These stocks lead the way.
The year-end volatility in the U.S. stock market has created a rare opportunity for long-term investors to buy high-quality stocks at a significant discount compared with prices from earlier this year. Fortunately for stock buyers, periods of market weakness tend to drag down all stocks, even the cream of the crop in specific industries. Bank of America recently compiled a list of stocks that have outperformed their industry peers by at least 50 percent in the past year. Here’s a list of eight stocks to buy that are top market performers in their respective businesses in a volatile 2018.
Adobe (ticker: ADBE)
While the S&P 500 index is slightly down overall in the past year, cloud giant Adobe stock is up 41 percent and has outperformed even its high-growth peer group. Analyst Kash Rangan says Adobe’s total addressable market will grow from $21 billion in fiscal 2018 to $36.7 billion by fiscal 2021, an annual growth rate more than 20 percent. Rangan says 40 percent of Adobe’s document cloud users are new, suggesting the company’s innovation is working. Bank of America has a “buy” rating and $308 price target for ADBE stock.
Advanced Micro Devices (AMD)
When it comes to dominating its peer group, no other stock in this list has outshined competitors more in 2018 than semiconductor company Advanced Micro Devices. Analyst Vivek Arya says AMD has a “generational opportunity” to take market share from competitors Intel Corp. (INTC) and Nvidia Corp. (NVDA) in coming years in the massive, high-growth markets of CPU and GPU chips. AMD stock is up 101 percent in the past year, beating out the average performance of its industry by 120 percent. Bank of America has a “buy” rating and $30 price target for AMD stock.
Salesforce shares are up 32 percent in the past year, and Rangan says that momentum will likely continue in 2019. He says Salesforce has an impressive growth profile similar to peers such as Adobe but on a much larger scale. Rangan says Salesforce will likely continue to gain market share and expand its margins in the high-growth cloud market. In addition, growth into analytics, artificial intelligence, internet of things, commerce and other verticals will also help expand Salesforce’s addressable market. Bank of America has a “buy” rating and $181 price target for CRM stock.
Discovery Communications (DISCA)
Cable TV is a far cry from the high-growth cloud computing business, but you wouldn’t know it by looking at Discovery Communications. DISCA stock is up 44 percent in the past year, and analyst Jessica Reif says the company’s three-pronged strategy of growing its global brands, focusing on its profitable channels and trimming costs to become more financially efficient is paying off. Reif says Discovery’s buyout of Scripps Networks earlier this year will help create long-term value for investors. Bank of America has a “buy” rating and $42 price target for DISCA stock.
Twenty-First Century Fox (FOXA)
Most of the 48 percent gain in Twenty-First Century Fox shares came during the bidding war for Fox that ultimately resulted in a buyout of most of the company’s assets by Walt Disney Co. (DIS). Reif says Disney will be able to extract tremendous value out of its Fox assets, but the post-merger “New Fox” shares will also be a solid long-term bet given its live news and sports assets, as well as its strong free cash flow. Bank of America has a “buy” rating and $51.50 price target for FOXA stock.
Shares of credit card giant Mastercard are up 32 percent in the past year, and analyst Jason Kupferberg says the company has been expanding its business outside of the traditional consumer payments. Kupferberg says Mastercard’s services segment already represents about 30 percent of the company’s total revenue, and the company’s goal is to become a “commerce enablement partner” for merchants and issuers. He says Mastercard’s services offerings, including safety and security, advisors and processing services, differentiate the company from its card competitors. Bank of America has a “buy” rating and $230 price target for MA stock.
Netflix stock has taken a breather in the second half of 2018, but a red-hot start to the year still has shares up an impressive 43 percent over the past 12 months. Netflix followed up a disappointing second-quarter earnings report with a third-quarter earnings beat and impressive fourth-quarter guidance. Analyst Nat Schindler says there is no end in sight for Netflix’s international business expansion, and the company has positioned itself for tremendous pricing leverage over the next decade. Bank of America has a “buy” rating and $440 price target for NFLX stock.
United Continental Holdings (UAL)
United Continental is the only “big four” U.S. airline stock to post double-digit percentage gains over the past year, gaining 39 percent. Analyst Andrew Didora says United’s guidance for between 3 and 5 percent unit revenue growth in the fourth quarter was well above consensus estimates. He says United has done an excellent job managing costs in 2018, and the airline appears to be on track to hit its 2020 earnings per share goal of between $11 and $13. Bank of America has a “buy” rating and $98 price target for UAL stock.
Best outperforming stocks to buy now.
To recap, these are the best stocks to buy now that are currently outperforming the market:
— Adobe (ticker: ADBE)
— Advanced Micro Devices (AMD)
— Salesforce.com (CRM)
— Discovery Communications (DISCA)
— Twenty-First Century Fox (FOXA)
— Mastercard (MA)
— Netflix (NFLX)
— United Continental Holdings (UAL)
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