Need a reason to invest in stocks? How about the beginning of a new year.
To help you find solid stock ideas we asked Motley Fool contributors covering technology and consumer goods stocks to talk about top stocks for 2015.
1. Ashraf Eassa likes Qualcomm: It’s hard not to be pleased with the performances of technology and, in particular, semiconductor stocks in 2014. The Philadelphia Semiconductor Index is up over 28% year-to-date, handily crushing the S&P 500 and the Nasdaq, up about 13% and 15%, respectively. However, one high-quality chip company that has underperformed pretty significantly during 2014 — but one that I believe is set to do much better in 2015 — is Qualcomm.
First, Qualcomm’s execution in developing and delivering a compelling range of mobile applications processor offerings looks unmatched. For example, the company revealed on Dec. 11 that it would be upgrading the baseband on its upcoming high-end Snapdragon 810 processor to offer 50% greater download speeds than had been previously announced. This further extends the company’s leadership position in cellular baseband technology.
It’s this kind of execution in its chip business that not only keeps it ahead of major competitors like MediaTek, but also makes it very difficult for mobile device vendors to successfully develop their own in-house chip solutions in a bid to cut Qualcomm out.
Further, Qualcomm’s technology licensing business, which collects royalties on most 3G/4G devices sold, is extremely profitable and should continue to grow with overall smartphone growth. Now, it’s well-known that Qualcomm is having issues collecting on royalties from some Chinese handset vendors (leading to pessimism around the business), but I think Qualcomm will be able to solve its issues there, as it has done in the past.
All told, Qualcomm stock is cheap at just 16.36 times trailing-12-month earnings, it’s a high-quality company, but the stock has underperformed during 2014. Qualcomm the company is a winner, and I think that during 2015, Qualcomm the stock will be, too.
2. Andrés Cardenal likes Google: Information is power and Goggle’s mission statement, “to organize the world’s information and make it universally accessible and useful” says a lot about the company and the role it plays in times of chaotically abundant information.
Google is the undisputed king in online search; the company has a bigger market share than all its competitors combined. In addition, Google has built a massive portfolio of services and applications, including enormously valuable assets like Gmail, YouTube, and Chrome, to name a few remarkable examples. More than 80% of smartphones around the planet are powered by Android, so Google is in a position of strength to continue thriving under the mobile paradigm.
The company generates tons of cash flows from its leadership position in online advertising, and management is not shy at all when it comes to investing that money in the search for breakthrough innovations. From self-driving cars to biotechnology solutions to fighting human aging and associated diseases, Google has plenty of exciting projects with disruptive potential in its pipeline.
Investors are getting concerned about slowing revenue growth and rising expenses lately, and this may provide a buying opportunity in the online search giant. Google trades at a forward P/E ratio near 17.5, roughly in line with the S&P 500 Index. However, even during a “disappointing” third quarter, Google delivered a big increase of 20% in revenues, a level of performance which most companies in the index can only envy. Google has a lot of things going right and I think Google is a top stock to consider buying for 2015.
3. Tamara Walsh likes WhiteWave Foods: From smart acquisitions to promising opportunities in oversees markets such as China, hiteWave Foods is one of my favorite stock picks heading into the new year. The packaged food and beverage company has enjoyed a nice run this year with the stock up more than 47% year-to-date. However, there should be plenty of growth ahead thanks to WhiteWave’s partnership with Mengniu Dairy, one of China’s largest dairy companies.
As part of this joint venture, WhiteWave purchased a production facility where it plans to begin manufacturing its products for the Chinese market in the coming months. WhiteWave Foods owns a 49% stake in the deal, which will enable the company to sell its brands in China, one of the world’s largest consumer markets with over 1.3 billion consumers and a rapidly growing middle class.
Market-leading brands including Silk soy milk and almond milk, Land-o-Lakes butter, and International Delight coffee creamers, have already helped WhiteWave Foods make a name for itself in North America and Europe. The company celebrated a record third quarter recently, with net sales climbing 35% to $857 million in the period. I expect this momentum to carry over into the new year, and for the stock to continue to gain speed in the year ahead as the company expands into new markets and product categories.
4. Rick Munarriz likes SeaWorld Entertainment: I’m going to go full contrarian with a stock that everybody seems to hate. SeaWorld is in a bad spot these days. Activists have succeeded in keeping guests away from its marine life theme parks given the negative publicity about killer whales in captivity. Attendance across its 11 parks fell 4.1% in 2013 and is off by another 4.7% through the first nine months of 2014. This is the only theme park or regional amusement park operator that’s experiencing lower turnstile clicks this year.
The stock that went public at $27 early in 2013 is now all the way down to the mid-teens, and earlier this month it announced that it would have to postpone the dividend that was supposed to go out in December because it would violate its debt covenants.
This all seems pretty grim, but changes are coming. SeaWorld’s CEO is leaving in January, opening the door for an outsider who can help soften the battered brand. Along the way we have some favorable trends including an improving economy and lower gas prices that should deliver big boosts to the theme park industry in general.
SeaWorld is in a bad spot, but it’s also important to remember that just three of its parks are orca-housing SeaWorld attractions. The dividend should return in January, and guests will eventually follow as the chain either takes active steps to improve its image or fickle consumers move on to a new cause. With SeaWorld trading at a valuation discount to its peers there’s plenty of upside in 2015 even if the market doesn’t comply. The climate is ripe for SeaWorld to make a big splash in the year ahead.
5. Dylan Lewis likes Apple: It’s far from a sexy pick, but most who have bet against Apple the past five years have come to regret it and I don’t see 2015 being any different.
Apple’s brand cachet and customer loyalty hasn’t wavered — while the company’s iPad line is faltering, Macs are selling well. In October the company revealed the segment posted its highest quarterly market share since 1995.
Apple’s brand prestige is even more valuable in the increasingly competitive smartphone market as Asian OEM’s Xiaomi, Lenovo, and Huawei continue to produce low-cost devices. Skeptics need to look no further than Samsung’s shrinking smartphone market share to appreciate the moat Apple enjoys due to its status, quality, and exclusive iOS and Mac operating systems.
The recent December sell-off gives investors an even more attractive entry point, the company still trades at a trailing P/E of 17 and a forward P/E of 14.
Even in the neighborhood of some of the more conservative analyst estimates of 5 million to 10 million units, the Apple Watch could provide a 1%-3% lift on projected revenue for CY 2015. The fledgling Apple Pay now supports credit cards that comprise 90% of the U.S. credit card purchase volume and could prove to be an even bigger catalyst than the new line of wearables. With each e-commerce security breach (it seems like there’s one almost every other week), Apple Pay’s tokenization system becomes increasingly appealing to consumers seeking security.
Stability with its hardware stalwarts, new growth opportunities, a decent dividend yield (1.7%) and an average of $11 billion in stock repurchases each quarter for the past year and a half — there are simply too many reasons to ignore the Mac maker in 2015.
6. Tim Brugger likes Facebook: With its stock price up 38% so far this year, it may seem counterintuitive to include Facebook on a list of stocks to buy in 2015. However, there are a laundry list of revenue opportunities at Facebook’s fingertips heading into the new year, and it appears a couple in particular are about ready to pay off.
Though Twitter is loath to admit the importance of the milestone, the news that Instagram recently topped 300 million monthly active users (MAUs) is significant, to say the least. Perhaps most impressive is how quickly Instagram’s MAUs grew. The number was hovering around 200 million users just nine months ago. No wonder Twitter’s envious.
Facebook COO Sheryl Sandberg made waves earlier this year when she said that there was no rush to monetize Instagram in any meaningful way, nor incorporate video spots as an advertising medium. Instead, Sandberg and CEO Mark Zuckerberg wanted to grow Instagram’s user base, ensure a positive user experience, and test the video ad waters — at a whopping cost of $1 million a day — before making them available to its marketing partners. The MAU growth of Instagram is certainly there, and with the advent of video ads on both Facebook and Instagram, 2015 should be yet another banner year.
7. Sean O’Reilly likes Taiwan Semiconductor: Technology can be a tough business to be in for investors. The relentless competition and constant need to innovate frequently make long-term shareholder gains elusive. However, Taiwan Semiconductor not only dominates its market but happens to be leveraged to an increasingly important technological trend making it my top stock pick for 2015.
Taiwan Semiconductor is the world’s largest fabricator of silicon chips. The company pioneered the dedicated semiconductor foundry model and operates primarily by partnering with fabless customers that don’t have the scale and operating expertise that Taiwan Semiconductor possesses. Cost advantage and scale are the name of the game and these happen to be things that Taiwan Semiconductor has in spades. These advantages will become all the more apparent as the world’s need for semiconductor chips grows exponentially in the coming years.
As the world becomes more and more connected (a trend called the “Internet of Things”), Taiwan Semiconductor stands to benefit in a big way. Technology research organization Gartner estimates that 4.9 billion connected “things” will be in use in 2015, up from 3.75 billion in 2014. Gartner’s estimate for 2020? Try 25 billion connected devices. Investors have two ways to participate in this increasingly connected world: Focus on those that produce the connected devices, or the companies that make connecting these devices to the internet possible, like Taiwan Semiconductor.
There’s a lot to like on Taiwan Semi’s balance sheet and income statement as well. The company trades for just under 14 times this year’s estimated EPS according to S&P Capital IQ estimates (high for a semiconductor fabricator but more than fair given its dominant industry position) and has a pristine balance sheet with very little debt. Add in the company’s exceptional return on equity, which has averaged 23.62% over the last five years and you get a company that should be on every (Motley) Foolish investor’s holiday wish list.
