Celgene Corp (CELG), Facebook (META -0.86%), and Amazon.com (AMZN -1.00%) aren't only three of the market's most successful companies, they're also our Motley Fool contributors' top stock picks to consider buying. Each offers both a proven track record of market-beating growth and long-term catalysts that could reward investors. Read on to see if these stocks are right for your portfolio.
Buy this biotech stock from the bargain bin
Todd Campbell (Celgene Corp.): Every so often, great companies like Celgene go on sale, and when they do, bargain bin prices provide a fantastic opportunity for investors to buy.
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Celgene is widely considered one of the best big cap biotech companies. It markets a slate of top-selling drugs, including the most widely used first- and second-line multiple myeloma drug, Revlimid, the most widely used third-line multiple myeloma drug, Pomalyst, the pancreatic cancer drug, Abraxane, and the psoriasis drug, Otezla. This year, Celgene's expected to report $13 billion in sales and $7.30 in earnings per share, up $11.2 billion and $5.94 in 2016 and $5.5 billion and $4.91 in 2012.
The company's rapid growth over the past 5 years has rewarded investors with handsome returns, but in the past month, shares have lost more than $30 billion in market cap. The sell-off in shares is because of a late-stage trial failure in Crohn's disease, third quarter Otezla sales that were below estimates, and a cut to the company's 2020 guidance.
Yet, there's reason to look beyond this past month's cycle of bad news and cozy up to Celgene. First, Celgene's collaborating with some of the most innovative biotech upstarts on the planet. Second, it plans on filing for FDA approval of what could turn out to be the best-in-class oral multiple sclerosis drug. Third, its lowered guidance still reflects compounded annual revenue and EPS growth of at least 14% between 2016 to 2020.
In short, a bounce-back in Celgene's shares could be just a microphone of good news away.
A stock you can like in more ways than one
Dan Caplinger (Facebook): Social media is here to stay, and no company has done a more effective job of creating a brand-new social media ecosystem than Facebook. The service has become an essential part of beginning every day for millions of users, and the data that Facebook has been able to collect on its users has made it increasingly efficient in delivering the most useful information to each person from advertisers aiming to reach new customers.
At the same time, Facebook is looking at new initiatives that go well beyond its core business to serve its broader mission of bringing the world closer together. With more than enough financial resources to keep its most important business growing, Facebook can make modest but meaningful investments that could lead to massive new opportunities in the distant future. Just being affiliated with Facebook is enough to get ideas that might otherwise go unnoticed the attention they deserve.
Many investors have avoided Facebook because of their belief that social media is just a passing fad. Yet the company has already demonstrated an uncanny ability to adapt to changing times, even as some dub its original network uncool. Investors can expect Facebook to offer new services to younger generations of users, and that makes it a must-consider investment for those focused on the long run.
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Sometimes the obvious choice is the right choice
Rich Smith (Amazon.com): Even at a share price nearly 250 times trailing earnings, I think all investors need to at least consider buying stock in Amazon.com. Why? Let's first state the obvious:
Amazon.com today is probably the most important force in retail -- first and foremost over the Internet, but increasingly in bricks and mortar retailing as well. Similarly, Amazon's AWS Amazon Web Services unit is probably the number one destination for companies seeking cloud computing services. And the hits keep coming: video streaming, mobile devices, at-home, AI-powered smart speakers. Amazon is even believed to be developing flying, robotic warehouses for its new drone delivery air force!
Sure, all of this newfangled technology costs money, which depresses Amazon's GAAP profits, and keeps its P/E ratio looking sky high. A deeper look at the company, however, shows that Amazon has no difficulty turning out cash profits. Data from S&P Global Market Intelligence, for example, shows that over the last 12 months Amazon.com generated positive free cash flow of $8.8 billion -- more than four times its reported net income under GAAP.
At a market capitalization 53 times annual free cash flow, Amazon.com stock is far from cheap, but it's also far less expensive than its P/E makes it look. Amazon.com is one stock all investors need to consider.
