While the dramatic advance of bitcoin over the past year has gotten all of the attention lately, we can't ignore stocks, which have been on a remarkable run. The nine-year bull market on the Nasdaq has returned 440% for investors, and 27% this year alone.
That might make you feel like you've missed the boat on growth stocks, but three of our Motley Fool investors don't think that's necessarily the case. They've identified three top growth stocks for you to consider buying this December. Read on to learn why Axon Enterprises (NASDAQ:AAXN), Apache (NYSE:APA), and BofI Holding (NASDAQ:BOFI) are all top picks for this month.
Patience eventually will be rewarded
Brian Stoffel (Axon Enterprises): You're probably more aware of Axon Enterprises under its previous name, TASER International. The decision to use a new moniker wasn't because the company's stun guns were falling out of favor -- rather, it was to highlight its pursuit of an even more lucrative opportunity: body cameras and video storage on Evidence.com.
In order to invest in Axon, it's important to understand its three moving parts:
- Getting police departments to use the Evidence.com platform for storing and analyzing video.
- In order to win over police departments, the company is giving body cameras away for free.
- The weapons segment can supply reliable cash while the transition is being made.
Let's tackle the first. If Axon can get police departments to use Evidence.com, the switching costs will become very high. The price of migrating all that data, the headaches of retraining employees, and the danger of losing potentially life-altering footage, are all onerous.
The goal, then, is getting departments to sign on, and Axon decided, in April, to give away the cameras and a one-year subscription to Evidence.com for free to any law-enforcement officer who requested it. The move obviously has the short-term consequence of limiting profitability and eating up cash.
That's why the weapons segment is so important. Last quarter, sales jumped 12% as the company pivoted to five-year service agreements. Currently, Axon has $94 million in cash and investments on hand. As long as Axon can turn the corner and start earning outsized subscription revenue from its weapons giveaway before running into a cash crunch, this growth stock could be a huge winner for investors.
A driller ready to pop
John Bromels (Apache Corporation) Oil and gas industry stocks have been rough investments ever since energy prices slumped in 2014. One stock that's been beaten up by Mr. Market is Apache Corporation, with shares currently trading in the low $40s. I think the stock is undervalued for several reasons, but there are even more reasons to buy Apache this December, in anticipation of growth.
Apache has made several savvy moves in 2017, including selling off its underperforming Canadian assets and investing heavily in its monster Alpine High play in West Texas, which should lead to major production growth. But the stock is currently trading below its year-ago level, which means that the market isn't giving the company credit for these moves.
For the past few years, Apache's share price has moved in tandem with the price of West Texas Intermediate crude. (Note, in the chart below, the left-hand price column shows Apache's share price, while the right-hand column shows the WTI spot price.)
As you can see, something changed in the middle of 2017. WTI Crude prices have jumped, while Apache's share price has continued to languish. That presents an opportunity to pick up Apache shares on the cheap before the market catches on, and it's a great choice for your portfolio this December.
This may be the best deal in banking
Jason Hall (BofI Holding): So far this year, many of America's biggest bank stocks have seen double-digit gains, while one of the fastest-growing banks out there has seen its stock price fall almost 6%:
Even beleaguered Wells Fargo, which has struggled with falling profits following its "fake accounts" scandal, has seen its stock price climb almost 7%, while BofI's stock price has sputtered, even after banking quarter after quarter after quarter of industry-beating earnings, loan portfolios, and deposit growth.
So what gives? In short, it continues to be the shorts. At latest count, more than one-third of BofI's shares were held short after a multi-year attack on the bank including accusations of illegal activity, risky banking practices, and a litany of other allegations that have largely been disproven. But at the same time, there remains some risk: The company is dealing with a lawsuit filed by a former employee (though it should be noted he was not given whistleblower status) and a second lawsuit filed by a small pension fund.
I think the risk of damages from either lawsuit is factored in the stock price. Trading at less than two times book value and 12.6 times earnings, BofI is incredibly cheap, considering its track record and future prospects for earnings growth. Despite the risks of such a heavily shorted stock, BofI is reasonably safe, incredibly cheap, and has wonderful prospects for many years of growth to come.
Brian Stoffel owns shares of Axon Enterprise. Jason Hall owns shares of Bank of America and BofI Holding and has the following options: long January 2018 $30 calls on BofI Holding. John Bromels owns shares of Apache. The Motley Fool owns shares of and recommends Axon Enterprise and BofI Holding. The Motley Fool has a disclosure policy.