The S&P 500 has rallied 15% over the past three months, and the markets look to be in strong shape. But that is a bit misleading, because many individual stocks are still struggling. While many stocks related to artificial intelligence and tech have been doing well, this hasn’t been a big, broad market rally.
However, when the index set a new all-time high on Jan. 19, it signaled we’ve been in a bull market since the old bear market bottomed in October 2022. And there could be more gains coming, especially if a long-feared recession doesn’t weigh down the economy.
In a strong bull market, three stocks that could be among the biggest winners include PayPal (PYPL -2.72%), Realty Income (O -1.79%), and Green Thumb Industries (GTBIF 4.12%). Here’s why.
1. PayPal
Fintech stock PayPal hasn’t been doing well in recent years. As more companies have come out with different payment options, including “buy now, pay later” services, there’s been growing concern that PayPal is simply facing too much competition to be a big growth stock anymore. Over the past year, shares of PayPal have declined by 17%.
But as recently as 2021, nearly 77% of the top 1,000 retail chains, as determined by Digital Commerce 360, offered PayPal as a payment option. And usage among those retail chains increased that year compared to 2019. Even if PayPal’s market share declines, this will still be a top online payments company for years to come.
Investors may also be underwhelmed by PayPal’s recent results; through the first nine months of 2023, its revenue totaled $21.7 billion and rose by only 8%. But with the global economy still worried about a possible recession, there’s a bit of hesitance among consumers. In a bull market, there could be much more optimism and consumer spending, leading to better results for PayPal.
The company’s growth days are by no means over. And with the stock trading at a fairly modest 12 times its estimated future earnings, there is a lot of room for PayPal’s stock to rally.
2. Realty Income
Realty Income is another stock that hasn’t benefited from the S&P’s rally; its shares are down 15% over the past 12 months. Still, the real estate investment trust (REIT) has been doing fairly well of late, and there are no serious concerns about its performance or the safety of its dividend, which yields around 5.5%.
Through the first nine months of 2023, the REIT reported funds from operations (FFO) per share of $3.09, which was better than the $2.99 it posted a year ago. The REIT has a diversified portfolio anchored by some of the biggest names in retail and is one of the safer REITs you can invest in today.
With a strong FFO, a key number that REIT investors focus on when evaluating the safety of the dividend, there are no glaring concerns for investors about the business itself. The REIT pays a monthly dividend of $0.2565, which would total approximately $2.31 over a nine-month stretch — far lower than the $3.09 FFO per share it posted over a similar period; its payout ratio is 75% based on that metric.
Concerns about high interest rates are likely a key reason investors remain hesitant to invest in Realty Income and other REITs. But with rates widely expected to start coming down sometime this year, businesses like these could get a boost. Realty Income is another stock that could thrive under more encouraging economic conditions.
3. Green Thumb Industries
Green Thumb Industries is a top cannabis producer, but due to the federal ban on marijuana, this is the riskiest stock on this list. While it has often gotten a boost from excitement around the possibility of marijuana reform and legalization, Green Thumb and other multi-state operators have largely struggled because of the lack of progress on any significant reform.
Although the stock has rallied an impressive 60% over the past 12 months, when looking at Green Thumb’s three-year performance, its value is actually down by 58%.
The cannabis company has generated more than $1 billion in revenue over the trailing 12 months and has been close to breakeven, incurring a loss of $18.2 million during that time frame. It’s one of the safer cannabis companies to invest in, given its relatively strong financials, but there will be some inherent volatility with this investment due to the uncertainty around marijuana reform.
There is excitement around a possible rescheduling of cannabis, down from a Schedule I substance to a Schedule III. However, that by no means would guarantee or imply that legalization is around the corner.
But in a broad bull market, there should be much more excitement around growth stocks in general. And Green Thumb, with its sluggish performance over the past few years, may see a big increase in its share price as it is a leading company within the industry, with a presence in 15 states and 90 retail locations.
