We recently published a list of 8 High Growth High Margin Stocks to Invest In Now. In this article, we are going to take a look at where Lantheus Holdings (NASDAQ:LNTH) stands against other high growth high market stocks to invest in.
How Market Trends Shape Opportunities
When investor confidence is high, capital tends to flow into growth sectors, driving up stock prices and valuations. This is particularly relevant for companies with strong growth prospects and high margins, as they are often seen as more resilient in a recovering economy. Current market dynamics indicate that much of the upward movement may be attributed to multiple expansions rather than just earnings growth. High-growth stocks typically trade at higher price-to-earnings ratios, so if the market continues to expand, these stocks could benefit significantly as investors are willing to pay a premium for growth potential.
Jason Trennert, Strategas Research Partners chairman and CEO, joined CNBC’s ‘Squawk Box’ on October 3 to discuss the latest market trends and the state of the economy, highlighting that the bar is high to get bearish now.
Jason Trennert revealed that he turned bullish at the end of 2023 after initially predicting a recession. Despite the challenges of 2022 and early 2023, which made it difficult to envision a market recovery, he noted that the market has defied expectations and continued to rise. Trennert attributed a significant portion of this upward movement to multiple expansions rather than just earnings growth. He marked a pivotal moment in 2023 as the failure of Silicon Valley Bank, which led to increased liquidity in the market and a subsequent rally. He recalled that around eleven months ago, the S&P 500 briefly hit 4,100 when ten-year yields reached 5%, suggesting that market dynamics have shifted considerably since then.
When discussing current valuations, Trennert pointed out that the market is trading at approximately 22 times earnings during an easing cycle. He expressed skepticism about future earnings growth, as expectations for a 14% increase in S&P earnings next year seem inconsistent with the anticipated six rate cuts from the Fed. He emphasized that if the market is expecting such significant easing while also projecting strong earnings growth, there may be a disconnect.
Trennert also addressed concerns regarding government spending and deficits, noting that the federal deficit has reached 7% of GDP and expressing a desire for more free-market-oriented policies rather than gridlock in Washington. He criticized both parties for their lack of commitment to reducing deficits and highlighted the moral hazard created by prolonged quantitative easing over the past 12 years. He believes that this situation has led to irresponsible spending practices that will eventually necessitate accountability. Despite these concerns, Trennert acknowledged that it is challenging to adopt a bearish outlook given current market conditions. He noted that ten-year treasury yields above 4.5% typically lead to market indigestion, while yields below this threshold make it hard to remain pessimistic.
As for small-cap stocks, Trennert pointed out that they have historically been underrepresented in portfolios and may offer opportunities for future growth. He highlighted that many venture capital-backed firms are looking to go public, with approximately 45% of them potentially tapping into the IPO market at some point. However, he cautioned that if the economy continues to slow down and earnings growth expectations are not met, small caps may struggle.
Skepticism about the projected earnings growth for the S&P 500 could also apply to high-growth stocks. If expectations for earnings growth are too optimistic relative to economic conditions, such as anticipated rate cuts, it may lead to volatility in high-growth stocks, especially if actual earnings do not meet these elevated expectations. Companies with high-profit margins are generally better positioned to weather economic downturns. As Trennert noted concerns regarding government spending and deficits, firms that maintain or improve their profit margins may be more attractive to investors seeking stability amidst economic uncertainty.
Trennert’s overall analysis underscores the importance of monitoring government policies and economic indicators as they influence investor sentiment and market performance moving forward. Still, his predominantly bullish sentiment lays the groundwork for a lot of investors, and to make the portfolio expansion process even easier for them, we’re here with a list of the 8 high growth high margin stocks to invest in now.
Methodology
We sifted through Finviz to compile an initial list of the top stocks. From that list, we narrowed our choices to 15 companies with TTM net profit margin above 20% and 5-year net income compound annual growth rates above 25%. We then selected the 8 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A medical professional performing a pulmonary function assessment on a patient.
Lantheus Holdings (NASDAQ:LNTH)
5-Year Net Income CAGR: 32.86%
TTM Net Profit Margin: 29.80%
Number of Hedge Fund Holders: 34
Lantheus Holdings (NASDAQ:LNTH) is a radiopharmaceutical-focused company focused on developing and commercializing innovative products for various medical imaging applications. It specializes in imaging agents used to diagnose and monitor diseases like cancer, heart disease, and neurodegenerative disorders. The products are classified into three categories: Radiopharmaceutical Oncology, Precision Diagnostics, and Strategic Partnerships.
Revenue growth in Q2 2024 was 22.50% year-over-year. Radiopharmaceutical Oncology was up 29.3%, attributable entirely to the continued strength of PYLARIFY, where sales grew 30%, driven by increased awareness and adoption. Precision diagnostic revenue was 14.9% higher. Highlights include sales of DEFINITY, 10.7% higher year-over-year, driven by its clinical and commercial value proposition, along with TechneLite revenue, up 30.5% due to opportunistic sales in the quarter.
Strategic partnerships and other revenue were down 31.7% due to the prior year’s comparable having $7 million of RELISTOR-related royalties not repeated this year, offset by a strong MK-6240 contribution. Even though this decline was observed, the company had made significant strides in patient care and research partnerships by the second quarter of 2024.
It’s heavily focused on promising treatments for Alzheimer’s disease and prostate cancer. It acquired two potential diagnostic tools: NAV-4694 and MK-6240 for Alzheimer’s for early detection and diagnosis. It acquired the global rights to RM2, a promising diagnostic tool for early-stage prostate cancer. The company also licensed two promising drug candidates from Radiopharm Theranostics.
Lantheus Holdings (NASDAQ:LNTH) has been a standout performer, delivering a 306% return in 3 years. This impressive growth is fueled by strong financial performance, including a recent transition to profitability and increasing earnings per share ($1.80 in Q2 2024). The company’s recent momentum and positive outlook make it a promising investment option.
ClearBridge Small Cap Value Strategy stated the following regarding Lantheus Holdings, Inc. (NASDAQ:LNTH) in its Q2 2024 investor letter:
“Health care results lifted relative performance during the period and included our top two individual performers in Lantheus and newer portfolio addition Corcept Therapeutics. Lantheus Holdings, Inc. (NASDAQ:LNTH), which makes diagnostic and therapeutic products that help clinicians diagnose and treat heart, cancer and other diseases, saw its share price rise on strong first-quarter results.”
Overall, LNTH ranks 8th on our list of high growth high market stocks to invest in. While we acknowledge the growth potential of LNTH as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LNTH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
