Sometimes, being a successful investor is a matter of finesse. Other times, it’s simply about plugging into raw, unbridled bullishness.
Believe it or not, a handful of tickers are persistently driving their way higher this year, overcoming a couple of bouts of nasty marketwide weakness. Three of these magnificent stocks are worth a closer look just because their current rallies could continue into and through next year.
1. Cboe Global Markets
If you’ve been investing long enough, you’ve probably heard the parable about who actually made any real, reliable money in the California Gold Rush of 1949. It wasn’t the prospectors; most of them made little to nothing. The big winners were the people selling pickaxes and shovels to the folks who had gold fever. Or, perhaps you’re more familiar with casinos’ business model. That is, while some bettors win at other bettors’ expense, “the house always wins” because it essentially takes a small cut of everybody’s wagers for itself.
Enter Cboe Global Markets (CBOE -0.78%), parent to the Chicago-based exchange that handles the United States futures and options markets as well as a small amount of equity and currency trading. While it tends to disproportionally benefit from a roaring bull market, its role as a trading middleman means it does consistently well regardless of the environment. In fact, ugly bear markets that induce a great deal of selling can be just as beneficial to the Cboe exchange since it keeps a fraction of every trade’s value for itself regardless of the direction the underlying stock, option, or future is headed. To this end, Cboe Global Markets’ top and bottom lines have both grown every year since 2020.
Things are seemingly slowing down a bit this year, with investors waiting to see how the global economy will respond to the recent wave of rate hikes and slowing GDP growth. This is apt to only be a temporary slowdown, though. The market’s still bidding Cboe shares upward in anticipation of an economic revival.
And they just might get it. The analyst community is calling for stronger year-end revenue and profit growth, leading to healthy sales and earnings growth for the entirety of next year.
2. PDD Holdings
When investors think of China’s e-commerce stocks, names like Alibaba or JD.com typically come to mind. In fact, it’s likely that many people have never even heard of PDD Holdings (PDD 0.66%) or its business moniker Pinduoduo. With the stock up 75% from May’s low, though — and near its recent 52-week high — maybe this is a company more investors should put on their radar.
It’s an e-commerce outfit, although far from being typical. While it facilitates the online sale of predictable goods like apparel, electronics, and personal care items, its roots are actually in the fresh produce (yes, fruits and vegetables) business. It was the first to offer a major e-commerce platform to China’s farmers. It’s now estimated that more than 16 million farmers use the site to connect with consumers who may have otherwise remained out of reach.
The company still serves this market, too, although it’s evolved into so much more. In addition to most other categories of e-commerce, Pinduoduo provides social commerce tools that help sellers engage with potential customers. It even allows shoppers to play games via its app, with the ultimate intent of driving more sales, of course.
More important to current and would-be shareholders, this quirky business model works! While China’s annual “Singles Day” event that inspires a bit of self-indulgence is once again a respectable hit, few of its consumer-facing outfits reported triple-digit sales growth in as many markets and categories as PDD Holdings did during the shopping spree’s earliest days.
Take the hint. China’s online shoppers are looking for something else beyond what JD.com and Alibaba are offering. That’s why PDD shares are easily outperforming the other two similar tickers.
3. Ares Management
Last, but not least, take a look at the performance Ares Management (ARES 1.95%) shares are dishing out. The stock’s up an incredible 85% for the 18 months and higher to the tune of nearly 500% for the past five years.
What gives? First things first.
Ares Management isn’t your typical for-profit corporation. Although its shares trade just like any other stock, Ares is actually an alternative investment management outfit. Its chief purpose is providing funding in the form of loans, lines of credit, or in exchange for equity in privately owned up-and-coming companies. Any returns achieved on this capital are ultimately directed back to the fund’s shareholders in the form of capital gains and dividends. The key to success in this business? Knowing which companies to provide capital to and which ones to steer clear of.
That’s where Ares Management has more than proven itself with a track record that’s nothing less than incredible. Not only have its management fees grown every single year since 2006, including the years it was hampered by the COVID-19 pandemic, but its profit margin rate on these fees has also expanded every year since 2017.
The company is well positioned for such growth going forward, too. Based on the growing interest in non-traditional investments like private debt and private equity, Ares believes the amount of retail (individual) investor capital allocated to alternative investments, like the ones it manages, will more than triple to $12.8 trillion.
Of course, given Ares Management’s history of success in its markets in an environment that’s not always been great for more conventional stocks, who could blame individual investors for considering something different? This interest is already gelling, in fact. This ticker’s persistent bullishness is the key clue to this growing demand.