The U.S. markets have been calm so far in 2019, with the S&P 500 and the Nasdaq both rising more than 10% amid plenty of noise about political and macroeconomic risks. All of that noise might discourage investors from buying stocks.
But today, three of our Motley Fool investors will highlight a trio of high-quality American stocks that are still worth buying: Apple (AAPL 0.83%), RH (RH -0.70%), and Antero Midstream (AM 2.35%).
Apple looks beyond the iPhone
Leo Sun (Apple): Apple lost its mojo over the past year as its iPhone shipments declined amid sluggish demand in China. Its new iPhones were widely considered too expensive and lacking in new features, and sales of the cheaper iPhone XR cannibalized sales of the pricier iPhone XS.
Moreover, Apple's controversial decision to stop reporting iPhone shipment numbers spooked analysts and investors, and the abrupt resignation of retail chief Angela Ahrendts raised questions about its future retail and marketing strategies.
Apple's ongoing dispute with Qualcomm will also likely delay its launch of 5G iPhones, which could cause less loyal customers to switch to 5G-enabled Android devices. Apple's Services revenue rose 19% annually last quarter and accounted for 13% of its top line, but it failed to offset a 15% drop in iPhone sales.
Those issues support the bearish thesis against Apple, but its upcoming event on March 25 could excite investors again. Apple is expected to make some announcements regarding its long-rumored streaming video platform and Apple News subscriptions services -- which could both strengthen its Services unit and lock in more customers. There's also a chance that Apple could introduce new AirPods, a new entry-level iPad, and its long-delayed AirPower wireless charging pad.
Check out the latest earnings call transcript for Apple, RH, and Antero Midstream.
If Apple impresses investors with its presentation, its stock could rally on optimism about its future beyond the iPhone. After all, the stock is cheap at 14 times forward earnings, and investors can collect its 1.6% dividend as they wait for its long-term plans to pan out.
Can this retail stock keep climbing skyward?
Dan Caplinger (RH): The retail industry has gone through a lot of turmoil over the past several years, and home-furnishings specialist RH has had to make even bigger changes than most in order to adapt to changing conditions among retailers. After having experienced huge financial challenges, RH transformed itself, going to a membership-based business model and focusing on the upper end of the luxury retail niche. The results have been amazing, with the stock price having quintupled from where it started 2017.
RH is scheduled to report its latest financial results in late March, and investors have high hopes that the upscale retailer will be able to continue its positive momentum from recent quarters. Despite only modest expectations for sales growth of about 2.5%, those watching RH are looking for earnings to jump almost 70% compared to the year-earlier quarter. A lot will depend on what RH sees coming in the year ahead, though, because many shareholders are looking for sales growth to accelerate even as favorable tailwinds to the home-furnishings specialist's bottom line dissipate.
If RH sets the stage for continued growth, then investors should remain excited about the stock's prospects. Any hint of bad news, though, could cause RH shares to fall back from their lofty heights.
New company, same great growth profile
Maxx Chatsko (Antero Midstream): The long wait is finally over. The two master limited partnerships (MLPs) of Antero Resources have combined into a single company, reorganized as a C-Corp for tax advantages and relisted as a new company. While the simplification transaction may have been a little confusing for investors who didn't keep up with the details, there's nothing confusing about the long-term growth potential of the business as it supports the operations of its parent.
Antero Midstream is responsible for gathering, processing, and transporting natural gas and natural gas liquids (NGLs) production for its parent, in addition to handling the freshwater logistics. It's been a pretty sweet relationship for the midstream operator over the years. Antero Resources owns some of the most liquids-rich natural gas acreage in the Appalachian region comprising Ohio, West Virginia, and Pennsylvania. Considering the region is responsible for 40% of all shale gas produced in the United States today and is expected to grow output considerably in the next five years, investors can expect growth at the midstream operator to keep humming along.
Full-year 2019 guidance calls for adjusted EBITDA in the neighborhood of $895 million and distributable cash flow (DCF) of around $705 million. Both represent growth of over 1,200% since 2014, Antero Midstream's first year of operations -- and that growth should continue. Management expects DCF to grow between 18% and 25% per year through 2022 depending on energy prices.
The increasing strength and profitability of operations could allow Antero Midstream to lower its debt to adjusted EBITDA ratio to less than 2.5 by the end of 2022 -- the lowest in the industry. It will also allow the business to continue pouring capital into growth investments and continue distributing cash to shareholders. Shares already boast a dividend yield of 9.9%, but management thinks it can grow the dividend another 29% in 2020 and 20% in each 2021 and 2022.
Simply put, if this high-yield stock isn't on your radar, you may be missing out on a great income investment.