A lengthy, and expanding, set of macro uncertainties are giving investors sleepless nights these days. To name just a few, these include Brexit, the U.S. government shutdown, decelerating global and U.S. GDP growth, and a deteriorating outlook for corporate revenue and earnings increases. Goldman Sachs has responded by compiling a list of 27 global stocks that they believe are well-positioned to grow for the long term, regardless of prevailing economic and market conditions.
Among those stocks are these six: Five Below Inc. (FIVE), WPX Energy Inc. (WPX), Lumentum Holdings Inc. (LITE), Fortinet Inc. (FTNT), Yandex NV (YNDX), and PDC Energy Inc. (PDCE). The table below illustrates these stocks' longterm earnings potential. This is the second of two articles devoted to that report; the first covered six other stocks.
6 Long Term Growth Plays
(Based on Long Term EPS Growth Rate Estimates)
- Five Below: 29%
- WPX Energy: 31%
- Lumentum: 15%
- Fortinet: 33%
- Yandex: 45%
- PDC Energy: 38%
Source: Goldman Sachs
Significance For Investors
Fast-growing Five Below illustrates this handsomely. It's a variation on the dollar store concept, offering a broad, one might say random, array of merchandise selling for $5 or less. It is designed to appeal to bargain hunters who enjoy a hands-on shopping experience that cannot be replicated by online merchants. Indeed, a large part of the Five Below concept is shopping as entertainment, with "Let Go & Have Fun" as its tagline.
Calling the company "Amazon proof," The Wall Street Journal observes: "Many retailers are closing stores. Five Below Inc. can't seem to open them fast enough." In fact, Five Below recently opened a flagship location on Fifth Avenue in Manhattan, near Grand Central Terminal and amid pricey competitors. Nonetheless, just to cover all bases, the company also offers online shopping in addition to more than 750 physical store locations. Like our other stocks, the retailer is thriving despite the rising level of uncertainty outlined in the table below.
A World Of Escalating Market Risk: Areas of High Uncertainty
- U.S.-China trade conflict
- U.S. federal government partial shutdown
- Corporate revenue and earning growth
- U.S. GDP growth
- Global GDP outlook
WPX Energy also has found a way to sustain rapid growth. It's a spinoff from the Williams Companies Inc. (WMB) that is engaged in oil and gas exploration and production in the western U.S., including the Permian Basin region of Texas and New Mexico, the Delaware Basin in Texas, and the Williston Basin in North Dakota. During its first six years of operation, from 2012 through 2017, oil production has increased at a compound annual growth rate (CAGR) of more than 44%, per WPX.
One constant in the worlds of commerce and investing is that change is relentless, and often takes unexpected turns. While the stocks suggested by Goldman appear to have bright long term growth prospects now, they could still be disrupted by changing consumer preferences, shifts in government policies, and the emergence of new competitors.