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RIIQ Newsletter

Good morning investors!

If this is your first time reading, welcome to Raising InvestorIQ!

Every Sunday morning, we publish a free write-up within our RIIQ Newsletter with leading insight and analysis — the aim is to help investors of all skill levels focus on key fundamentals, gain confidence in developing an investment strategy, and gain an edge in the push to generate true wealth.

Grab your coffee and let’s dive in!

Top Picks This Month!

Top 10 WATCHLIST for October 2024

Every month, we spotlight 10 stocks that we believe are the most promising. We’ll follow these stocks closely and provide you with updates on their performance, analyst signals, company health, latest news, and upcoming projects. You’ll get a monthly analysis of these stocks that, in our view, present interesting investment opportunities. Whether it’s due to potential undervaluation, a recent dip creating a buying opportunity, or the implementation of innovative new strategies, these stocks are carefully chosen for their long-term growth potential.

And these picks aren’t just pulled out of a hat. Our list is dynamic and might change month-to-month based on their relevance and potential. We adapt to the market trends and shifts to ensure we’re always bringing you the best opportunities. For this edition, we’re covering various high-growth sectors influenced by demographic and technological fundamentals, including big tech, semiconductors, healthcare, and consumer goods.

Why these sectors? As you may know, semiconductors are the backbone of modern technology, with growing demand in every tech-driven industry. Healthcare sees constant innovation and an aging global population makes this a sector to watch. Consumer goods are evolving as consumer trends shift, with certain companies standing out for their ability to adapt and thrive. Many leading consumer goods companies also tend to harness very strong brands, consistent operating histories, and durable competitive advantages.

Stay updated and invest smart.

Each month, we’ll keep you updated on our picks of the current RIIQ Top 10 stocks, and how they are performing. With these updates, you’ll be well-informed and better prepared to make savvy investment decisions.

So, let’s dive in and uncover those hidden gems in the stock market!

#10 Amazon ($AMZN)

Amazon’s outlook is bright, even with a few recent stock dips. The stock has risen nearly 23% thus far in 2024, and there’s still optimism for a potential +46% upside, with targets around $265​.

The company’s focus on AI and automation is expected to save billions, particularly with its switch to electric vans from Rivian, potentially reducing fuel costs by $7 billion annually​.

Amazon’s free cash flow is also impressive, hitting $12.7 billion in the last quarter, giving it plenty of flexibility for future investments (see graph below, FCF per share).

AWS continues to be a major player in the cloud computing space, generating $25 billion in Q1 2024, while its digital advertising segment is growing rapidly, contributing $47 billion annually​.

With such strong fundamentals and growth across key areas, Amazon is set for long-term success, making it a solid choice for investors who are ready to ride out short-term market shifts!

#9 Google ($GOOG)

Google’s been facing some antitrust heat lately, but that hasn’t slowed it down. The stock is up +16% in 2024, and it’s still a dominant force, owning 90% of the search engine market​. 

In the last quarter alone, Google pulled in almost $85 billion in revenue​. And get this: they’ve ramped up their capital spending by a massive 91%, pouring $13.18 billion into future growth​.

The AI game is also heating up for Google, with cool new features like AI Overviews and the Performance Max ad platform, which are making ads more effective across YouTube and Search​. Plus, Google Cloud continues to crush it with +29% growth and $1.2 billion in operating income​.

With a forward P/E ratio of 24, Google is looking like a solid deal compared to other tech giants (see graph below with META & AMZN). If you’re into long-term growth plays, Google’s mix of AI, cloud, and search dominance makes it a strong contender for your portfolio​!

#8 Ulta Beauty ($ULTA)

Ulta Beauty might seem like it’s hit a rough patch, with shares down nearly -25% this year, but don’t overlook its long-term potential. Warren Buffett hasn’t, as he recently took a $266M stake in the company.

Yes, competition is heating up—especially with Sephora expanding through Kohl’s—but Ulta is holding its ground​. The company posted strong Q1 earnings of $6.47 per share, even beating analyst expectations, with a constant growing revenue per share since 2021.

While Ulta lowered its full-year forecast, it’s still expecting same-store sales growth of 2-3%, which isn’t bad considering the retail environment​. One big win is Ulta’s loyalty program, with 44 million members driving consistent revenue​. Plus, its expanded partnership with DoorDash is making same-day delivery a breeze, improving customer experience and boosting sales​.

At a forward price-to-earnings ratio of 16.1, Ulta is trading at a bargain compared to its historical highs, and the market has already factored in much of the bad news​.

For long-term investors, now could be a great time to scoop up this beauty giant while it's on sale!

#7 Meta Platforms ($META)

Meta Platforms is on fire, and it’s all thanks to its massive AI push. After an eye-popping 548% rebound from its 2022 lows, Meta’s stock has climbed another +90% in the past year​.

What’s fueling this surge? Meta’s 3.3 billion daily active users across Facebook, Instagram, and WhatsApp continue to make it a goldmine for advertisers. Ad impressions are up 10%, and the price per ad has risen by another 10%, showing just how well Meta is monetizing its platforms​. But the real magic is in its AI investments. From smarter ad targeting to its MetaAI virtual assistant, the company is blending AI with its ad strategy to boost conversions and keep users engaged​.

Earnings per share shot up +73% in Q2 2024, and Meta’s free cash flow reached an impressive $11 billion​. With a +20% revenue growth forecast for this year, Meta shows no signs of slowing down. If they keep riding the AI wave, this stock is one to watch.

#6 Visa ($V)

Visa’s stock may have taken a -5% dip recently, but don’t let that throw you off—this payments titan is still in great shape. With a dividend yield of 0.75% and 16 straight years of increasing payouts, Visa remains a top pick for income-hunters.

Even with some regulatory hurdles, Visa’s financials are looking strong. The company handled a massive $4 trillion in payment volume last quarter, bringing in $8.9 billion in revenue​. The stock’s price-to-earnings ratio is sitting at 29.6, which is lower than its five-year average, making it an appealing buy-the-dip candidate​.

With 4.5 billion Visa cards in circulation and more than 130 million merchants on board worldwide, Visa’s global dominance is undeniable. If you’re on the hunt for a solid dividend stock with room to grow, Visa is still a top contender!

#5 Domino’s Pizza ($DPZ)

Domino’s Pizza has been on a bit of a rollercoaster lately, with its stock swinging between $403 and $528​ per share. Sure, it’s down -13%, but Domino’s still crushed it last quarter, delivering $4.03 per share in earnings—a surprise boost of 8.92%​. While there are some worries about slower store growth, don’t sleep on Dominos’ dividend game.

This pizza giant has upped its dividend by a solid 17.7% annually over the last five years and keeps the streak going strong​. With cash flow expected to jump by +12.5% in 2024, it’s looking like a tasty pick for dividend hunters​. Right now, the stock’s sitting around $421, pretty close to fair value, but with profit set to rise 21%, this might be the perfect chance to grab a slice of a steady, dividend-paying player​.

#4 Nvidia ($NVDA)

Nvidia is still a major force in the AI and gaming world, with its stock soaring +140% this year​. Demand for their new Blackwell AI chips is through the roof, as industries rush to implement AI technologies​.

Last quarter, Nvidia raked in $30 billion in revenue, easily beating expectations, and its net operating margin shot up to an impressive 55%​. Looking ahead, the company has forecasted $32.5 billion for Q3, showing no signs of slowing down​.

Even with some market fluctuations—like when Nvidia briefly lost its spot as the top S&P 500 performer—investors are still optimistic. Price targets are ranging from $180 to $210, and Nvidia’s recent partnerships, including an expanded deal with Accenture, keep fueling its growth​.

If you’re comfortable with a bit of volatility, Nvidia could be a great play for those wanting to ride the AI wave. The stock’s strong financials and booming AI market position make it one of the most exciting growth stories out there!

#3 Netflix ($NFLX)

Netflix is still killing it in the streaming game, with its stock jumping nearly +47% this year, thanks to the buzz around its ad-supported plan and crackdown on password sharing​.

On the financial front, things are looking sharp—Netflix is rocking gross margins of 44% and is expected to hit a solid 28.1% operating margin for Q3 2024, a nice jump from last year​. Earnings are also climbing, with projections showing a +37% increase to $5.10 per share​.

The ad-supported tier is proving to be a smart move, bringing in more revenue per user than some of the pricier, ad-free options. Plus, Netflix is spicing things up by diving into live content—think WWE’s "Raw" and NFL games. This mix of smart financials and fresh content keeps Netflix well ahead of the curve.

So, if you’re looking for a stock with growth potential and some serious staying power, Netflix is definitely worth keeping an eye on!

#2 AirBnB ($ABNB)

Airbnb’s stock has seen some ups and downs, dropping about -25% from its peak earlier this year, but that might just be an opportunity. Despite some investor jitters after the company’s Q2 2024 results, Airbnb is pushing forward with major innovations. 

They’re transitioning from just a booking platform to becoming more of an interactive travel concierge, which could boost user engagement. And with impressive gross margins of 83%, Airbnb's financial strength is solid​!

Their new co-hosting service, launching soon, will match people with properties they don’t have time to manage with those looking for hosting opportunities—a smart move to increase listings. Plus, Airbnb is eyeing big international growth, especially in under-penetrated markets like Asia and Latin America​.

With strong cash reserves, innovative features, and room to grow globally, Airbnb is a solid option for long-term investors looking to take advantage of the current dip.

#1 ASML ($ASML)

We talked about it on the last TOP10 Watchlist, you might remember it. This month, it’s still our number one. As a reminder, ASML is a big deal.

This Dutch company started as a small division of Philips in 1984, and since then, it’s grown into a major player in the semiconductor industry. Right now, it’s in a sweet spot for growth—both in terms of technology and financial performance.

Let’s kick things off with the numbers. ASML’s foundations are seriously strong. Their revenue is projected to jump by +44% by 2026, thanks to the massive demand for their high-tech photolithography machines. That’s a huge growth story, especially with ASML consistently pulling in impressive profit margins.

Their ability to turn a healthy profit before taxes and interest, combined with their net margins, puts them in an elite category. What’s more, their excellent financial standing means they have plenty of cash to keep investing and staying ahead of the competition​, and the return on equity stands at a notable 49%, demonstrating their efficiency in generating real returns.

On the stock front, there’s plenty of excitement. Over the past year, future revenue predictions have been bumped up multiple times, and many believe ASML shares are a great buy. Even though the company has a high price-to-earnings ratio for this year (a solid 45), there’s still significant potential for the stock to climb higher. With price targets set above current levels, the growth opportunities are clear​.

But what makes ASML really special? Their cutting-edge tech, especially in the world of Extreme Ultraviolet (EUV) lithography. This tech is at the core of producing the most advanced chips powering everything from AI to 5G. Companies like Intel, Samsung, and TSMC are hooked on ASML’s machines to stay ahead in the race for faster, more powerful chips. While competitors like Nikon and Canon are trying to keep up, ASML is miles ahead. And they’re not slowing down—High-NA EUV is already in the works, and it’s set to push chip-making tech even further​.

On top of their tech, ASML also shines when it comes to environmental and social governance. Their ESG score from Refinitiv stands out in the industry, which is becoming a bigger deal for investors who want to back companies that not only make money but also have a positive impact. It shows ASML’s commitment to balancing profit, growth, and sustainability​.

Now, it’s not all smooth sailing. ASML has found itself in the middle of some tricky geopolitical tensions. Recently, the Dutch government tightened restrictions on exporting certain DUV systems to China, following pressure from the U.S. to limit China’s access to advanced chip-making equipment.

While this could have been a major setback, ASML has been quick to reassure that these restrictions won’t hit their financial outlook for 2024 or beyond​. Plus, there’s growing debate in Europe’s semiconductor sector about these trade limits, with calls for a more balanced approach to remain competitive globally. There’s even talk of a European Chips Act 2.0 to strengthen the industry​.

So, what’s the takeaway? ASML is sitting pretty with cutting-edge tech, strong financials, and solid growth prospects. Yes, they’ve got some geopolitical challenges to navigate, but their leading position in the semiconductor world, along with the soaring demand for advanced chips, makes them a compelling investment. Whether it’s AI, 5G, or the next big thing, ASML is going to be at the heart of it.

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Information provided on this site is based on my own personal experience, research, and analysis, and it is not to be construed as professional advice. Please conduct your own research before making any investment decisions.  I am not a professional financial advisor, stockbroker, or planner, nor am I a CPA or a CFP.

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