Even though the stock market has performed miserably lately, and throughout most of 2022, macroeconomic data shows there is reason to be hopeful equities can rebound meaningfully sooner rather than later. Moreover, unlike in April, May and June, a significant number of non-defensive stocks across numerous sectors are holding their own and even advancing on some big down days. As a result, it’s much easier for short- and medium-term investors to find promising growth stocks to buy than it was in the second quarter.
Underlying my confidence in the market is the fact that U.S. consumer confidence just hit its highest level since April. The Conference Board’s Consumer Confidence Index rose to 108 this month from 103.6 in August, beating expectations despite recession fears. Furthermore, despite the drag of rapidly rising interest rates, sales of new houses unexpectedly surged nearly 29% in August compared with July.
If you’re looking for hidden bull market opportunities, here are seven growth stocks to buy.
| CEIX | Consol Energy | $67.23 |
| BTU | Peabody Energy | $24.87 |
| LLY | Eli Lilly | $334.16 |
| LVS | Las Vegas Sands | $39.69 |
| MLCO | Melco Resorts & Entertainment | $6.56 |
| RIVN | Rivian | $35.08 |
| LRN | Stride | $42.49 |
Consol Energy (CEIX)
In general, developed nations have been moving away from using coal as an electricity source. The fossil fuel is much worse for the environment than almost any alternative. Yet, with natural gas prices soaring as Europe desperately looks to replace Russian energy, some countries are turning to coal.
According to the International Energy Agency, global coal consumption is expected to increase by 0.7% this year. That would put 2022 in a tie with 2013 for the annual record. And with increased demand expected, IEA forecasts 2023 will set a new record for coal consumption.
This, along with the sharp increase in coal prices, bodes very well for coal producers like Consol Energy (NYSE:CEIX). Shares have tripled in price so far this year.
In the first half of the year, the company’s coal revenue jumped 105% to just over $1 billion. During the same period, net cash from operations doubled to $346.6 million.
While CEIX stock is up just over 200% year to date, shares sit 15% below their record high of $79.17, made in late August. But trading this week suggests the stock may be heating up once again.
Peabody Energy (BTU)
Consol Energy isn’t the only coal producer on today’s list of growth stocks to buy. I also like rival Peabody Energy (NYSE:BTU).
In Q2, Peabody’s revenue surged 83% year over year to $1.3 billion. Meanwhile, operating income soared to $449.3 million from a loss of $4.2 million in Q2 2021. The company’s EBITDA, excluding certain items, came in at $577.8 million, its “highest in more than a decade,” CEO James Grech said on the company’s earnings call.
Grech predicts the coal producer’s performance will improve even more in the second half of the year: “We continue to expect a strong second half with higher projected volumes compared to the first half of the year in all our segments and markets.”
It’s worth noting that Peabody’s trailing price-earnings ratio is a minuscule 3.3. And its net cash position is slightly positive, as it had $1.12 billion of cash and $1.07 billion in debt as of the end of Q2.
BTU stock is up nearly 150% year to date, although shares remain 25% below their 52-week high, made in April. But the sharp rally in shares over the past few days could be just the beginning as we head into the cold winter months.
Eli Lilly (LLY)
As I noted in a recent column, Eli Lilly (NYSE:LLY) may have “one of the most lucrative drugs of all time on its hands” in the form of Mounjaro, which is currently being studied as a potential obesity treatment.
The drug, which is currently approved to treat Type 2 diabetes, could see peak annual sales of $25 billion, according to UBS analysts. This would make it one of the most lucrative drugs in history. UBS believes the drug could be approved as an obesity treatment by mid-2023 based on strong clinical trial results.
The analysts also note the potential of Eli Lilly’s donanemab, which they called its “highest potential late-stage Alzheimer’s asset.” However, given the potential blockbuster the company has on its hands with Mounjaro, the analysts referred to donanemab as simply “icing on the cake.”
Yet, LLY stock shot up 7.5% today and made a new all-time high on news of positive trial results from Biogen’s (NASDAQ:BIIB) Alzheimer’s drug. Eli Lilly’s drug targets the same protein, prompting the rally in shares.
So far this year, LLY stock is up 22% year to date, but it likely has much further to run.
Las Vegas Sands (LVS)
In conjunction with a couple of other companies that own casinos in the Chinese region of Macau, Las Vegas Sands (NYSE:LVS) has rallied this week. That’s because, on Monday, Macau’s government said it would reintroduce its e-visa program for travelers from mainland China and allow group tours. According to officials, all pandemic-related travel restrictions are set to be lifted in November.
Following the news, Jefferies analyst David Katz upped his rating on LVS stock to “buy” from “hold” and hiked his price target to $50 from $40. Katz argued that while some uncertainty remains, a recovery is underway and called for “a notable, immediate rerating” of LVS stock.
Shares are up 15% this week alone and 5.5% so far this year in the face of a bear market. Assuming the market doesn’t plunge further and Macau doesn’t signal any change in its plan to allow visitors to return to the region, LVS stock is likely to climb significantly in the coming weeks.
Melco Resorts & Entertainment (MLCO)
Investors looking for a name that’s likely to get an even bigger boost from Macau’s resurgence should consider Melco Resorts & Entertainment (NASDAQ:MLCO).
According to a report from Singapore-based Lucror Analytics, Melco has the strongest cash position of any of its peers. Even if Melco brought in $0 in revenue from its Macau operations, its $1.65 billion in cash and $1.1 billion in undrawn revolving credit facility would sustain the company until April 2024, the analysts said.
Citigroup analyst George Choi this week upped his price target on MLCO stock to $11.50 from $11 and maintained his “buy” rating on shares. Calling the easing travel restrictions “a positive surprise,” Choi said Macau has a “clear roadmap to recovery” and investors may start to warm to stocks such as MLCO.
That certainly seems to be the case so far, with MLCO stock jumping 24% this week. While shares are down around 35% for the year, Choi’s $11.50 price target implies upside of 75% from current levels.
Rivian (RIVN)
Unlike most of the other names on today’s list of growth stocks to buy, Rivian (NASDAQ:RIVN) is in the red for the year. However, the electric truck maker has been fairly resilient since the company announced an alliance with Mercedes-Benz (OTC:MBGAF) earlier this month.
I’ve been upbeat on the deal, writing in a Sept. 20 column that the agreement “looks to be a game-changer” as it “increases Rivian’s respectability” and provides it “with an important foothold in the large European auto market.”
Multiple Wall Street analysts have also weighed in positively on the transaction. For example, Wedbush’s Dan Ives said the deal will enable Rivian to “penetrate Europe while ramping production of the [electric delivery van] platform to meet its long-term growth and profitability target.”
Ives gives RIVN stock an “outperform” rating with a price target of $45. That is more than 28% above the current share price.
Stride (LRN)
Last up on today’s list of growth stocks to buy is Stride (NYSE:LRN), a provider of education services for children in kindergarten through 12th grade such as online curriculums and software systems. The stock has been bucking the broader bear market this year.
Last month, Morgan Stanley raised its rating on LRN stock to “overweight,” saying, “we see an attractive risk-reward and believe the market is under-appreciating the growth story.” The analysts note that the company’s Career Learning business, which seeks to enhance the career prospects of middle and high school students, is only in 24 states so far. That leaves a lot of room for growth.
Shares have been on a tear over the past month and are up 27.5% so far this year. Yet, they are changing hands at an affordable forward price-earnings ratio of just 15.8 and price-sales ratio of 2.2.
Given the combination of affordability and growth potential, along with the endorsement by Morgan Stanley, LRN stock is likely to keep rallying for some time.
On the date of publication, Larry Ramer owned shares of RIVN stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.