After a white-hot start to 2019, it has been a wild ride for investors. As the war of words has progressed in the trade battle between China and the U.S., price volatility has been on the rise. Investors tend to shy away from volatility, which is a word that generally is only mentioned when prices are moving lower. In fact, the CBOE Volatility Index (VIX) is often referred to as the “fear gauge.”
However, seasoned investors realize that volatility can be your friend. “When you put it all together, this is a healthy time to come into the market for the long term,” said Thorne Perkin, president of Papamarkou Wellner Asset Management, to CNBC on May 16. “We always look at these pullbacks as buying opportunities for the long term.”
In short, attractive investments are out there if you’re willing to dig a little deeper. Here are seven stocks primed to take off. I sourced these companies by looking for stocks with a bullish “strong buy” Street consensus on TipRanks. That’s based on all ratings received in the last three months. Plus I also ensured that the average analyst price target indicates attractive upside potential from current levels.
With that in mind, let’s dive in now:
Stocks to Buy: Health Insurance Innovations (HIIQ)
Health Insurance Innovations (NASDAQ:HIIQ) is a leading developer of affordable, web-based individual health insurance plans. According to the Street, this is a company with huge upside potential.
“We believe that HIIQ is well-positioned to benefit from increasing demand for short-term medical products. We expect top-line growth of 24% in 2019 and 3-15% annual top-line growth for the rest of our explicit forecast” reveals Cantor Fitzgerald’s Steven Halper. “HIIQ shares remain inexpensive, in our opinion, as they trade below our DCF-based price target of $75.”
Given the current sub-$25 share price, this translates into 200% upside potential! And before you dismiss this, note that Halper ranks No. 129 out of over 5,000 analysts for his strong stock picking skills.
The analyst adds “We reiterate our view that concerns regarding HIIQ’s exposure to FTC lawsuit against Simple Health are entirely overblown.” This is regarding the dispute between the FTC and one of the company’s former distributors, Simple Health. However a recent disclosure shows that HIIQ is not a defendant or party in the case and is in regular dialogue with the FTC. “This disclosure, in our view, should put to bed any lingering concerns regarding HIIQ’s exposure to Simple Health” says Halper.
Raymond James analyst Randy Binner echoes this message — he believes the resolution of the matter will be positive for shares. Indeed, HIIQ boasts seven recent buy ratings from the Street. Its average analyst price target stands at $65 (160% upside potential).
Wabtec Corp (WAB)
Welcome to our second pick, Wabtec Corporation (NYSE:WAB) — an under-the-radar stock poised to outperform. Wabtec is one of the world’s largest providers of tech components and services for the rail industry. It has products on virtually all U.S. locomotives, freight cars and passenger transit vehicles, as well as in more than 100 other countries.
That means the stock is perfectly positioned to benefit from the accelerating growth of global transit rail markets — especially following the transformative $11 billion GE Transportation merger.
“We see Wabtec as the number one rail automation play” cheers Cowen & Co’s Matt Elkott. “WAB pays a dividend and is well positioned for organic and external growth. This deep value, income and growth trifecta should appeal to new long-term investors” cheers Elkott.
He reiterated his WAB buy rating on May 22 with a $92 price target. That indicates sizable upside potential of over 40%. “WAB now trades at ~11x adjusted 2020E EPS, almost half the multiple of its closest comp KBX, a discount unwarranted by fundamentals” the analyst tells investors. Note that the Street shares this perspective. Although only three analysts cover WAB, all three rate the stock a “buy.”
This list also includes one of my favorite FAANG stocks — Amazon (NASDAQ:AMZN). Amazon has everything going for it right now. Despite a 7% pullback in the last month, shares are still up 23% so far this year. And plenty of upside potential lies ahead. According to Piper Jaffray analyst Michael Olson, AMZN stock is on track for some impressive share gains. Even better, these gains are possible without much “extra’ work from Amazon:
“We believe AMZN shares will reach $3,000 by sometime between mid-’21 and mid-’22 or within 24-36 months,” Olson calculated. This equates to a rally of about 65% from current levels. “We have a high degree of confidence that AMZN shares can reach this level with no major acquisitions or other significant changes to the business.”
“Adjusting for the value of the AWS segment and Advertising (within “Other”), the company’s core retail segment is trading at a level that implies that business is valued below a traditional brick & mortar multiple of sales,” he explained. A potential Amazon Web Services spin off would also highlight the “relatively low valuation of the other segments,” the Top 100 analyst added.
Intercept Pharma (ICPT)
Biopharma Intercept Pharmaceuticals Inc(NASDAQ:ICPT) is one of the best-rated healthcare stocks right now, according to TipRanks. This is a company developing chronic liver disease treatments using its special bile acid chemistry. Its lead product candidate, obeticholic acid, or OCA, is a bile acid analog already approved for primary biliary cirrhosis (PBC).
Crucially, the drug is now also in development for non-alcoholic steatohepatitis (NASH) and primary sclerosing cholangitis (PSC). According to Reports and Data, the global NASH market is expected to reach $13.38 billion by 2026. In short, we are looking at a very lucrative opportunity for drug companies.
RBC Capital’s Brian Abrahams has a buy rating on ICPT with a $143 price target (69% upside potential). Abrahams calculates the current PBC indication has $400M potential, but that approval of OCA for NASH could create a significant additional $2.5 billion-plus opportunity. “We believe that OCA’s efficacy profile is supportive of approval” says the analyst.
“With stable growth in PBC, a high likelihood of first-to-market approval in large NASH market with meaningful effect on fibrosis, and enthusiasm among physicians, we believe shares currently underappreciate OCA’s peak revenue potential” the analyst writes.
What’s more, he draws parallels between Intercept and InterMune, which Rocheultimately acquired for $8.3 billion. “While we acknowledge it is not a perfect apples-to-apples comparison, we believe the similarities do further highlight the significant valuation disconnect for ICPT” says Abrahams. Out of the 11 analysts polled, 10 rate ICPT a “buy.” And their $165 average analyst price target suggests even greater upside potential of 96%.
If you are looking for a marijuana stock with plenty of growth potential, look no further. Low-cost Canadian cannabis producer Aphria(NYSE:APHA) has only buy ratings from the Street. Their average analyst price target of $11 indicates shares can spike 60% from current levels. That’s on top of the 11% growth already experienced year-to-date.
Jefferies’ analyst Owen Bennett has just initiated coverage of APHA stock. His bullish review of the stock sent shares soaring 8%. “On our strategic scorecard Aphria scores highly, and third overall behind only Canopy and Aurora,” Bennett told investors. “Despite its strong global outlook, its valuation is the cheapest across our space, with allegations around inflated assets/insider deals weighing.”
The company suffered a disastrous 2018, featuring a hostile takeover attempt, the exit of its CEO and allegations from a short-seller that insiders profited from acquiring international businesses at highly inflated prices. However a special board committee found that the price paid for businesses in Latin America was acceptable. And with chairman Irwin Simon now acting as interim CEO, this cannabis stock is ready to rebound. “With these issues now seemingly cleared up, as the company continues to execute, and with likely positive developments on U.S. optionality/Canadian derivatives, we see significant re-rating” says Bennett.
Chinese e-commerce giant Alibaba (NYSE:BABA) has taken a bit of a hit recently. Shares are down 19% over the last month. But that just means we are looking at more compelling upside potential of 40%. That’s based on the stock’s 16 recent back-to-back buy ratings and bullish $217 average price target.
Five-star Stifel Nicolaus analyst Scott Devitt has just reiterated his BABA buy rating. But even more promisingly, he has now added Alibaba to the firm’s elite ‘Select List’ of favorite stock ideas. “We continue to like Alibaba as a leading global eCommerce company that holds a dominant market share in China online shopping and operates an efficient, commission/ advertising model in its core marketplace businesses, Tmall and Taobao” explains Devitt. He has a $220 price target on shares (45% upside potential).
For investors concerned about U.S.-China tensions, you can breathe easy. According to Devitt, Alibaba has “limited exposure” to the ongoing trade war. Luckily, cross-border business between the U.S. and China is a relatively small component of total company revenue. And long-term trends like the growing middle class and an increasingly services-based economy are more important to Alibaba’s growth trajectory, says the analyst.
Additionally, as Joe Tsai pointed out, Alibaba is on the right side of the issues surrounding the trade conflict, such as China becoming more open to foreign businesses, intellectual property protection and the shift towards digitization.
Verint Systems (NASDAQ:VRNT) is a software stock specializing in customer engagement technology. Unfortunately for Verint, a bear report has just sent shares spiraling 8%. Bad news for Verint, but good news for us. Bear in mind, on a year-to-date basis, shares are still up 34%.
Short seller Spruce Point Capital claims the company is using M&A to hide low organic growth. Verint has already released its own counter-statement saying “We stand by … the recently provided long-term organic growth targets for revenue and margin expansion.”
Analysts are providing further support to VRNT’s statement. This is a company with 100% buy ratings from top-performing analysts. That means no hold or sell ratings in the last three months. One of the analysts is Wedbush’s Daniel Ives. He calls the selloff “pure noise” and writes “we strongly disagree with all the issues raised [in the report].”
“As we have seen the company emerge from the post Comverse dark days into a $1 billion+ revenue thriving company today and successfully beating the Street’s forecasts for the last 6-8 quarters, it is NOT a surprise that now some of the bears will come out of hibernation mode and try to poke holes in the company’s emerging success story” Ives tells investors.
He believes we now have a “golden buying opportunity” to own this secular growth name that “is still in the early innings of penetrating its installed base with a holistic cloud strategy.” According to Ives, another guidance raise for the year is likely.