Buying and holding high-quality growth stocks is a great way to defeat the market in the long run. But there are many reasons why investors often hesitate to purchase growth stocks, including the fact that owning these stocks tends to cause huge volatility, their valuations appear to be high, or their ability to maintain growth is doubted.
To this end, we demand that the top three Motley Fool investors select the growth stocks that forward-looking investors can appreciate. Read on to find out why they chose Kemet (KEM), Bank of America (BAC), Cerner Corp (Nasdaq: CERN)
Top Growth Stocks For April 2018: Kemet Corporation (KEM)
Value investors are always looking for a good deal – any way to take advantage of undervalued stocks. Given so many factors, let’s take a closer look at why Kemet (KEM) may be the solution to the struggle to find real value stocks.
The basic principle of value investing is to find stocks that are undervalued at the current level. Comprehensive considerations such as price/revenue ratio, price/book ratio, and cash flow/share.
P/E ratio is a good indicator of value, and lower P/E ratio tends to be better value. The Kemet ratio is 9.4, which is close to half of the industry average of 19.2. A typical value investor looks for a P/E ratio below 20, and when we see Kemet trade at this ideal rate and a discount to the industry average price, we can see why this is considered an “A” value stock.
When it comes to value investing, there are often stability issues, that is, the old principles, that if it is cheap, there must be something wrong. Kemet’s cash flow/share price is currently at $1.23 per share, more than twice the industry average of $0.53 per share. This confirms the company’s financial stability, so that investors do not have to worry about poor quality stocks.
Top Growth Stocks For April 2018: Bank of America (BAC)
Considering the friendly regulatory environment and rising interest rates of large banks, the nation’s second largest bank asset is an attractive buy, which is a boon to asset-sensitive banks such as Bank of America.
This company has come a long way in the past decade. Ten years ago, Bank of America purchased Countrywide and Merrill Lynch at a high price, and loosened credit loans to promote loan growth. These decisions were catastrophic for their shareholders, leading to tens of billions of dollars in legal reconciliation and credit losses in the years following the financial crisis.
Today, U.S. banks find themselves leaner and more efficient, and in my opinion, the risk is significantly reduced from a credit perspective. Over 80% of its US credit cards and other consumer loans are borrowers with a FICO score of 680 or higher. Shareholders can rest assured that it can no longer make another acquisition – Bank of America is so large that it is legally not allowed to buy another bank. Its size has an advantage in a growing regulatory review world because large banks can allocate regulatory costs to their trillion-dollar balance sheet.
Bank of America has spent unnecessary operating expenses over the past 10 years, shut down or sell non-core branches, and improved its coverage. Now, as interest rates continue to rise, investors will see a huge return on this progress, as Bank of America has one of the four most attractive deposit franchises. The tangible book value of the stock is approximately 1.7 times, which is an attractive price for a bank with a truly competitive advantage because of its size and ability to collect low-cost deposits in a rising environment.
Top Growth Stocks For April 2018: Cerner Corp (Nasdaq: CERN)
Cerner Corp. (Nasdaq: CERN) is the world’s largest pure healthcare IT (HCIT) company with customers in 30 countries. Among the top 100 medical systems in the world, 70 have earned a footprint through patient income. The company is the market leader for health systems outside the United States, with 28% of the market dispersed.
Washington’s policy uncertainty regarding health care means that some hospitals are delaying the implementation of HCIT services. This keeps stocks under pressure since September but may lead to potential demand booms.
Even in this context, Cerner’s booked volume increased by 16% last year, and revenue increased by 7% from 2016 to reach US$5.1 billion. The company’s unfinished orders increased by 10% to $17.5 billion, more than three years of sales.
The increasing complexity of repayment, the aging of the population, and the need to simplify costs based on increasing healthcare costs all drive the demand for healthcare systems. Once customers implement IT systems, high conversion costs and implementation cycles of up to 24 months make service revenue very reliable. Repeated support, maintenance, and service for customers accounted for 72% of Cerner’s revenue.