Discovering wealth building companies and investing in them for the long haul doesn't need to be challenging. The trick is to find companies with an economic moat or strong competitive advantage that promise investors solid earnings growth for years to come. To help you get started, the Motley Fool's contributing writers explain why Priceline (NASDAQ:PCLN), Under Armour (NYSE:UAA), and WhiteWave Foods (NYSE:WWAV) are three of the top stocks to own today.
Andrés Cardenal: Priceline fell by more than 8.4% on Tuesday, as investors reacted with pessimism to the company's earnings report. Economic headwinds in Europe seem to be dragging on performance; however, Priceline is an extraordinary growth company trading at an attractive valuation, so short term weakness could provide a buying opportunity for long-term investors.
Priceline is the global leader in online travel bookings, a promising growth industry in which the company is generating impressive financial performance. Sales during the third quarter grew 25% to $2.62 billion, while adjusted earnings per share jumped 28%, as Priceline combined rapidly growing sales with big fat profit margins of nearly 47% at the operating level.
Guidance for the fourth was below expectations, though, management expects sales to increase between 11% and 18% annually in the last quarter of the year. It's important to keep in mind that Priceline usually provides conservative guidance, management tends to under-promise and over-deliver, however, the depreciation of the euro could be a heavy headwind for the company over the coming months.
On the other hand, Priceline's leadership in Europe is a key strategic advantage for the company, as the Old Continent is major tourist destination for travelers around the world. Currency volatility comes and goes, but the long term growth story in Priceline is still remarkably strong. Priceline stock is trading at a forward P/E ratio of 17, in line with companies in the S&P 500 Index according to data from Morningstar. Considering its long term potential for growth and remarkable profitability, current valuation looks like a convenient entry price for investors.
Joe Tenebruso: The stock I'm excited about is Under Armour. Shares have been on tear so far in 2014, rising more than 40% as the hard-charging sports apparel maker continues to deliver quarter-after-quarter of expectation-crushing revenue growth.
Under Amour has delivered more than 4 straight years – including 17 consecutive quarters – of at least 20% sales growth. And that incredible and consistent performance shows no signs of slowing down, with Under Amour's revenue surging 34% to $610 million, in its most recent quarter.
As to how large Under Amour can ultimately become, CEO Kevin Plank aspires to transform UA into "the biggest, baddest brand on the planet, bar none." That's a bold statement from a passionate CEO, yet he and his team are well on their way to reaching that goal. The company's products are respected by athletes across the U.S. and, increasingly, the world. Plank and his team relish their underdog image, especially when compared to their much larger rival Nike (NYSE:NKE), and love to operate within and promote an "us versus them" philosophy. This competitive fire has endeared it to hardcore athletes and their fans, and helped the company take share in the global sports apparel market both here in the U.S. and abroad.
In fact, it's Under Amour's tremendous opportunity in international markets that I'm most excited about. That's because international revenue currently comprises only 8% of UA's total revenue and remains a multi-decade growth opportunity. International sales surged 80% year over year in the second quarter, and I expect this segment to steadily become a larger percentage of Under Amour's overall sales base. As the company accelerates its expansion plans in China and enters key new markets such as its recent launch in Brazil, look for this segment to continue to turbocharge UA's revenue growth.
All told, Under Armour is a business with massive global potential and multiple catalysts that should continue to fuel its growth – and reward its shareholders – for years to come.
Tamara Walsh: WhiteWave Foods has enjoyed a record year, with the stock currently trading around $36 a share, up more than 60% year-to-date. However, if you're worried you missed the rally, don't be. There is much more growth ahead for this consumer products company, particularly as it operates in the increasingly lucrative industry of organic and plant-based foods and beverages. If you're not familiar with the moniker WhiteWave, you likely know their products. Some of the company's leading brands include Silk soymilk and almond milk, Land-o-Lakes butter, and International Delight coffee creamers.
Nevertheless, WhiteWave isn't resting on its laurels. The company is investing in its future through smart acquisitions and brand building. WhiteWave entered the flourishing organic produce channel last year by purchasing Earthbound Farm for $600 million. That is an attractive price considering Earthbound is the largest organic produce brand in North America -- having generated net sales in excess of $500 million in 2013. This, together with the company's more recent acquisition of So Delicious (a dairy-free desserts maker), should help fuel earnings growth in the year ahead.
International expansion in China is another reason we're excited about WhiteWave Foods stock going forward. WhiteWave has been steadily investing in the Chinese market for the past two years. Moreover, its efforts should finally start to payoff in 2015 thanks to a strategic joint venture with one of China's largest dairy companies, Mengniu Dairy.
WhiteWave owns a 49% stake in the deal, which promises to be a boon for the company's international sales in the quarters to come as more Chinese consumers become familiar with WhiteWave's products. Ultimately, this creates a massive opportunity for WhiteWave Foods because China is the world's largest consumer market with more than 1.3 billion consumers and a rapidly growing middle class. Together, these catalysts should drive WhiteWave Foods stock higher from here.
Andrés Cardenal owns shares of Priceline Group. Joe Tenebruso has no position in any stocks mentioned. Tamara Rutter owns shares of WhiteWave Foods. The Motley Fool recommends Nike, Priceline Group, Under Armour, and WhiteWave Foods. The Motley Fool owns shares of Nike, Priceline Group, Under Armour, and WhiteWave Foods. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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