3 Home-Run Stocks for Baseball Season
Adem is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Successful investing is one of life's pursuits that lends itself to endless metaphors. Because of the competition and the emotional toll involved when putting real money on the line, I always find that sports metaphors are especially fitting. So with the baseball season in full swing and the market uncertain, it's time for you to invest in some home-run stocks.
Home-run stocks, usually small-caps, offer the possibility of high reward for taking on high risk. Unlike low-risk "singles and doubles," such as GE or Pfizer, small-cap home-run plays can grow many times over, and transform your portfolio.
Here are a few potential home runs you should look at right now.
Hopping around the base paths
Annie's (NYSE: BNNY) is a natural and organic food company that is at the forefront of a monster trend. This company, which you may know by its "bunny logo" brands like "mac n' cheese," makes many convenience foods, healthier. Annie's gives customers access to organic frozen pizzas or macaroni, all at the local neighborhood market.
Regardless of whether you think Annie's is a good investment here, you have to like the trend. Look around, fellow Fools -- soda sales are declining every year in the U.S. and fast food giants are cannibalizing themselves, all while healthy eating names are experiencing hyper growth.
American's are becoming more health conscious, but they still love their convenience, and that's where Annie's comes in.
The consensus analysis estimate is for earnings to grow over 20% for Annie's, and to increase each of the next three years. Returns on equity come in at a whopping 34%, and revenue is growing at 16%. The numbers, and the super trends, are in Annie's favor so the big test will be how the company handles the next leg up the growth ladder. Annie's cash position dropped precipitously from 2011 to 2012, partially due to a frozen pizza recall but also (largely) to support growth. Now that hyper-growth is here, we'll have to see how Annie's handles increased costs and competition. The next year will be crucial, but I think Annie's offers more than enough reward to be worth the risk.
Ignite your portfolio
Nothing goes better with baseball metaphors than some good eating, so let's stay on this restaurant theme and look at another small-cap grower: Ignite Restaurant Group (NASDAQ: IRG).
It's Baseball Season
These stocks make perfect sense right now, with stocks at all-time highs. I think the perfect portfolio, in this market, would include 80% index funds and 20% "home-run" stocks.
The reasoning is simple, the easy money has already been made. So while you need some safety (indexing) you also need a few individual stocks that can double or triple, even if the market stays flat.
These home-run stocks can deliver those returns. It's time to play ball.
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Adem Tahiri has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!