3 Stocks That Could Double Your Money

Anders Bylund, Timothy Green, and Dan Caplinger, The Motley Fool

Updated Fri, Jun 15, 2018, 6:19 PM

But it's not always easy to find these high-growth opportunities. That's why we asked for some help from your fellow investors here at The Motley Fool. Our panelists believe that International Business Machines (NYSE: IBM), Fitbit (NYSE: FIT), and Toll Brothers (NYSE: TOL) are primed to double your investment in relatively short order.

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Don't call it a comeback, Big Blue has been here for years

Anders Bylund (IBM): I know, IBM isn't supposed to get growth investors all excited. The technology veteran has seen nothing but shrinking revenues over the last five years alongside stable profits, at best. Over the same period, stock prices fell 29% lower and IBM investors missed out on a 70% growth spurt in the broader market.

Those lean years only positioned IBM for a more elastic bounce. Make no mistake -- IBM is returning to growth again, retooled and ready for a new era of market-beating returns. The new IBM is built around a basket of operations known as "strategic imperatives," centered on high-growth, high-margin businesses such as artificial intelligence, cloud computing, data analysis, and even blockchain technologies.

The switch has been going on for several years, causing top-line sales to fall as IBM moved away from legacy operations like server and storage hardware. These days, strategic imperatives account for roughly half of IBM's total sales.

Change is hard, and IBM's strategy makeover has been rougher than most. The stock is trading far below sector peers in terms of various price-to-profit ratios, and simply getting back to industry averages would come close to doubling IBM's share prices. On top of that, both revenue growth and profit margins should take off as the strategic imperatives overshadow IBM's less impressive business operations.

All told, IBM should be able to double your investment in a couple of short years, and the sky is the limit beyond that.

A homebuilder stock with no ceiling to growth

Dan Caplinger (Toll Brothers): The housing market has been quite strong in recent years, and for half a century, Toll Brothers has found considerable success aiming its efforts at meeting the needs of would-be homebuyers seeking upscale residential properties in high-demand areas in 22 states. Properties include not only traditional single-family home communities, but also master-planned resort-style golfing, urban high-rise buildings, apartment complexes, and student housing. Those properties have helped Toll Brothers produce solid gains in sales over time, including a 17% jump in revenue during its most recent quarter compared to year-ago levels.

Toll Brothers' luxury focus helps it do well during times of maximum economic expansion but also exposes the homebuilder to stress when industry conditions become less than ideal. Share prices have fallen during 2018 as investors come to grips with the potential impacts of rising interest rates and higher labor and materials costs on the business. Tax reform efforts that limited deductions for mortgage interest on home loans exceeding $750,000 also could have a disproportionate impact on Toll, especially given its market share in some of the highest-value communities in the nation.

Despite short-term pressures, Toll Brothers has the benefit of facing a long-term demographic shift that favors greater demand for housing, in general. That sets up the stock as a value opportunity after recent declines. With shares currently trading at less than 10 times what Toll Brothers expects to earn this year, it wouldn't take much of a boost in confidence for Toll Brothers to see its shares double -- especially if feared hits to housing's health turn out to be less extreme than expected.

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The beginning of a comeback

Tim Green (Fitbit): Shares of Fitbit have recovered a bit over the past couple of months, but the stock is still down nearly 88% from its all-time high. A collapse in demand for its fitness trackers has led to plunging revenue, and the company's first attempt at a smartwatch failed to turn the tide.

But there's still hope for Fitbit. The company launched the affordable Versa smartwatch earlier this year, aimed squarely at the mass market. Priced at $200, the Versa is only $50 more expensive than Fitbit's Charge 2 Fitness tracker and about $130 cheaper than the base version of the latest Apple Watch. This pricing strategy seems to be working -- Fitbit has sold over 1 million Versa smartwatches in less than two months.

It will take more successful smartwatches for Fitbit to return to growth. Thankfully, the company has a cash-rich balance sheet that buys it plenty of time to turn things around. Fitbit may never reach the same levels of profitability it managed when fitness trackers were all the rage, but there's a viable path out of the land of red ink. If Fitbit's affordable smartwatch strategy keeps working, the stock could easily double.

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Anders Bylund owns shares of IBM. Dan Caplinger owns shares of Apple. Timothy Green owns shares of IBM. The Motley Fool owns shares of and recommends Apple and Fitbit. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.