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It’s not too late to buy these market-beating stocks

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In the stock market, past performance is no guarantee of future success. Still, it’s worth considering investing in companies that have a history of beating the market. If said company can replicate the formula (or something close to it) that has made it successful in the past, it may still have what it takes to deliver above-average returns.

Let’s take a look at two stocks that have impressive track records on the stock market: DexCom (NASDAQ:DXCM) and netflix (NASDAQ:NFLX). For investors who might have missed either company, it’s not too late to get in on the action.

DXCM data by YCharts

1. DexCom

DexCom is a specialist in medical devices. Thanks to its G6 device, it is the market leader in continuous blood glucose monitoring (CGM) systems. CGM technology allows diabetic patients to automatically track their blood sugar levels throughout the day. The increasing adoption of CGM technology is one of the main reasons DexCom has been so successful. It’s not hard to see why it’s becoming increasingly popular among people with diabetes.

Blood sugar fluctuates throughout the day. Diabetic patients who use blood glucose meters (BGM) can only know their blood sugar level at a given time. Not to mention the fact that BGMs sit on sore fingers. In contrast, CGMs continuously track this essential measurement for diabetic patients and generally do not rely on fingers.

The DexCom G6 takes 288 readings per day, or one every five minutes. Overall, CGM technology is associated with better health outcomes for people with diabetes.

Image source: DexCom.

DexCom benefited from the growing popularity of CGMs with growing revenues. Last year, the company’s revenue jumped 27% year-over-year to $2.45 billion. Its adjusted net earnings per share for the year declined to $2.66 from $3.10 reported in the prior year period. DexCom recently fell along with the broader market in a selloff that has been particularly difficult for growth stocks. However, there are excellent reasons to be optimistic about the company’s future.

First, it is gearing up to launch a brand new product, the G7, which will deliver even better health outcomes for its target population.

Indeed, DexCom recently obtained a regulatory decision that will allow it to market the G7 in Europe. It has already submitted an application for regulatory review for the G7 in the United States, and the device could gain approval before the end of the year. Second, CGM still has a long way to go. Even in the United States – a world leader in technology adoption – it enjoys relatively low penetration.

DexCom is well positioned to remain a leader in this market which is on an upward trajectory, which is why the company’s future still looks bright.

2.Netflix

Netflix has performed beautifully over the past decade, but the company is arguably going through its toughest time in quite some time. Here are some of the problems it faces.

First, there is competition. The number of streaming platforms has exploded in recent years. Consumers have more choice than ever, which affects the company’s ability to attract new subscribers.

And that brings us to our second point: Netflix’s paid net additions have been unimpressive (to say the least) over the past two quarters. In the first quarter, the company lost 200,000 subscribers, which fell short of its projection for new additions totaling 2.5 million. That’s a big reason Netflix’s shares have been hammered lately.

Third, the company faces a password sharing problem. It estimates that around 100 million households log into its platform with borrowed passwords. This is in addition to the 222 million paying subscribers it had at the end of the first quarter.

Despite these issues, there’s one crucial point that Netflix management keeps mentioning: streaming platforms still don’t control the bulk of television viewing time in the United States. In February, streaming accounted for just 28.6% of the total. So there’s still plenty of room for streaming to overtake broadcast and cable. The question is how well can Netflix perform in this environment. The company is exploring several options, including some that have proven successful in the past.

Netflix will continue to focus on producing high quality content to keep consumers engaged and entertained. However, this will no longer be enough and the tech giant will have to look elsewhere. Management is considering several options, one of which is to introduce low-cost plans that display advertisements. This could encourage some households that engage in password sharing to get their own subscriptions. The company has also dabbled in games.

Even if the short term looks muddy for Netflix, the company’s name recognition, cash flow generation and track record of its shrewd capital allocation strategy should help turn the tide. I don’t expect Netflix to produce the kinds of returns it did in the 2010s, but in my opinion, there’s still plenty of fuel left in the company’s growth engine.

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Prosper Junior Bakiny has no position in the stocks mentioned. The Motley Fool owns and recommends Netflix. The Motley Fool recommends DexCom. 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.

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