When it comes to buying stocks that are already bullish or taking a break from their bullish phase, it’s wise to be careful. If you purchase a bullish stock about to run out of steam, you are more likely to incur a short-term loss than a profit.
And if you mistake the beginning of a bear market phase for a temporary reprieve in the bullish run, it may be weeks or months before you recoup your investment, let alone make a profit.
With that in mind, let’s look at two bullish stocks and what the future might hold for them.
A construction business
Ontario-based Bird Construction (TSX: BDT) experienced exceptional growth in the last 12 months — over 186%. Underlying this impressive growth is a solid (and parallel) Earnings-per-share growth. Also, despite this strong upward surge, the stock is still trading at a reasonable and fair price-to-earnings (P/E) ratio of 18.
The fact that it didn’t become overvalued after such a powerful growth surge is reason enough to consider this stock. The company has also grown its payouts by a significant margin of 30% in 2024. This is one of the reasons why the yield has remained at a reasonable level of 2.1% despite the surge in stock price.
Whether the stock will keep growing at the current pace or if a stagnation or correction is coming is difficult to answer. A slump in earnings or a major hit to the construction industry might derail the company’s bullish phase. Still, even if no negative catalyst comes along, it might be prudent to expect a limited amount of growth in the future, as the stock is already plateauing.
A healthcare technology company
Healwell Al (TSX: AIDX) offers its investors exposure to two different industries: healthcare and artificial intelligence (AI). However, its performance has been contrary to both healthcare and tech stocks. The stock slumped hard between its inception and mid-2023, when it hit rock bottom. It was trading at a 98% discount, but it made a solid recovery and has climbed over 2,100% in fewer than 14 months.
The stock has returned over 170% to its investors this year alone, and that’s after a 34% slump that the stock is still struggling to recover from.
The current slump may be temporary, and the stock may start growing at an amazing pace again, but that would require certain positive catalysts, like the company becoming profitable or some of its technologies gaining mainstream recognition or endorsement of the medical community. Or, it could be the beginning of a long-term bear market.
Foolish takeaway
Out of the two bullish stocks, Healthwell AI might be a more prudent buy than Bird Construction since the latter is definitely plateauing after a long bullish run. In contrast, Healthwell AI might be able to leverage not just its internal strengths but also the momentum of the AI hype train.
