It is never too late to buy these stocks that are outperforming the market
In the stock market, past performance is no guarantee of future success. However, it is worth considering investing in companies that outperform the market. If said company can replicate the formula (or something close to it) that has made it successful in the past, it may still have what it takes to deliver above-average returns.
Let’s look at two stocks with proven track records in the stock market: DexCom (DXCM -6.72% ) And Netflix (NFLX -1.24% ). For investors who may have missed out on either company, it’s never too late to get in on the action.
DexCom is a specialist in medical devices. With its G6, it is a market leader in continuous glucose monitoring (CGM) systems. Continuous Diabetes Monitoring technology allows diabetics to automatically track their blood sugar levels throughout the day. One of the main reasons for DexCom’s success is the increased adoption of CGM technology. It is not difficult to see why it is increasingly common among diabetics.
Blood glucose levels fluctuate throughout the day. People with diabetes who use blood glucose meters (BGMs) can only know their blood sugar level at a certain point. Not to mention the fact that BGMs rely on sore fingers. In contrast, CGMs constantly track this important measure of diabetes and are not generally dependent on fingers.
DexCom’s G6 takes 288 readings a day – or one every five minutes. In general, CGM technology is associated with better health outcomes for patients with diabetes.
DexCom has benefited from the increased popularity of CGMs while increasing revenue. Last year, the company’s net profit jumped 27% year-over-year to $2.45 billion. Adjusted net income per share for the year decreased to $2.66, compared to $3.10 during the prior year period. DexCom recently fell along with the broader market in a sell-off that was particularly tough on developing stocks. However, there are good reasons to be optimistic about the company’s future.
First, it is preparing to launch a brand new product, G7, which will provide better health outcomes for its target population.
In fact, DexCom recently obtained a regulatory decision that will allow it to market the G7 in Europe. I’ve already applied for regulatory review of the G7 in the US, and the device could get clearance before the end of the year. Second, continuous monitoring of diabetes still has a long way to go. Even in the United States – the global leader in technology adoption – it has relatively low penetration.
DexCom is well positioned to remain a leader in this upward trajectory, which is why the company’s future still looks bright.
Netflix has been doing great in the past decade, but the company is arguably going through the toughest period in some time. Here are some of the problems you encounter.
First, there is competition. The number of streaming platforms has swelled over the past few years. Consumers have more choices than ever before, affecting the company’s ability to attract new subscribers.
And that brings us to our second point: Netflix’s net paid additions have been unimpressive (to say the least) over the past two quarters. In the first quarter, the company lost 200,000 subscribers, which fell short of its forecast for new additions totaling 2.5 million subscribers. That’s a big reason to beat the Netflix stock lately.
Third, the company deals with the problem of password sharing. It estimates that about 100 million households log into its platform using borrowed passwords. This is in addition to 222 million paid subscribers as of the end of the first quarter.
Despite these issues, there’s an important point that Netflix’s management still keeps in mind: streaming platforms still don’t control most TV viewing time in the US in February, streaming was just 28.6% of the total. So there is still plenty of room for broadcast to bypass broadcast and cable. The question is how well Netflix can perform in this environment. The company is looking at multiple options, including some that have shown success in the past.
Netflix will continue to focus on producing high-quality content to keep consumers engaged and entertained. However, that will not be enough, and the tech giant will have to look elsewhere. The administration is considering various options, one of which is to offer low-priced plans that display ads. This may tempt some families who are involved in password sharing to get their own subscriptions. The company has also started to move towards gaming.
Although the near term seems muddy for Netflix, getting to know the company’s name, cash flow generation, and history of a smart capital allocation strategy should help it turn things around. I don’t expect Netflix to deliver the kinds of revenue it did during the 2000s, but in my view, there’s still plenty of fuel left in the company’s growth engine.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.