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3 Red-Hot Stocks That Could Continue to Crush the Market

By Daniel Foelber, Scott Levine, and Lee Samaha - Jul 11, 2021 at 6:00AM

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These growth and dividend stocks are thriving.

Economic recovery concerns and inflation worries have been no match for a smoking-hot stock market. The industrial sector is helping to lead the charge. It sports a fair share of up-and-coming growth stocks, as well as large traditional businesses -- many of which are beating the market. 

We asked some of our contributors which stocks they thought could continue to crush the market. They chose Zebra Technologies (ZBRA 3.20%), Waste Management (WM 1.18%), and NIO (NIO 1.39%)

A herd of zebras grazing in an open field with a bright sun in the background.

Image source: Getty Images.

Zebra Technologies stands out from the crowd

Lee Samaha (Zebra Technologies): Zebra's stock is up 111% over the last year and by 39% in 2021. That's a comfortable outperformance, and it comes as the company's technology has come to the fore during the pandemic.

Zebra is a manufacturer of what management calls "enterprise asset intelligence" solutions. In plain English, mobile computers, barcode scanners, specialty printers, RFID printers and readers, and other products are used by workers to gather information. Real-world examples of its technology include e-commerce warehouses using scanners to monitor workflows, retailers managing inventory, and healthcare workers tracking and tracing medical products.

Global supply chains came under a lot of stress during the pandemic, so, understandably, many companies are making investments in Zebra's technologies a priority. Whether companies are looking to invest in automating production in a warehouse or capturing data to use with advanced analytics in a retail or healthcare environment, Zebra's hardware and software solutions have the answer.

As such, management expects adjusted net sales growth of 18% to 22% in 2021, having started the year forecasting 10% to 14%. Clearly, momentum is behind the company, and it's likely the expansion of smart automation and digitization in the industrial economy is going to encourage multi-year growth in sales of Zebra's solutions.

Trading on 31 times estimated 2021 earnings, Zebra wouldn't be seen as a value stock by most. Still, investors should keep an eye out for its results because it wouldn't be a surprise to see Zebra upgrade guidance again, given the reopening economy.

Don't trash this dividend stock

Daniel Foelber (Waste Management): You may want to keep your distance when passing one of the hundreds of landfills owned by Waste Management, North America's largest integrated trash and recycling services company. But the company's stock performance has left investors smelling like a rose. Waste Management stock is up over 20% so far this year and just blasted to a new all-time high last week. 

While trash and recycling are a steady business model that tends to perform in good times and bad, Waste Management generates a substantial amount of revenue from its industrial and commercial clients. As business slowed during the pandemic, these businesses naturally produced less waste, which presented a challenge. The company responded by implementing cost-cutting measures, many of which it expects will be permanent.

These strategic decisions along with its resilient and diversified customer base across a slew of different industries helped it generate plenty of free cash flow (FCF) and net income to support its dividend. The company just raised its dividend for the 18th consecutive year and instituted a new share buyback program. All told, the company plans to distribute nearly $1 billion in dividends and buy back up to $1.35 billion in stock this year. 

Waste Management has the potential to combine its stable and recession resilient business model with the upside of environmentally conscious consumers who are increasingly interested in limiting waste output. During a recent talk at WasteExpo 2021, CEO Jim Fish highlighted the role Waste Management could play in managing and providing the waste necessary for companies to produce plastics and chemicals from sustainably sourced materials. Converting this proposition to profit remains uncertain. But it's a nice long-term trend that's worth following.

Hitch a ride with this EV superstar

Scott Levine (NIO): NIO sputtered along during the first five months of 2021, falling nearly 21%, but the company's stock has taken a U-turn over the past few weeks and is charging higher. In fact, shares of NIO soared nearly 38% in June while the S&P 500 crept more than 2% higher. And there's plenty of reason to believe that this EV manufacturer can continue racing ahead in the days to come.

In the first quarter of 2021, NIO reported strong growth in the number of deliveries. Achieving a company quarterly record, NIO delivered 20,060 vehicles in the first quarter of the new year, representing year-over-year growth of 490%. But the record was short-lived. Last week, NIO announced that it delivered 21,896 vehicles, a year-over-year increase of 112%, in the second quarter, representing a new quarterly high-water mark. 

Looking beyond the second quarter, investors will find that the company is working at expanding its charging infrastructure in China through 2021 -- a move that will help assuage the fears of potential customers who are worried about the convenience of charging their vehicles. As of the end of the first quarter, NIO had 206 battery swap stations, yet management forecasts expanding this to over 700 stations by the end of the year. In addition, the company, which had 146 charging stations in its network at the end of March, plans on growing this out to 600 charging stations by year-end.

Besides its efforts to grow its presence in China, NIO aspires to gain a foothold in Europe as well. Last month, the company announced it received approval for the production of its SUV, NIO ES8, including approval for the associated license registrations of the vehicle. The company plans to deliver the first vehicles to Norway, which will be NIO's first overseas market, in September.

Providing customers in China with a variety of solutions for keeping their vehicles charged, NIO is aggressively addressing the range anxiety that plagues potential EV owners. It plans on bringing a similar suite of solutions to Europe when it begins deliveries of the vehicles -- something that is distinguishing it from its peers and which should help the company continue on the road to future growth.

Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NIO Inc. The Motley Fool recommends Waste Management and Zebra Technologies. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Zebra Technologies Corporation Stock Quote
Zebra Technologies Corporation
ZBRA
$346.74 (3.20%) $10.74
Waste Management, Inc. Stock Quote
Waste Management, Inc.
WM
$171.74 (1.18%) $2.00
Nio Inc. Stock Quote
Nio Inc.
NIO
$21.11 (1.39%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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