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3 Growth Stocks Near 52-Week Highs to Buy Anyway

By Cory Renauer – Oct 14, 2021 at 6:49AM

Key Points

  • Palo Alto Networks stock is at an all-time high thanks to an increasingly profitable cybersecurity operation.
  • A string of successful new drugs has pushed Alnylam up near a peak it reached this summer.
  • Xenon Pharmaceuticals is a clinical-stage biotech developing a new epilepsy drug that scored high marks in a mid-stage study.

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These top performers have what it takes to keep providing outsized gains for patient investors.

Buying low and selling high is a winning investment strategy, but it's a lot easier said than done. That's because the best stocks tend to keep on rising while bargain-conscious shoppers wait for an entry point.

Palo Alto Networks (PANW -3.20%), Alnylam Pharmaceuticals (ALNY 6.42%), and Xenon Pharmaceuticals (XENE 5.31%) put up big gains for their shareholders recently. Here's why it's probably a better idea to put them in your portfolio now rather than wait for a better price that might not materialize.

Two people meeting with a financial advisor and looking at a computer screen.

Image source: Getty Images.

1. Palo Alto Networks

Shares of Palo Alto Networks have soared around 42% in 2021. The cybersecurity stock recently closed at an all-time high just around $505 per share. 

It's been rising in response to impressive growth. In August, the cybersecurity specialist reported fiscal fourth-quarter revenue that rose 28% year over year. The company is still losing money on a GAAP basis, but Palo Alto reported adjusted earnings that reached $162 million during the fiscal fourth quarter ended July 31, 2021.  

A string of high-profile ransomware attacks this year accelerated demand for Palo Alto's next-generation firewall and cloud security services beyond the company's own expectations. In 2019, management predicted $5 billion in revenue during fiscal 2022. This August, Palo Alto Networks bumped that estimate up to $5.3 billion in top-line revenue.

Palo Alto is increasingly profitable, with a free cash flow margin that works out to around 30% of top-line revenue. That should provide all the resources the company needs to stay a step ahead of cybercriminals and the competition.

Cybersecurity employees at work.

Image source: Getty Images.

2. Alnylam Pharmaceuticals

Shares of this biotech stock have more than doubled since the Food and Drug Administration (FDA) approved its first drug, Onpattro, in 2018. Since then, a string of successful drug launches has given Alnylam Pharmaceuticals investors a lot to look forward to.

A strong earnings report pushed Alnylam stock up to an all-time high in August, and it's still just a couple of percentage points below its peak. A potential new-drug approval expected in early 2022 could drive it even higher. Earlier this year, the FDA began reviewing an application for vutrisiran, an injectable drug that works along the same lines as Onpattro. 

The agency is expected to issue an approval decision for vutrisiran next April. In the meantime, Alnylam and its collaboration partner Novartis expect an approval decision regarding inclisiran. This is a cholesterol-reducing treatment that earned approval in the European Union last December under the brand name Leqvio.

With a string of recently launched products and a late-stage pipeline poised to deliver more blockbuster treatments, Alnylam stock could double again over the next few years.

Scientists at work in a laboratory.

Image source: Getty Images.

3. Xenon Pharmaceuticals

At the beginning of October, shares of this clinical-stage drugmaker exploded around 109% higher in response to encouraging clinical-trial data. The stock's still at an all-time high, but it doesn't look like the market fully appreciates Xenon Pharmaceuticals' experimental epilepsy drug called XEN1101.

On Oct. 4, 2021, Xenon shared results from a phase 2 trial with XEN1101 as a treatment for focal epilepsy. Focal seizures, which begin on one side of the brain and leave people unaware of their surroundings, are the most common type of seizure for patients with epilepsy.

Antiepileptic drugs are woefully inadequate for a majority of patients, and it looks like XEN1101 could become an important new treatment option for this large, underserved population. In the high-dose group, a majority of patients given XEN1101 achieved a monthly seizure-frequency reduction of 53% or better. That was more than twice as high as the placebo group.

All of the participating patients were already taking at least one anti-seizure medication, and 51% were on three medications during the study. With results like this, XEN1101 has a good chance to earn approval and eventually generate more than $1 billion in annual sales. 

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Palo Alto Networks. The Motley Fool recommends Alnylam Pharmaceuticals. The Motley Fool has a disclosure policy.

Stocks Mentioned

Xenon Pharmaceuticals Stock Quote
Xenon Pharmaceuticals
XENE
$38.89 (5.31%) $1.96
Novartis Stock Quote
Novartis
NVS
$89.99 (0.19%) $0.17
Alnylam Pharmaceuticals Stock Quote
Alnylam Pharmaceuticals
ALNY
$234.40 (6.42%) $14.15
Palo Alto Networks Stock Quote
Palo Alto Networks
PANW
$172.69 (-3.20%) $-5.71

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

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