Investors who buy stocks through both bull and bear markets are the ones who tend to benefit more in the long term because they are growing their portfolios consistently. But a bull market does seem to have a way of getting investors more excited about putting cash into stocks.
If you are getting the increased urge to capitalize on great businesses in the latest bull market, you don't have to look far to find plenty of options to consider. Here are two growth stocks you might want to own to take advantage of this bull market.
1. UnitedHealth Group
UnitedHealth Group(NYSE: UNH) is one of the largest healthcare companies in the world. Its ecosystem of services spans everything from healthcare plans for employers, individuals, and Medicare beneficiaries through its UnitedHealthcare segment, to a selection of offerings for both providers and patients in its Optum business.
The Optum segment features Optum Health, which offers numerous tech-enabled services to help patients receive care and providers ensure quality care in person, in-home, or virtually. It also has Optum Insight, which provides data and analytics to drive more efficient clinical operations. Optum Rx is the network of medical, pharmacy, and behavioral care services, including specialty pharmacies, that Optum operates.
UnitedHealth Group has had to contend with some challenges recently, including a massive data breach earlier this year that resulted in personal information on a considerable number of American healthcare customers being leaked to cybercriminals. To help resolve the issue and compensate potential victims (including affected healthcare providers) of the breach, the company has already set aside over $9 billion in advance funding and interest-free loans.
Rising healthcare costs are also affecting many companies in this space, and UnitedHealth Group is no exception. These factors are all important points for potential investors to be aware of, but these are also elements that the company is well-equipped to manage, as it's coming from a notable place of financial strength.
UnitedHealth reported total earnings of around $7.9 billion in the second quarter on revenue of $98.9 billion (up 6.5% year over year). Key Optum divisions were the biggest growth drivers, with revenue from Optum Health and Optum Rx both growing by 13% on a year-over-year basis.
UnitedHealth Group also reported Q2 cash flows from operations just shy of $6.7 billion and it ended the quarter with over $31 billion in cash and short-term investments on its balance sheet. The company is also a stalwart dividend payer. It just hiked its annual dividend by 12%, which was its 15th year in a row it increased the dividend by double-digit percentages.
The dividend yield is 1.5%, roughly in line with the average stock trading on the S&P 500. While the company is facing some near-term hurdles, it's important to take a look at the bigger picture too. Over the trailing five years, UnitedHealth Group has grown its annual revenue by 53%, while its annual net income has grown over 60%. Investors searching for a resilient healthcare stock that has an incredible moat in its respective operating markets -- and is a faithful dividend payer to boot -- might want to take a second look at this company.
2. Chipotle Mexican Grill
Chipotle Mexican Grill(NYSE: CMG) made headlines recently for its 50-for-1 stock split. The stock had generated such tremendous growth in recent years that a single share was running at $3,000 apiece. Post-split, investors can buy a share for around $50. While a stock split doesn't change a company's underlying value, it does increase the number of shares outstanding, making it a more viable investment to a wider swath of investors.
Chipotle's recent stock split alone isn't a reason to scoop up shares. However, the company's continued expansion in the fast-casual segment of the restaurant industry, along with its favorable financials, might induce some investors to consider buying shares. In Q2 2024, Chipotle generated revenue of $3 billion, an 18% increase year over year. Comparable restaurant sales rose 11%, while transaction growth was over 8%. Management cited Chipotle's brand marketing and the relaunch of the Chicken Al Pastor menu offering as key factors behind this growth story.
Chipotle achieved a restaurant-level operating margin of 28.9% in the quarter, an increase of 140 basis points from the same quarter in 2023. Meanwhile, overall operating margin was 19.7%, up from 17.2% in the year-ago period.
Chipotle is a profitable and cash-flow-positive company. Net income totaled $455.7 million in Q2, a 33% increase from one year ago. Looking over the trailing 12 months, Chipotle has brought in free cash flow of about $954 million, with operating cash flow just shy of $2 billion.
Chipotle has continued to launch more of its new modern drive-thru lanes, called Chipotlanes. A Chipotlane is designed for picking up mobile orders. The recent quarter saw the restaurant open 52 new locations, with 46 of those including a Chipotlane.
You might be wondering: How much more growth can a business with 3,200 restaurants generate from here? Well, most Chipotle restaurants are located in the U.S., but it also has restaurants in various international locations, including France, Kuwait, and Germany. A Polaris Market Research analysis projects the global fast-casual restaurant market to grow at a 4.9% compound annual growth rate through 2030 and total $265 billion annually.
There's tremendous room for this business to run, and room for multiple successful players. Its financials are in solid shape, and the affordability and accessibility of its products make it tempting to consumers in a wide range of economic environments. These are all value propositions that could induce some long-term investors to take a bite -- so to speak -- and buy-in.
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Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.
