3 High-Growth Stocks With Multibagger Potential by 2025
It’s undoubtedly been a tough year for growth investors. In the current environment, finding multibagger high-growth stocks that offer the potential for huge returns but also have a defensive posture is no easy feat. But it is possible.
The bear doesn’t appear to be going into hibernation anytime soon. On the bright side, investors stand to benefit from the lower valuations it has brought with it. Sure, stocks can always get cheaper. But, over the long term, equities are one of the best wealth-generating mechanisms we have.
Therefore, investors should consider easing into positions in these high-growth stocks with defensive business models and the potential for multibagger returns over the next three years.
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Occidental Petroleum (OXY)
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Energy is crucial, making the sector attractive for long-term investors looking to put capital to work right now. My top pick among energy stocks is Occidental Petroleum (NYSE:OXY), which has also attracted the attention of Warren Buffett. The Oracle of Omaha has been buying shares hand over fist, and it seems he hasn’t lost his touch. OXY stock is up more than 130% year to date.
Buffett and others no doubt like Occidental’s diversification. In addition to the development of oil and gas properties, the company manufactures and markets basic chemicals. This portion of its business is often overlooked, but it is a vital driver of profitability and cash flows. Plus, as with energy, demand for chemicals will not disappear with a recession.
No matter what transpires on the macroeconomic level, I think Occidental could be the best-positioned company in this market. It’s my top pick for defensive investors looking for growth right now.
Target Hospitality (TH)
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Perhaps a less-conventional pick for a list of high-growth stocks is Target Hospitality (NASDAQ:TH), which focuses on the rather boring rental real estate market. The company owns, constructs and operates a wide range of rental accommodations, including hotels and temporary housing units, primarily serving the energy and government sectors.
There is tremendous value in the company’s vertically integrated business model. Target Hospitality provides not only rental accommodations but hospitality services as well, such as culinary, concierge, laundry and security services, in addition to recreational facilities.
TH stock is up an eye-popping 230% so far this year. Much of this can be attributed to the massive run-up in shares in early July. This followed news the company expanded its lease and services agreement with the government to provide support for around 6,400 displaced people, about 60% more than the original contract.
“The recurring lease and infrastructure enhancement revenue will generate a minimum of $390 million for Target Hospitality annually,” wrote Investor Business Daily’s Harrison Miller. “Along with the services revenue component, the contract could provide a maximum of $575 million in annual value.”
After bagging the deal, management upped its full-year revenue forecast by more than 50% to $505 million at the midpoint of their range. That would be a record for the company and represent sales growth of more than 73% over 2021.
TH is one high-growth stock that should be on investors’ watch list, at the very least, right now.
Marathon Oil (MRO)
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Longtime readers know I have been bullish on energy stocks for some time. While the sector peaked in early June, I don’t foresee the gains stopping yet. Marathon Oil (NYSE:MRO) is one of the best high-growth stocks in this market of late.
Rising energy prices have shifted the paradigm for this sector in a big way. In 2020, no one wanted to touch energy stocks. Today, the cash-flow-generating machines stand out from the crowd. This is particularly true of companies like Marathon, which have improved their balance sheets and provided strong returns for investors. Notably, Marathon has done this while becoming increasingly ESG compliant.
For the second quarter, Marathon reported record quarterly free cash flow of $1.2 billion and net income of $966 million. For a company worth roughly $19 billion, that amounts to nearly 20 quarters’ worth of free cash flow. In other words, the stock is cheap, even after its 70%-plus advance this year.
Bottom line: MRO stock is a great way to gain exposure to this high-growth sector right now.
On the date of publication, Chris MacDonald 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.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
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