It’s a common misconception that when a stock you buy skyrockets, it makes sense to sell it (or at least sell some of it) to lock in your gains. But the context is important. If the stock has risen sharply because the company is performing exceptionally well, this could still be a bargain.
I have a few examples of these types of stocks in my own portfolio. These three have risen 100% or more in just a few years, but still seem attractive investment opportunities today.
A great environment for home builders
Dream Finders Homes (NYSE:DFH) went public in 2021 and started buying shares shortly after. But I aggressively added to my position when the real estate market stalled in late 2022 and stocks plummeted. Today my total Dream Finders investment is 110% more than what I paid.
What is the main reason for the great performance? While home sales slowed, the market clearly favored new homes over existing homes. Not only did homebuilders have the opportunity to produce more inventory at a time when existing housing stock was at a generational low, but they could also offer incentives (especially when it came to financing) that existing home sellers cannot offer, such as buying up mortgages .
Dream Finders exceeded already ambitious home closing expectations by 2023, with 7,314 closed home sales (the initial expectation was 6,000) and a 7% increase in average sales prices. However, following somewhat disappointing results in its first quarter earnings report, Dream Finders fell significantly and now trades at just 9.4 times forward earnings, presenting investors with an excellent long-term opportunity.
Group hotels are a great business
I first bought shares of Ryman catering properties (NYSE:RHP) in 2019 and watched them plummet when the COVID-19 pandemic began. I ended up tripling my position near the low and buying about two-thirds of my shares at about $14.50. From that point on, Ryman is up 633%. However, given my total cost basis, I’m up about 125% on my Ryman investment, not including the dividends I received along the way.
In short, Ryman specializes in group-oriented hotels and events. It owns the five massive Gaylord hotels and several iconic entertainment assets. And the company is proving to be much more resilient in a post-pandemic world than many expected.
In the first quarter of 2024, Ryman’s average daily rates (ADRs) for same-store hotels were the highest ever in a first quarter. Additionally, Ryman’s entertainment business is expanding rapidly. It just opened its flagship Ole Red location on the Las Vegas Strip and has a massive entertainment complex in Nashville in development in partnership with country star Luke Combs.
Ryman trades for less than 15 times expected 2024 funds from operations (FFO), despite its impressive performance and long-tail growth potential.
Don’t believe the ‘shopping malls are dying’ story
I added Simon Real Estate Group (NYSE: SPG) Added to my portfolio in mid-2020 as an opportunistic play during the pandemic lockdowns. At the time, no one knew when (or if) it would be safe to go to the mall again, and the stock price reflected that uncertainty. About four years later, the stock is up 127%, but I still think it’s cheap.
In the most recent quarter, despite widespread fears of a slowdown in consumer spending, Simon’s net operating income grew about 4% year over year, and mall occupancy grew 110 basis points to 95.5%. The company gave shareholders a dividend increase for the second quarter in a row and now yields about 5.4%. With shares trading at 11.7x management’s full-year FFO guidance, Simon appears to have tremendous value at its current price.
These may be volatile stocks, but they are solid businesses
These three stocks can be (and have been) quite volatile in the short term. But these are three excellent and well-managed companies trading at cheap valuations, and patient long-term investors might want to take a look.
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Matt Frankel has positions in Dream Finders Homes, Ryman Hospitality Properties and Simon Property Group. The Motley Fool holds and recommends positions in Dream Finders Homes. The Motley Fool recommends Ryman Hospitality Properties and Simon Property Group. The Motley Fool has a disclosure policy.
3 Stocks That Have Already Doubled My Money But Still Look Like Dirt-Cheap Bargains Originally published by The Motley Fool
