At the tail end of the summer, it's high time to take stock of your investment portfolio. There are plenty of good-looking buying ideas right now, but it's not always easy to separate the true gems from the wannabes and the has-beens.
So we asked a handful of Motley Fool contributors to share their best mid-cap stock tips for this moment in time. Read on to see why they selected Boyd Gaming (NYSE:BYD), Stitch Fix (NASDAQ:SFIX), and SolarEdge (NASDAQ:SEDG).
A back-to-school winner
Jeremy Bowman (Stitch Fix): August means back-to-school season for retailers, the biggest time of year after the holiday season. One intriguing way to take advantage of the spike in kids shopping is Stitch Fix, the subscription-based styling service.
Stitch Fix introduced Stitch Fix Kids in June, and the new service, which offers kids-sized clothes from 2T-14, is ready to roll for back-to-school season. Parents who order from Stitch Fix Kids will receive eight to 12 items in a price range of $10-$35, and like the general service, kids keep the clothes they like and send back the rest.
In its short life as a publicly traded stock, Stitch Fix already is looking like a winner. Shares have more than doubled since its IPO last November, and the company is both profitable and putting up solid revenue growth. In the company's most recent quarter, revenue increased 29%, to $316.7 million, and active clients jumped 30%, to 2.7 million. On a price-to-sales basis, Stitch Fix still is considerably cheaper than Amazon.
The styling service provides several advantages of traditional clothes shipping, be it online or in-store. Its algorithms help stylists choose clothes based on shoppers' previous selections and guide its buying process to make it more efficient. That should help translate into a long trail of growth ahead.
Considering the company's fourth-quarter report, which is due out in September, and a potential bump after launching Stitch Fix Kids, now could be a great opportunity to buy the stock, as the market still seems to be underestimating the opportunity.
Betting big on sports gambling
Rich Duprey (Boyd Gaming): Regional gaming powerhouse Boyd Gaming could be one of the big winners from the Supreme Court's ruling striking down a federal law prohibiting betting on sports. Because of Boyd's broad geographical diversity, it should be able to capitalize on sports betting's proliferation, as more states formalize rules permitting it.
Delaware and New Jersey were the first states to go live with legalized sports betting in June, and Mississippi followed on August 1. Several other states, including Pennsylvania, Rhode Island, and West Virginia, have passed legislation authorizing sports betting, but no action has taken place yet. A number of others are expected to pass laws in the coming months.
The Northeast is expected to become the epicenter of sports gambling because of its population density and the valuable sports franchises that exist, most notably in the New York metropolitan area.
Boyd currently owns and operates 24 casinos in seven states, but just signed a pact with MGM Resorts (NYSE:MGM) to cross-market to each others' properties to offer online and mobile gaming platforms, including sports betting, casino gaming, and poker, wherever the two have an actual casino and there's an online license available. That gives the two a shared presence in 15 states.
Boyd Gaming has one of the largest sportsbooks in Nevada, where sports betting has been legal for years. It can take that expertise and replicate its success all across the country. Although its stock trades at 32 time trailing earnings and 23 times next year's estimates, this regional casino operator still is a good bet to cash in on sports betting's growth.
The future's so bright, I gotta wear shades
Anders Bylund (SolarEdge): This leading supplier of ultra-efficient inverters and power optimizers for solar panel installations has been on a tear in 2018, only pausing to take a breather in August. As a global leader in a high-growth industry with great long-term prospects, SolarEdge is a no-brainer of a buy recommendation right now.
The stock has gained 69% over the last 52 weeks, including a 16% dip in the last 30 days. In early August, SolarEdge delivered strong second-quarter results that still failed to impress some analysts and investors. Share prices fell as much as 17.5% lower on the news.
To be clear, the solar power industry can be a rocky place to do business. Panel and module makers are struggling amid border-crossing tariffs and intense competition. SolarEdge inhabits a unique corner of this green-power industry, protected by patents on its hard-to-copy power optimizer research and technologies.
You won't catch me calling that earnings report "disappointing," by the way. Earnings rose 53% year over year on a 67% revenue boost. SolarEdge also sees next quarter's sales well above the analyst view that was current at the time of that report. And since the market gains were based on stellar business growth, the impressive yearly share-price gains have not resulted in an overpriced stock.
You can still pick up SolarEdge shares at bargain-bin valuation ratios like 16 times trailing earnings and 14 times free cash flows. Against the backdrop of 53% earnings growth, that's a downright steal.