2018 is a little less than halfway over, but that hasn’t stopped some investors from looking ahead to 2019 and the companies most likely to deliver growth next year.
According to Goldman Sachs strategist David Kostin, “investors will soon look past 2018 and focus on 2019 growth. For many years, beginning in July investors would start to value stocks based on the following year’s profit outlook.”
But as markets continue to be heavily headline driven, it may be hard to even consider for many investors.
Nevertheless, the smart money on Wall Street will look past the noise and put bets on those companies most likely to succeed next year.
2019 is sure to be a year of rising interest rates and less of a bump from tax reform, and Goldman Sachs says the best stocks to weather these circumstances will be companies with strong sales growth potential.
So far, Wall Street is modeling 2019 S&P 500 sales growth at 5%. Goldman Sachs’ new “high revenue growth stock basket” could see sales growth of 12% in 2019.
These are the companies Goldman has set its sights on.
Align Technology (NASDAQ: ALGN)
Selfies are driving this stock higher.
Align Technology, maker of the Invisalign clear teeth-straightener, is up just over 49% year-to-date. The company is seeing sales propelling in Japan, which has quickly become one of its top 5 markets, and predicts sales growth in that country of 25% to 35%.
“Smiles have never been more visible because of the whole selfie generation,” said CEO Joe Hogan in an interview in Singapore. “I think it’s an aesthetic in Japan, it’s important.”
Established in 1997, the company has said that 5.5 million patients have used its Invisalign product. Shares of Align have surged more than fivefold in the last three years as sales have doubled.
Amazon (NASDAQ: AMZN)
As Amazon continues to transform the retail landscape, Goldman expects its shares to continue to climb.
The e-commerce giant has returned a market-crushing 64% in the last 12 months, and a 510% gain in the last 5 years.
While Amazon looks expensive by just about every valuation metric, it continues to grow and disrupt market after market. The company’s top-line sales have doubled in the last three years, and adjusted earnings have skyrocketed 560%.
Autodesk (NASDAQ: ADSK)
Autodesk’s shares have slipped a bit this week after a strong Q1 earnings report as investors consider lower guidance for Q2, but the company’s actual results show a company in the middle of a strong transition toward greater profitability and recurring revenues.
The real story is in ADSK’s growth in its subscription business for its AutoCAD software. Subscription revenue more than doubled to $350.4 million last quarter, which was far above the expected $328.9 million.
Cabot Oil & Gas (NYSE: COG)
COG may be down 20% year-to-date, but you may want to consider buying the dip.
This U.S. shale company has a consensus outperform rating from 30 Wall Street analysts, with analysts placing a $28.29 price target on the company, a nearly 25% gain from today’s prices.
Concho Resources (NYSE: CXO)
This Permian Basin juggernaut recently reported that it brought home $835 million in net income for Q1, compared to $650 million a year ago.
The company’s growth potential is very attractive with expectations from 17 analysts for earnings to rise to $9.821 from $7.677 over the next three years, indicating an estimated earnings growth of 15.89% per year which is exceedingly positive.
Facebook (NASDAQ: FB)
Despite being embroiled in scandal this year, Goldman sees room for growth for Facebook in 2019.
Shares plunged 21% in the wake of the Cambridge Analytica scandal, but shares have since shaken off their lows and are now back up to pre-scandal levels, and options traders are betting shares will rise to a new record high by mid-July.
Analysts are becoming more upbeat as well, upping their price targets to an average of $217.84, or nearly 14% higher.
Netflix (NASDAQ: NFLX)
Netflix recently surpassed Disney’s market cap for the first time, making it the most valuable media company in the world.
This first-mover in video streaming has upped its original content game, which has seen it deliver such hits as Stranger Things and The Crown, helping it to deliver huge subscriber growth numbers.
The stock has skyrocketed 1,300% since April 2013, and its price target has been raised to $390 by MKM Partners, or 11% higher than today’s prices.
Pentair (NYSE: PNR)
Pentair is a machinery company based in the U.K. focused on water quality systems, and flow and filtration solutions.
The need for food and energy to support huge population growth in emerging markets is spurring the need for significant investments in sustainable water solutions, which is very good news for Pentair as the company expands in China and Southeast Asia.
The next five years EPS growth rate is projected at 64%.
Vertex Pharmaceuticals (NASDAQ: VRTX)
Vertex shares fell this week as the FDA put a hold on a new drug application for the treatment of sickle-cell disease, “pending the resolution of certain questions that will be provided by the FDA as part of its review.”
Currently, Vertex has three cystic fibrosis drugs on the market. At this point, there are no other approved drugs that correct the malfunctioning proteins produced by the CFTR gene that results in cystic fibrosis, giving Vertex a monopoly in treating the rare disease.
The company is also targeting 10 additional indicators, including sickle cell disease and pain. Success in just one or two of their pipeline programs would give Vertex sustained growth for years to come.
The company more than doubled last year, but the stock has cooled off in 2018 giving investors a buying opportunity before the stock takes off again.