Diverse Investment Opportunities: Top Stocks to Consider for Your Portfolio
As we approach 2025, it’s a great time to explore three promising stocks from the energy, consumer products, and technology sectors—areas I became well-acquainted with during my time as an investment analyst. All three stocks present robust growth potential at appealing valuations and can contribute to a well-rounded investment strategy.
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Energy Transfer: Positioned for Growth
Energy Transfer (NYSE: ET) stands out with one of the largest midstream systems in the U.S. This company expertly handles the transportation, storage, processing, and upgrading of hydrocarbons like natural gas and refined products. Its extensive system allows it to capitalize on various energy arbitrage opportunities.
Energy Transfer’s advantageous position enables it to meet rising power demands associated with artificial intelligence (AI), utilizing inexpensive natural gas sourced from the Permian Basin. In fact, natural gas prices in this region were frequently below $0 in 2024 due to limited takeaway capacity.
Interest from power companies and data centers for potential natural gas projects has surged, highlighted by a recent $2.7 billion takeaway project announced by Energy Transfer aimed at supporting growth in Texas.
The company currently trades at an enterprise value (EV)-to-EBITDA multiple of just 8.4, considerably cheaper than the historical average of 13.7 for similar master limited partnerships (MLPs) from 2011 to 2016. This combination of growth opportunities, valuation, and a supportive regulatory environment makes Energy Transfer a top pick, offering a 6.6% forward yield with an expected distribution growth of 3% to 5%.
E.l.f Beauty: Bargain Growth in Cosmetics
E.l.f Beauty (NYSE: ELF) has cemented itself as a leading contender in the consumer products space, presenting an attractive growth story paired with affordability.
Utilizing influencer marketing and creating products inspired by high-end brands, E.l.f has captured the attention of younger consumers, gaining significant mass market share. The brand’s popularity extends internationally, quickly becoming the top mass cosmetic brand in several overseas markets with ample room for further growth.
A major growth prospect lies in the company’s foray into adjacent categories, bolstered by its skincare brands and plans to explore opportunities in fragrance and hair care.
The recent quarter saw E.l.f’s sales surge by 40%, yet its stock trades at a forward P/E ratio of 28.5, complemented by a low price/earnings-to-growth (PEG) ratio of only 0.5. A PEG under 1 typically indicates a bargain for growth stocks, reinforcing the potential value E.l.f presents.
Image source: Getty Images
Alphabet: Capitalizing on Innovation
In the technology arena, Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) emerges as a dominant player in the search industry with Google, in addition to being a leading video streaming platform with YouTube. These segments are enhanced by a substantial advertising technology business that fuels revenue across its various platforms, including Gmail and Maps.
Alphabet’s strong adtech presence is expected to unlock substantial AI monetization opportunities. Historically, ads were served to only 20% of search results; however, new ad formats for AI could tap into the remaining untapped potential.
The company’s most prominent growth segment, Google Cloud, posted a remarkable 35% revenue increase last quarter, making it the fastest-growing cloud service among major providers. Operating income jumped from $266 million to $1.95 billion in the same timeframe, showcasing the efficiencies achieved as Alphabet scales.
Moreover, Alphabet’s innovative ventures include advancements in quantum computing and a lead in autonomous vehicle technology through its Waymo division, which is already offering paid rides. With a forward P/E of merely 18.5, Alphabet presents a compelling investment opportunity in the tech sector.
Is Energy Transfer a Smart Investment?
Considering an investment in Energy Transfer? We urge you to think carefully.
The Motley Fool Stock Advisor analyst team recently named the 10 best stocks for informed investors, and Energy Transfer was not included. The selected stocks hold immense potential for remarkable returns in the following years.
For context: when Nvidia made the cut on April 15, 2005, an investment of $1,000 would have surged to $885,388.*
With Stock Advisor, investors gain straightforward guidance on successful portfolio strategies through regular updates and bi-monthly stock picks. This service has significantly outperformed the S&P 500 since 2002.*
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*Stock Advisor returns as of December 30, 2024
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet, Energy Transfer, and e.l.f. Beauty. The Motley Fool has positions in and recommends Alphabet and e.l.f. Beauty. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
