Uncertainty from geopolitical tensions within the Ukraine war and China issues has led to slower United States labor market growth. In this environment of uncertainty, the United States labor market has displayed a degree of resilience but at a notably slower pace of growth. On the other hand, this has led to the rise of the best companies to invest in.
Recent data released by the Labor Department underscores this cautious trend, as it’s revealed that U.S. employers added 187,000 jobs in July, reflecting a tampered pace compared to previous periods of economic expansion.
However, even as geopolitical tensions continue to shape the economic landscape, other sectors are experiencing unique growth trajectories, and these three companies are the best to invest in for long-term returns.
Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor Manufacturing Company (NYSE:TSM) is a semiconductor manufacturer, producing 60% of the world’s semiconductor supply. TSM stock is up 29.89% YTD and Yahoo! Finance reported 11 analysts having a mean 1-year price target of $112.01, ranging from $85.00 to $135.00. The majority of notable firms rated TSM as a “buy.”
The global semiconductor industry is projected to grow at a 12.2% CAGR through 2029, from $573.44 billion in 2022 to $1.38 trillion by 2029. TSMC reported Q2 financials that are recovering, with revenue of $15.68 billion beating expectations by 300 million, diluted EPS of $7.01 down 23.3%, and net income of $5.925 billion.
TSMC is poised to benefit from the increase in artificial intelligence use, with the company forecasting that CPUs, GPUs, and other AI-related technology will grow at a 50% CAGR in the next 5 years, doubling revenue. The company also recently announced a new R&D center in Taiwan having 300,000 meters of floor space, which will be used to develop process technology at the 2-nanometer generation and beyond. TSMC has been quick to relocate to this center, as everything will be ready for a full staff of 7,000+ by September.
In Arizona, TSMC is continuing to build its first fab to support U.S. semiconductor infrastructure, where the production schedule of N4 process technology is expected to be complete by 2025. In Japan, TSMC is building a specialty technology factory, with volume production utilizing 12,16, 22, and 28 process technologies on track for late 2024. TSMC is also engaging with customers and partners in Europe, to evaluate building a specialty fab in Germany, with a focus on automotive-specific technologies. Lastly, in China, TSM is expanding the production of its 28-nanometer process chips
TSM’s dedication to diversifying its customer base showcases its commitment to expanding its global manufacturing footprint, making it a great stock pick with enormous growth potential.
Dexcom Incorporated (DXCM)
Dexcom Incorporated (NASDAQ:DXCM) is an American biotechnology (biotech) company that manufactures medical devices to monitor diseases such as diabetes.
Dexcom boasts strong financials with Q2 2023 revenue of $871.3 million beating analyst expectations by $30.3 million and growing at a 19.6% CAGR. Dexcom demonstrates excellent profitability with a 63.9% gross profit margin well above the sector median, a 13.7% levered FCF margin, and a high 16.41% ROCE.
Dexcom has had successes with international expansion this year alone. The company gained approval in Canada to sell its newest generation glucose monitoring system to Canadian citizens, the Dexcom G7, by Health Canada. Dexcom also planned to invest $330.8 million over 5 years for the development of its first European factory in Ireland, with the G7 having gained approval in the EU in late 2022. This international expansion from device approvals and factory developments allows Dexcom to capitalize on the international market and gain new customers with its newest generation device. This makes it one of those best companies to invest in.
Dexcom has also partnered with key companies. Dexcom is collaborating with DarioHealth Corporation to integrate the data from Dexcom’s CGM systems into DarioHealth’s chronic condition platform. Dexcom also entered a similar partnership with MedNow to integrate CGM system data into MedNow’s virtual diabetes management platform. Dexcom’s unique partnership with South-Korean-based Kakao Health combines Dexcom’s software and Kakao’s software and AI capabilities into a product for the South Korean market coming in 2024. Dexcom has been able to further expand its reach in the international market with its Kakao Health partnership, as well as finding a new revenue stream by integrating its data into software platforms.
With DXCM up 6.2% YTD, strong buy ratings from analysts, and an average predicted 12-month upside of 25.8%, Dexcom is a definite buy in August because of its strong financials, its international expansion, and advantages from the partnerships mentioned above.
Wells Fargo (WFC)
Wells Fargo (NYSE:WFC) is a bank with loans ranging from commercial real estate to consumer mortgages. WFC stock is up 7.32% YTD. Macroeconomic factors have recently hurt the banking sector. As the Federal Reserve increased interest rates, Mortgage Loan Origination decreased from $37.9 billion to $6.6 billion from Q1 2022 to Q1 2023 as fewer consumers were looking for a mortgage. The decrease in interest rates will likely bolster growth, as the number of people seeking mortgages will increase. As a result, the banking sector will grow at a CAGR of 11.85% until 2031.
In its latest earnings, Wells Fargo ended with a revenue of $18.82 billion which increased 14.34% YoY, net income of $4.94 billion increased by 57.16% YoY, and diluted EPS of $1.25 grew 66.67%. All in all, it’s one of those best companies to invest in.
Moreover, with a P/E ratio of only 11, investors will likely snap it up as the Fed eases on interest rate hikes Additionally, in the long term, Wells Fargo will resolve and move on from its previous scandals, boosting growth as management can focus on new innovations and products for consumers.
Yahoo! Finance reports 23 analysts’ having 12-month price targets that range from $43.75 to $65.00, and the average being $50.89. These are optimistic price targets as the stock’s current price is just $44.85. WFC stock is undervalued, and macroeconomic factors with the passage of time push to boost growth.
On the date of publication, Michael Que did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
