The stock market might be at yet another all-time high, but long-term investors have seen this story play out before. With average historical gains of 7% a year, inclusive of dividend reinvestment, the stock market has proven to be a top-tier creator of wealth. It also means there are always bargains abound for investors to choose from.
With this in mind, we asked five of our Foolish investors for what they'd consider to be their top stock for November. Their responses included five companies from five very different industries.
Read on to see why Latin American e-commerce giant, MercadoLibre (NASDAQ: MELI), biotech blue chip Celgene (NASDAQ: CELG), fast-growing gold-miner Yamana Gold (NYSE: AUY), wearable camera developer GoPro (NASDAQ: GPRO), and financial-services behemoth American Express (NYSE: AXP), are worth a closer look.
The Amazon of Latin America
Danny Vena (MercadoLibre): MercadoLibre started life as an online auction site, but it's now widely considered the "Amazon of Latin America" and is the platform of choice for e-commerce in the region. It helps business owners facilitate online sales, and it gets a portion of every transaction and payment made on its site.
The stock has been under pressure recently, falling nearly 20% last month, on reports that Amazon.com will increase its presence in Brazil, MercadoLibre's largest market. Investors feared the consequences from Amazon's expansion, potentially taking share from the Latin American e-commerce leader.
MercadoLibre has already rolled out free shipping in Chile and Colombia, and it expanded that program last quarter to Mexico and Brazil, currently sacrificing gross profit margin to build its leadership in the region.
A few key statistics are necessary to understanding the investing thesis. Payment transactions have risen greater than 60% year over year in each of the past 11 quarters, while active users have grown 21% on average each quarter going back five years. Items sold, which averaged year-over-year growth above 40% over the past six quarters, accelerated in the most recent quarter to 56%, while growth in payment transactions topped 69%, both year over year.
The stock is by no means cheap. At 76 times trailing earnings, and carrying a forward multiple of 92, its valuation may seem stretched, but with the torrid growth it's producing, those multiples are probably justified.
An emerging middle class, an entrenched position, and a long e-commerce runway make this stock a buy.
Mr. Market won't be crazy for too long
Keith Speights (Celgene): Celgene has long been one of my favorite biotech stocks. And for quite a while, it was one my best-performing stocks. The company's double-whammy of a big clinical setback and disappointing guidance, though, has sent the stock dropping like a brick. Warren Buffett's mentor, Ben Graham, wrote about how "Mr. Market" could sometimes act very irrationally. I think Mr. Market is downright crazy with the sell-off of Celgene and suspect he could come to his senses to some degree in November.
First of all, even after reporting disappointing results for experimental drug GED-0301 in treating Crohn's disease, Celgene has a pipeline still loaded with potential blockbusters. Several of them are expected to be just as big as the company hoped GED-0301 would be, if not bigger.
As for the lower guidance, Celgene now projects full-year 2017 revenue of $13 billion, compared with a high estimate of $13.4 billion. The biotech also expects adjusted earnings per share to grow by 19.5% annually through 2020, with revenue by then between $19 billion and $20 billion. And this caused Celgene to lose one-third of its market cap? That's ridiculous.
I expect Celgene to scoop up its own stock like it's going out of style in the weeks ahead. The company just announced $3 billion in new senior unsecured notes that could be used on several things, including share repurchases. When Celgene begins buying back its stock in a big way, I expect Mr. Market to take notice -- and possibly regain his sanity.
A shining star among precious-metal stocks
Sean Williams (Yamana Gold): The stock market may be hitting new highs, but bargains abound in the gold industry. In particular, downtrodden mid-cap Yamana Gold looks to be on the verge of regaining its luster, which is what makes it my top stock to buy in November.
Yamana had been pounded by a persistent decline in gold prices between 2011 and 2015, along with high capital costs tied to expansion projects. The company also took on quite a bit of debt while acquiring Osisko Mining in partnership with Agnico-Eagle Mines a few years back. More recently, it's failed to live up to Wall Street's bottom-line expectations -- but with good reason.
Next year, Yamana is set to bring two major gold-producing mines online: Cerro Moro and C1 Santa Luz. The Argentinian-based Cerro Moro is expected to yield a mine-life average of 130,000 ounces of gold and 6.4 million ounces of silver per year, with production commencing during the second quarter of 2018. Production over the first couple of years is expected to average 150,000 ounces of gold and 7.2 million ounces of silver as a result of higher ore grades.
Meanwhile, the recommissioning of Brazilian-based C1 Santa Luz next year opens the door to an estimated average of 114,000 ounces of gold over its first seven years, with 130,000 ounces of gold expected in its first full year. Proven and probable reserves stand at 1.2 million ounces, yielding a mine life of perhaps a decade.
In addition, the company has a third project that should commence production in 2019: the Suruca development within the existing Chapada mine. This expansion could yield between 45,000 and 60,000 ounces of gold annually for up to five years.
In total, we're looking at a 35% to 40% increase in production by the end of the decade, with perhaps a 50% to 55% jump in cash flow per share. Sure, expenses are up at the moment as the company spends heavily on its expansion, but its recent weakness appears to be the perfect opportunity to snag what could right be the cheapest gold stock in the industry.
Don't underestimate GoPro
Steve Symington (GoPro): GoPro stock plunged more than 12% in a single day last week after, the action-camera and drone specialist followed its stellar third-quarter report with disappointing guidance for the crucial holiday quarter.
But the market seems to be ignoring that GoPro achieved its goal of returning to double-digit revenue growth and sustained profitability earlier than expected in the quarter. During the subsequent conference call, management also explained that demand for GoPro's entry-level Session camera was significantly stronger than expected following a midyear price adjustment. This meant an earlier-than-expected end of life for the product, but it also gives GoPro the perfect opportunity to outperform when it launches its new entry-level product in 2018.
For now, that also leaves GoPro working to drive sales and carefully manage inventory for its higher-priced (and higher-margin) HERO5 Black, recently launched HERO6, and soon-to-be-launched Fusion spherical cameras in the fourth quarter. But GoPro management also noted that it was pleased with what should be a more attractive revenue split between the third and fourth quarters than investors have grown accustomed to in past years. And that should mean the company is entering 2018 from a position of strength.
In the end, it's clear that GoPro is intent on more effectively managing the business with a long-term mindset. With GoPro shares down more than 20% over the past year, the recent pullback could prove to be a golden opportunity for patient investors to open or add to a position.
This credit card giant could climb even higher
Matt Frankel (American Express): Credit card giant American Express recently hit a new 52-week high, but I think there could be much more room to the upside.
For starters, the numbers look great. The company's third-quarter earnings per share skyrocketed by 25% year over year, showing that its two-year turnaround plan following the loss of its Costco partnership has been a success.
Also, the company is doing an excellent job of growing internationally, which is arguably the part of AmEx's business with the most upside potential. International revenue has climbed by 7% over the past year, and since American Express doesn't have nearly the acceptance rate as Visa or Mastercard in many international markets, there could be lots of room to expand the business.
This is especially true if American Express continues to produce new and innovative credit card products. For example, the recently revamped Platinum card is designed with unique benefits, such as $200 in annual Uber credits, that could resonate with millennial travelers, which had been increasingly attracted to competing products such as the Chase Sapphire Reserve. And the newly expanded partnership with Hilton could be well worth the money paid to Citigroup for the exclusive co-branding rights, especially if the new ultra-premium Hilton credit card with its $450 annual fee is a success.
Even at its 2017 high, the stock trades for less than 15 times forward earnings, which looks like an absolute bargain if American Express can sustain a double-digit earnings growth rate.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon and MercadoLibre. Keith Speights owns shares of Celgene and JPMorgan Chase. Matthew Frankel owns shares of American Express. Sean Williams has no position in any of the stocks mentioned. Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Celgene, GoPro, Mastercard, MercadoLibre, and Visa. The Motley Fool recommends American Express and Costco Wholesale. The Motley Fool has a disclosure policy.