Ouch! Tuesday was a day full of pain for investors in top stocks, with the markets sliding downward into the dirt. Very few stocks were spared.
On such a day, it’s hard to find any success stories. Thankfully, there were a few amid the rubble. Here’s the skinny on two of these hardy survivors.
It wasn’t luck that pulled Luckin Coffee‘s(NASDAQ: LK) American depositary receipts (ADRs) almost 6% higher on Tuesday. Rather, it’s likely because a noted investor bought a big position in the company.
Luckin, an upstart, China-based coffee chain operator, became a market darling when it was disclosed Friday afternoon that Lone Pine Capital had bought into it. Since that hedge fund is headed by veteran investor Stephen Mandel, its stock picks matter, and investors often follow by buying the same securities.
With Luckin, Lone Pine disclosed that it and affiliated entities have accumulated 6.1 million American depositary receipts. This represents 48.5 million class A shares of the company.
Luckin makes for quite the compelling investment case. It’s growing extremely fast in its native market, a spurt that helped vault its revenue an eye-popping 640% higher in its most recently reported quarter. The number of paying customers also shot skyward, at a 413% clip.
Although it isn’t yet profitable on the bottom line thanks to such aggressive expansion, Luckin should get there before long — its store-level operating result flipped to a profit, with an encouraging 12.5% margin.
The company aims to become the largest coffee chain in China by year-end. Even if it doesn’t hit that goal, it’s still on a tear… and consider just how large and populated that country is.
Those aforementioned quarterly results were well above analyst expectations, so not surprisingly, the American depositary shares have been on a sharp upward trajectory, too. But even with the rising popularity of coffee in China, that market remains significantly underserved, and Luckin appears to be the best candidate to fill the gap. Considering that, I’d say this stock feels very much like a buy.
Another high-potential stock rising high on Tuesday was SolarEdge Technologies (NASDAQ: SEDG). The company, which produces specialized components (chiefly inverters and optimizers) for residential solar energy systems, saw a rise of almost 8% on the day.
The catalyst seems to be a positive investment bank analyst note. At the beginning of the week, Needham & Company initiated coverage on SolarEdge with a buy rating and a price target well above its level. (Needham pegs the share value at $102; it last closed at just over $88.)
The investment bank feels that over the next two fiscal years, SolarEdge will capitalize on “a growing product roadmap and expanded supply chain outside of China in its core solar products business.”
I’d agree, and add that since solar is becoming an increasingly affordable and, therefore, compelling option for homeowners, smart operators in the industry should continue to see excellent growth in the coming years. What helps is that SolarEdge’s components fit numerous systems made by other solar manufacturers, and as such those parts are often the go-to choice for installers.
Through organic growth and acquisitions, SolarEdge has also done a good job upping its revenue, and lately it’s been profitable at encouraging margins. I certainly think the company can keep up the momentum, so investors should seriously consider buying this stock.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of Luckin Coffee Inc. The Motley Fool recommends SolarEdge Technologies. The Motley Fool has a disclosure policy.