General dynamics): Last week I did the case for Huntington Ingalls is a good stock to invest in regardless of who wins the US presidential election. Because the US Navy has under the 355 ships we need at the smallest level In order to maintain a full military presence in waters around the world, to me it looks like the future will be very bright for anyone building warships for the Navy.
Today, I still believe this. But since I’ve already explained why I think Huntington Ingalls is a good way to keep up with that trend, today I’m going to turn my attention to Huntington’s biggest rival in the defense industry: General Dynamics.
Like Huntington Ingalls, General Dynamics does a lot of shipbuilding for the Navy. But unlike Huntington, GD is a more diverse player, such as building military tanks and armored vehicles for the Army and business jets for the civilian market. For the risk-averse investors, this diversification is tempting – but I think the core military shipbuilding business remains the most compelling aspect of General Dynamics, given America’s competition with China continues to grow.
With luck, this competition will never turn into a real shooting war, but even if it doesn’t, the USN still needs to build a large number of ships just to avoid the challenges. over sea. Currently, the Chinese navy has surpassed the US Navy in terms of size, and with China looking to double the size of its destroyer fleet by 2025, the difference is getting bigger and bigger. less.
Because of this, I see little or no likelihood of the Navy’s budget being cut – but rather seeing it growing over time, for the sake of General Dynamics. With the stock now down 21% in the past 52 weeks and trading at 12 times cheaper than earnings and a single sale, General Dynamics stock has finally become cheap enough to buy.