Bull Market Buys: 3 Outstanding Growth Stocks to Own for the Long Run

Bull Market Buys: 3 Outstanding Growth Stocks to Own for the Long Run

Great stock ideas can be found in all market segments. The three companies below are very different, but for their own reasons, they are all excellent growth stocks. Here’s why a contract logistics provider GXO Logistics (NYSE:GXO), Delta Airlines (NYSE:DAL)and heating, ventilation and air conditioning (HVAC) company Global carrier (NYSE:CARR) are all great stocks to buy for growth investors.

GXO Logistics

GXO Logistics operates in the e-commerce space, which is expected to see continued growth in the long term. GXO provides warehousing, distribution, logistics and supply chain solutions to a diverse customer base, with no single customer accounting for more than 4% of its revenue.

Its long-term growth drivers are the increasing willingness of blue chip customers to outsource their logistics operations to GXO, freeing up time and resources to focus on their core business.

Notably, GXO’s services offer substantial benefits to its clients. For example, it can reduce variable warehousing costs by 50%, increase inventory turns and reduce overall costs. These improvements result in higher profits and more efficient use of working capital for the customer.

Additionally, GXO’s competitive advantage is expected to deepen as it continues to integrate cutting-edge technology into the warehouses it designs and operates for its customers. This includes machine vision for quality control and monitoring, automation and robotics for workflow improvement, product identification scanners and advanced analytics for logistics warehouse management.

Implementing these technologies requires expertise and experience, and as technological advancements improve their productivity, it will make more sense for blue-chip clients to use GXO and other contract logistics providers.

Delta Airlines

Delta Air Lines is expected to see revenue growth in line with the broader economy. However, this is not a reason to buy stocks. The real reason is Delta’s growing focus on premium travelers, where it expects revenues to grow more than the economy. That includes its “loyalty and other” revenues, which it expects to grow much more than the economy.

Delta sees additional potential in its SkyMiles loyalty program and co-branded Delta SkyMiles American Express cards. The latter is an increasingly important part of the investment case for the stock as Delta expects American Express payments to rise from $6.8 billion in 2023 to $10 billion in long term.

The two revenue drivers – premium travelers and American Express payments – are symbiotic. Attracting higher-income travelers to Delta Air Lines leads them to get Delta American Express cards, which leads to more spending on those cards.

Delta is expected to quickly grow its free cash flow (FCF) from $2 billion in 2023 to $3 or $4 billion, which will allow it to reduce its debt.

The bottom of this FCF range would leave the stock trading at less than 11 times FCF in 2024. Delta remains an excellent value stock for investors comfortable with a continued recovery in travel combined with increasing attention to to high-end travelers.

Carrier’s best days are yet to come

Carrier Global was spun off from the former United Technologies in 2020, and since then management has refocused the business on its key growing “smart climate and energy solutions” markets. As part of the move, management sold its remaining shares in commercial and industrial refrigeration company Beijer Ref for approximately $300 million in 2020.

His sale of Chub its $3.1 billion fire and security business followed in 2021, and the sale of its security business, Global Access Solutions, to Honeywell for $4.95 billion followed this year. Additionally, Carrier entered into an agreement to sell its commercial refrigeration and industrial fire businesses, and began a process to sell its commercial and residential fire businesses.

Alongside these divestitures, Carrier completed a $12 billion strategic acquisition of European heat pump and solar photovoltaic company Viessmann Climate Solutions. The agreement aims to shift Carrier’s focus towards energy transition technologies, with Viessmann’s solutions naturally aligning with Carrier’s core heating, ventilation and air conditioning (HVAC) businesses.

Bull Market Buys: 3 Outstanding Growth Stocks to Own for the Long Run

Image source: Getty Images.

The portfolio restructuring has created a global business focused on climate technologies and energy transition solutions, positioning it for long-term growth. This is an attractive business favored by regulatory changes, and Carrier’s valuation (it trades at 19 times estimated 2025 FCF) makes it a stock worth considering buying for long-term investors.

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American Express is an advertising partner of The Ascent, a Motley Fool company. Lee Samaha holds positions at Honeywell International. The Motley Fool recommends Delta Air Lines and GXO Logistics. The Mad Motley has a disclosure policy.

Bull Market Buying: 3 Exceptional Growth Stocks to Own for the Long Term was originally published by The Motley Fool

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