3 top stocks you’ve been overlooking

Shareholders of these rather unheralded stocks are reaping fantastic returns.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Fresh fruit and veg grower and distributor Total Produce (LSE: TOT) is an easy company to overlook, but shares of this under-the-radar large-cap are up over 350% in just the past five years. Now, the fresh produce industry isn’t exactly a high growth one, so what has been behind this massive increase in share prices? Total’s insistence on expanding at a rapid clip beyond its core European markets.

The primary focus for recent expansion efforts is the massive North American market and through a combination of organic growth and acquisitions it’s targeting $1bn in sales in the coming years. This number will only grow as the company redirects retained earnings into further acquisitions in the US as well as in operations further afield, including India.

The fresh produce market is a sector with very slim margins, which means economies of scale are incredibly important. With over €3.4bn in annual revenue, this works in Total Produce’s favour by creating a wide moat to entry for competitors. Likewise, the defensive nature of the sector gives it room to breathe during any economic downturn. The shares aren’t super cheap at 15 times forward earnings, but with a long history of successful acquisitions and a healthy balance sheet, I reckon there’s more growth on the cards for Total Produce.

Cashing in on cashless trend

Having only gone public in late 2015, card payment processor Worldpay Group (LSE: WPG) has flown under many investors’ radar despite a solid history of growth. Worldpay is benefitting from the global shift towards non-cash payments and in just the first six months of 2016 processed over 7.2bn payments worth over £200bn.

Taking a cut of these transactions provided Worldpay with net revenue of £539m during the period, a 16% increase from the same period a year prior. This is a highly cash generative business and the company has been ploughing proceeds back into growing its online payments business, as well as expanding into new countries. This is a growth tech stock with a commensurate lofty valuation, currently 23 times forward earnings. But with plenty of growth potential from the core UK market as well as new regions and platforms, Worldpay isn’t a stock to sleep on.

Margin marvel

One fast growing tech stock that may escape investors’ attention due to its ubiquity is online property platform Rightmove (LSE: RMV). With a 77% market share Rightmove is the dominant platform in the UK, a position that management has leveraged into high prices from the estate agents that list on it.

High prices combined with an asset-light business model equals high margins. In the first half of 2016 operating margins hit an astounding 74.6%. The low-cost nature of running a property portal also means it’s been relatively cheap and easy for Rightmove to expand overseas. In H1 it saw over 50m searches for homes overseas, which is a fraction of the total 750m searches in the period but is growing quickly.

With overseas growth presenting a huge opportunity, unbelievable cash generation from core UK operations and very high dividends and share buybacks, I believe Rightmove is worth a closer look, even with the shares trading at 27 times forward earnings.

Can investors beat Rightmove’s 200%+ five-year returns?

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ian Pierce has no position in any shares mentioned. The Motley Fool UK has recommended Rightmove and Worldpay. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Newspaper and direction sign with investment options
Investing Articles

When cheap markets meet favourable conditions, sentiment flips very quickly

London’s stock market is cheap — some sectors, even cheaper. Given a change in sentiment, the uprating could be substantial.

Read more »

Investing Articles

Empty Stocks and Shares ISA? I’d snap up these 3 stocks to start with!

Sumayya Mansoor explains how she would start to build wealth from scratch with an empty Stocks and Shares ISA and…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

7.7% yield and going cheap! Why is this unknown FTSE 250 stock flying?

It's no household name, but there's one FTSE 250 stock with a high dividend yield and booming profits that looks…

Read more »

Photo of a man going through financial problems
Investing Articles

I’d stop staring at the Nvidia share price and buy this FTSE 100 stock instead

This writer reckons there is a smarter way to invest in Nvidia today without taking on stock-specific risk. Here is…

Read more »

Young lady working from home office during coronavirus pandemic.
Top Stocks

5 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Young Asian man drinking coffee at home and looking at his phone
Dividend Shares

These 3 FTSE 250 stocks offer me the highest dividend yields, but should I buy?

Jon Smith considers FTSE 250 shares with a very high yield, but questions whether the income is going to be…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Is FTSE 100 takeover target DS Smith a great buy?

A mega-merger between FTSE 100 giants DS Smith and Mondi has the City abuzz. But is there any value in…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

The WPP share price dips as profits fall. Here’s why it could be a top dividend buy

I'm starting to think the WPP share price undervalues the stock, especially if the long-term dividend outlook comes good.

Read more »