As a value-oriented investor, it can seem reckless to buy a stock that’s at or around its 52-week high. That means you missed out on a considerable amount of gains and now have to pay up for something you could have gotten on sale just a few months ago.
While it’s tempting to ignore the 52-week high list, I think for most long-term-oriented growth investors, that it’s a bad idea, as many winners on the list are poised to keep on winning. Sometimes it pays massive dividends to break the rules of traditional value investing.
Motley Fool CEO and Rule Breaker David Gardner certainly isn’t afraid of heights when it comes to investing. Whether we’re talking about high P/E ratios or 52-week highs, such metrics are not indicative of sells. And this piece will have a look at two Canadian stocks that are blasting off and could have a heck of a lot higher to soar as we head into 2020.
Kinaxis
First up, we have Kinaxis (TSX:KXS), a supply chain management, sales, and operation management solutions provider that’s been harnessing the power of the cloud over the years.
The stock soared 14% in a day last Friday, propelling the name to the 52-week high list and setting the stage for a potential breakout past all-time highs.
I’ve been pounding the table on the stock for well over the last year, and now that shares have picked up traction again, I still think the stock is a timely bet as it looks to make up for lost time.
What happened? And should you be wary of the frothy 136 trailing P/E multiple?
The company pulled the curtain on its third-quarter results, which saw revenues pop 29% to $47.1 million with SaaS sales surging by 28% to $31.2 million. Kinaxis also beat analyst expectations on the bottom line, with profits that soared 70% to $4.5 million, up from $2.7 million over the same period last year.
The big beat was thanks to some new customers, which continue to be drawn in by Kinaxis’s competitive product that continues to look better by the quarter.
Royal Bank of Canada
Up next, we have a good, old-fashioned Canadian bank in Royal Bank of Canada (TSX:RY)(NYSE:RY), a top performer that’s left its smaller brothers behind amid broader industry headwinds.
The company posted robust Canadian banking and wealth management results for the third quarter, alongside lower expense growth of 2.2%, down from 6% in the first half. While the outlook remains bleak for the banks as a whole, Royal Bank has continued to set itself apart from its peers amid the bump in the road, with enviable efficiency numbers that more than justify Royal Bank’s quick return to the top.
While Royal Bank stock may not seem cheap relative to its peers, one must remember that the premium is well deserved given the exceptional operating performance on this side of the border.
The stock sports a bountiful 3.94% dividend yield and trades at a multiple that you wouldn’t consider too expensive at 11.3 times next year’s expected earnings.
As management continues to demonstrate why it’s worthy of a premium to its peers, I’d get in the stock before it leads the next upward charge in the space, enticing skeptical analysts to upgrade the name from across the board.
Stay hungry. Stay Foolish.
