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My Top Three Growth Stocks Watch List

June 6, 2017, 9:36 am

There are so many investing opportunities, it can be hard to figure out which ones to invest in now and which ones might be worth adding to your portfolio down the road. This is why I keep such a close eye on my screens since you never know what’s going to pop up! The good news is that I have three names that I’m watching right now that are growing at a fast clip and have a bright future that could very well make for quality investments in the future. Let’s take a look.

Inogen (INGN) manufactures portable oxygen containers to patients suffering from respiratory illness. These containers offer greater mobility than traditional oxygen tanks, which also require regular delivery and cumbersome tubing. Revenues for the company have more than quadrupled from $49 million in 2012 to $203 million in 2016 and management expects sales to increase another 15%-18% this year. This rate would be even greater if not for INGN’s decision to put less emphasis on revenues in light of lower government reimbursements. Portable oxygen was the highest growth category of the Medicare Oxygen Therapy segment between 2012 and 2015, and since it is still only 8% of the total oxygen market, there is plenty of room for expansion. However, with the shares trading at 72X 2017 EPS estimates of $1.10, up from $0.63 in 2016, INGN is a little too rich for my liking.

Callidus Software (CALD) is a cloud-based customer relations management (CRM) software company whose products enable sales and marketing automation, learning management systems and customer experience management. CALD’s software has garnered a strong presence in the corporate world, as it is used by seven out of the top 10 technology and insurance companies and six of the top 10 telephone companies globally. This strong customer acceptance has driven a 29% compound annual sales growth rate from 2012 through 2016, with management guiding to another 28% increase in sales in 2017.

Consulting firm International Data Corp. expects the company’s market to double from 2016 to 2021, so there’s significant potential growth ahead. Valuation is a little steep now at 71X 2017 EPS estimates of $0.31 and 6X estimated revenues of $244 million, but this stock might be worth another look if it pulls back 10%.

Atlassian Corp. (TEAM) is a Netherlands-based company that sells and develops software. Its main product, JIRA, helps customers plan projects while working in a group or team environment. JIRA offers extensions that allow customers to work with other vendors’ products, including one to develop, build and deploy applications to Amazon Web Services. TEAM’s other products include Confluence, used to create shares and discuss content on the Internet, and HipChat, which helps teams communicate in real-time.

TEAM’s revenues more than doubled from $215 million in the June 2014 fiscal year to $457 million in fiscal 2016, and are expected to climb another 35% to $617 million in fiscal 2017. While I like the possible expansion, the shares are trading at 100X and 75X June 2017 and June 2018 EPS estimates, making the stock a little pricey right now. However, TEAM is near the top of my list of companies to buy should we get another healthy market sell-off.

I hope this gives you a good starting point! There are two other names I am watching, and if you’d like to find out which ones those are as well as the new stock I’m recommending to my GameChangers subscribers on Wednesday please make sure to sign up for this risk-free trial now so you don’t miss out!

3 comments

  1. Thanks, great article.

    Comment by Bablofil on June 10, 2017 at 3:32 pm
  2. Used to listen to Hilary on NBR/PBS and always appreciated her wisdom!

    Comment by A. R. on June 10, 2017 at 8:22 pm
  3. Hilary, why is it that you don’t advocate buying Calls instead of shares? As you know (better than we) one gets more bang-for-the-buck with options…especially in that here they’ll be held no more than some 3 months. [A longer hold contravenes your ACR investing concept; one should not be in a trade more than 3 months, it seems.]

    Also, why not use options where you can choose one of two ways to protect yourself: [1] Buy a Call having a strike equal to about 85% of the underlying stock’s current market price. Turn this into a debit spread by simultaneously selling a Call having a strike at the stock’s market price. This scheme limits your exposure both via the short Call; & via reducing your chance of loss via the deep-in-the-money long Call instead of (costly) shares that offer no protection.

    [2] the alternative conservative approach to one of your reco’s is to buy that in-the-money deep 85% call and simultaneously buy an at-the-money Put. Known as “market neutral”, this ploy allows you to make money regardless of the stock’s direction. But you can lose (a (little) money (only) if the stock moves sideways. And this can be sidestepped substantially by rolling over the trade for, say, one-two more months.

    Comment by OLIVER on June 12, 2017 at 8:48 pm

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