The recipe for successful long-term investing is simple in theory but difficult in practice: Buy shares of high-quality companies; pay reasonable prices for those shares; and hold on to them for many years, unless there are legitimate reasons to sell. Failing at any one of those steps will cause trouble.
Any stock could double over the next decade, but only some have an above-average shot at doing so. These Motley Fool investors think following are these such stocks. Here’s what you need to know.
Top 10 Blue Chip Stocks To Watch Right Now:AbbVie Inc.(ABBV)
Worry that its best-selling drug would soon face competition because of expiring patents may have caused you to remove AbbVie from your radar. However, the likelihood of competition to Humira has fallen considerably, and that suggests income investors ought to be looking at it again.
Humira is a widely used autoimmune disease drug. In 2017, its sales of more than $18 billion accounted for about 65% of AbbVie’s revenue. Patents protecting Humira have already begun to expire, but a favorable patent decision last fall prompted competitor Amgen (NASDAQ:AMGN) to ink a nonexclusive deal with AbbVie that should keep Humira copycats at bay in the U.S. until 2023.
The extra time is great news because AbbVie has a lot of late-stage drugs that could reach the market before Humira’s sales begin to drop. Over the next year, it plans FDA filings for Rova-T, a solid-tumor cancer drug; upadacitinib, a rheumatoid arthritis drug; and risankizumab, a psoriasis drug. All three of those drugs target multibillion-dollar indications and thus could be blockbusters.
AbbVie has FDA approvals pending for an endometriosis drug, Elagolix, and a chronic lymphocytic leukemia drug, Venclexta, that have billion-dollar potential, too.
The company has increased its dividend by 77% since it was spun out of Abbott Labs (NYSE:ABT) in 2013. Since management expects its effective tax rate to fall to 9% in 2018, from over 30% last year, and thinks new drugs could increase non-Humira sales from $9 billion to as much as $35 billion in 2025, there’s reason to think even more dividend increases are coming.
Top 10 Blue Chip Stocks To Watch Right Now:AeroVironment, Inc.(AVAV)
Drones have been a topic of excitement in the press for years, but very few companies generate meaningful revenue from them. One that does is AeroVironment, the leading supplier of small drones to the military. The company makes drones used for surveillance and combat support, and some drones even have been equipped with strike capabilities.
In the first three quarters of fiscal 2018, drone revenue jumped 36% to $153.7 million and gross margin in the segment was up 51% to $55.3 million. The company also has a growing presence with customers other than the U.S. military, highlighted by a $44.5 million order from a Middle Eastern country in March. Commercial drone use is beginning to expand as well, with surveillance, energy production, and agriculture shaping up as major growth markets. According to Statistics MRC, the small drone market is expected to grow from $6.8 billion in 2016 to $14.7 billion in 2023.
Drones are AeroVironment’s biggest business, but it’s not the only industry in which the company is positioned for growth. AeroVironment is one of the leaders in electric vehicle (EV) chargers, with solutions for consumers, businesses, and emerging charging networks. The segment isn’t growing as quickly as drones, but charger revenue in the first three quarters of fiscal 2018 grew 6% to $27.9 million and gross profit improved 17% to $7.9 million. If electric vehicles grow from about 1% of auto sales in 2015 to 24% of sales in 2025, as Bloomberg New Energy Finance predicts, this could be another segment that grows exponentially in the next decade.
AeroVironment’s current price-to-earnings ratio of 41 is expensive, but both drones and EV chargers are going to be big growth businesses over the next decade, and I think this is a stock that’s worth paying a premium for.
Top 10 Blue Chip Stocks To Watch Right Now:Centene Corporation(CNC)
Centene Corp (NYSE:CNC) operates as a diversified and multi-national healthcare enterprise that provides programs and services to under-insured and uninsured individuals in the United States.
The company’s total revenue stands at $48.3 billion as of its latest fiscal year. This is nearly 5x higher than the $8.1 billion achieved five years prior.
Going forward, analysts are forecasting that Centene’s total revenue will reach $87.9 billion by fiscal year 2022 representing a five-year CAGR of 12.7%.
Shares of the company are trading 54.2% higher year over year. But the stock price could end up trading another 31.6% higher in 2018 based on Centene’s future cash flow projections.
It’s worth noting that highly followed portfolio manager David Tepper currently holds a position in Centene worth $76.5 million. Tepper, founder and portfolio manager at Appaloosa Management, is widely known for having inspired what’s been dubbed the Tepper Rally of 2010.
Top 10 Blue Chip Stocks To Watch Right Now:Orange(ORAN)
Many American investors are unfamiliar with Orange. Formerly known as France Telecom, it is the largest provider of landline and mobile phone services in France, with a large and growing presence in developing markets around the world. All told, the company serves 273 million customers.
Orange’s stock comes with a generous 4.35% yield at today’s share prices. The dividend policy is very European in nature, as Orange adjusts the quarterly payments up and down as circumstances allow, not worrying about boosting the payouts without fail every year.
More to the point, Orange is working through an ambitious cost-savings program while expanding its presence in the promising telecom markets of Eastern Europe. Those attractive dividends are backed by free cash flows, which covered all of Orange’s payouts last year with some room to spare.
I’m a big fan of telecoms chasing growth in underdeveloped markets, and Orange is doing exactly that while producing stellar dividends and rock-solid cash flows. In fact, I like this company so much that I own the stock myself.
Top 10 Blue Chip Stocks To Watch Right Now:Mastercard Incorporated(MA)
Let’s do a double for this one: Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA). Both companies are huge beneficiaries of the same trend, as global consumers continue moving to credit and debit from cash and check. Further, growing e-commerce sales bode well for V and MA too, for obvious reasons.
The credit card business is attractive for many reasons, as V and MA serve as simple “toll booth” businesses. They don’t lend consumers money and they don’t take on big risks. Instead, when a consumer purchases goods or services from a merchant and pays via credit card, the merchant pays a fee that goes to V and MA.
While the pair of stocks may look expensive on a sales basis at first glance, the earnings-based valuation isn’t all that bad. Especially considering their double-digit earnings and revenue growth.
Throw in the fact that Visa has profit margins of almost 40% while MA has margins of 32% and we can see that these two are earning money hand over fist.
Both stocks tend to trade with a high correlation. They’ve been in a steady uptrend since early 2017 and I hate that I’ve taken some off the table since I first initiated a position almost six years ago.
As V and MA both bump up against resistance, they look like they’ll soon push through to new highs, short of another market-wide selloff.
Top 10 Blue Chip Stocks To Watch Right Now:Tiffany & Co.(TIF)
Luxury goods company Tiffany & Co. (NYSE:TIF), like many other retail stocks, is struggling to find any positive momentum whatsoever in 2018. The stock is off more than 9% through the first few months of the year – far worse than the broader market’s 1.9% declines.
That said, it’s not all thorns for Tiffany.
Just a few months ago, the company reported a solid holiday-season quarter that included a 5% jump in comparable-store sales and an 8% improvement in the top line, largely bolstered by impressive performances from the Asia-Pacific region and Europe. That led Tiffany to upgrade its own outlook for the fiscal year’s profits.
Sometime near the end of May, shareholders should be on the receiving end of another dividend hike. Tiffany has upgraded its payout by nearly 50% over the past five years, and is likely to tack on an additional bump during the last week of the month.
Top 10 Blue Chip Stocks To Watch Right Now:Tesla Motors, Inc.(TSLA)
Tesla (TSLA) shares are on the verge of breaking down out of a multimonth consolidation range amid ongoing Model 3 production woes, executive departures and fresh worries about the future of autonomous vehicles after an Uber self-driving car killed a pedestrian.
Goldman Sachs analysts, in a recent note, reiterated a sell rating on worries about output and Q1 deliveries.
The company will next report results on May 2 after the close. Analysts are looking for a loss of $3.22 per share on revenues of $3.6 billion. When the company last reported on Feb. 7, a loss of $3.04 per share beat estimates by 11 cents on a 43.9% rise in revenues.
Top 10 Blue Chip Stocks To Watch Right Now:Network-1 Technologies, Inc.(NTIP)
(NYSEAMERICAN:NTIP) has a market cap of $65 million, so it isn’t a game changer at this point. And from the looks of things, it may not get the opportunity to even try its hand becoming a force.
Its specialty is protecting intellectual property assets. Granted this is huge deal in the tech sector where knowledge is almost as important as products. If you don’t have the ability to keep your new tech ideas out of the hands of competitors, you don’t have a chance.
Most of NTIP’s IP portfolio deals with networks and Quality of Service (QoS) patents for delivering content over the internet.
It’s off 42% in the past year, but there’s no reason to go bargain hunting now.
Top 10 Blue Chip Stocks To Watch Right Now:Catalent, Inc.(CTLT)
Our first pick from the medical-drug sector is Catalent Inc (NYSE:CTLT). This New Jersey-based company has an Earnings ESP of +1.70% and a Zacks Rank of 3.
The Zacks Consensus Estimate for first-quarter earnings is pegged at 39 cents per share. The company flaunts a positive earnings surprise record, outshining expectations in all the last four quarters with an average beat of 16.44%.
Top 10 Blue Chip Stocks To Watch Right Now:Magellan Midstream Partners L.P.(MMP)
This company is among the most conservatively run midstream oil and natural gas players. Its debt-to-EBITDA ratio is well below industry bellwethers like Enterprise Products Partners L.P. and Kinder Morgan, Inc. And it avoids dilutive unit issuance, with its unit count effectively flat over the past five years compared to a roughly 17% rise at Enterprise.
With Magellan’s price down roughly 33% from 2014 highs, it’s a good time for investors to pick up an industry-leading name on the cheap. But why the sell-off?
The answer is that investor sentiment on the midstream space has turned negative, with the Alerian MLP ETF down 50% from its highs. The negative shift isn’t unreasonable, as some midstream players are highly leveraged and a number have been forced to trim distributions. But neither of those issues apply to Magellan, which has increased its distribution every quarter since its IPO in 2001.
MMP AVERAGE DILUTED SHARES OUTSTANDING (QUARTERLY) DATA BY YCHARTS.
More important for the future, Magellan plans to keep increasing distributions between 5% and 8% a year between now and 2020 while maintaining robust distribution coverage of 1.2 times. The key is its pipeline of capital investments. But Magellan doesn’t build on spec, it only risks its unitholders’ money when it has a good reason to do so.
For example, of the roughly $1.2 billion in spending planned for this year and next, virtually all of the projects have customers lined up, which clearly illustrates a need for expansion at existing assets. As an industry standout, Magellan is a solid option for any investor.