Sarah Travers
Investors who consistently buy stocks through both bull and bear markets tend to reap more long-term benefits, as they steadily grow their portfolios. However, bull markets have a unique way of exciting investors and encouraging them to invest more. If you’re feeling the urge to capitalize on strong businesses during the current bull market, here are two growth stocks worth considering.
UnitedHealth Group: A Healthcare Powerhouse
UnitedHealth Group stands out as one of the largest healthcare companies globally, offering a comprehensive ecosystem of services. These services range from healthcare plans for employers, individuals, and Medicare beneficiaries under its UnitedHealthcare segment, to various offerings for both providers and patients within its Optum business.
The Optum segment is particularly noteworthy, featuring Optum Health, which provides numerous tech-enabled services designed to help patients receive care and ensure providers deliver quality care, whether in person, in-home, or virtually. Additionally, Optum Insight offers data and analytics to enhance clinical operations’ efficiency, and Optum Rx operates a network of medical, pharmacy, and behavioral care services, including specialty pharmacies.
Despite facing challenges such as a massive data breach earlier this year that compromised personal information of many American healthcare customers, UnitedHealth Group has taken significant steps to address the issue. The company has set aside over $9 billion in advance funding and interest-free loans to compensate affected customers and healthcare providers. Rising healthcare costs also pose a challenge, but UnitedHealth Group’s strong financial position allows it to manage these issues effectively.
In the second quarter, UnitedHealth Group reported total earnings of approximately $7.9 billion on revenue of $98.9 billion, reflecting a 6.5% year-over-year increase. The Optum divisions were key growth drivers, with revenue from Optum Health and Optum Rx both growing by 13% year over year. The company also reported Q2 cash flows from operations just shy of $6.7 billion and ended the quarter with over $31 billion in cash and short-term investments.
Furthermore, UnitedHealth Group has a solid track record as a dividend payer, recently increasing its annual dividend by 12%, marking the 15th consecutive year of double-digit percentage hikes. The current dividend yield stands at 1.5%, aligning with the average stock trading on the S&P 500. Over the past five years, UnitedHealth Group has grown its annual revenue by 53% and its annual net income by over 60%, making it a resilient healthcare stock with a strong competitive moat.
Chipotle Mexican Grill: Expanding Horizons
Chipotle Mexican Grill has been making headlines recently due to its 50-for-1 stock split. This move made its shares more accessible, as the stock had experienced tremendous growth, reaching $3,000 per share before the split. Post-split, investors can purchase a share for around $50, making it a more viable investment for a broader range of investors.
The stock split, while notable, isn’t the only reason to consider investing in Chipotle. The company’s continued expansion in the fast-casual segment of the restaurant industry, coupled with its strong financial performance, makes it an attractive option. In Q2 2024, Chipotle generated $3 billion in revenue, an 18% year-over-year increase. Comparable restaurant sales rose by 11%, and transaction growth exceeded 8%, driven by effective brand marketing and the relaunch of the Chicken Al Pastor menu item.
Chipotle attained a restaurant-level operating margin of 28.9% for the quarter, marking a 140 basis point increase compared to the same period in 2023. The overall operating margin was 19.7%, up from 17.2% year over year. The company remains profitable and cash-flow positive, with a net income of $455.7 million in Q2, a 33% increase from the previous year. Over the trailing 12 months, Chipotle has generated free cash flow of approximately $954 million and operating cash flow close to $2 billion.
Chipotle’s expansion efforts include the launch of its modern drive-thru lanes, known as Chipotlanes, designed for picking up mobile orders. The recent quarter saw the opening of 52 new locations, 46 of which included a Chipotlane. While most Chipotle restaurants are located in the U.S., the company also has international locations in countries like France, Kuwait, and Germany. With the global fast-casual restaurant market projected to grow at a 4.9% compound annual growth rate through 2030, there is significant room for growth.
Solid Picks for Long-Term Growth
Both UnitedHealth Group and Chipotle Mexican Grill present compelling cases for long-term investment during the current bull market. UnitedHealth Group’s strong financials and diversified healthcare services, coupled with Chipotle’s impressive growth in the fast-casual dining sector and international expansion, make these stocks attractive options. Investors seeking resilient and promising growth stocks should consider adding these companies to their portfolios.
