To The Moon

A marketwide rising tide generally lifts all stocks -- but it won't lift them all equally. Some will reap much bigger gains.

The past week was anything but bullish for the broad market. Fitch downgraded the U.S. government's debt, strong economic data prompted yet another interest rate hike, and a few too many companies served up lackluster earnings guidance.

But investors should be wary of jumping to long-term conclusions based on emotionally charged headlines. Things may not be nearly as bad as they seem on the surface. After several weeks of uninterrupted bullishness, stocks were ripe for profit-taking; many of these headlines were crafted in a way to give investors the prod they needed to do just that.

Once they're satisfied, the bigger economic picture will matter again. That picture's underpinnings are strong employment, surprisingly healthy GDP growth, and cooling inflation.

In other words, don't dismiss the possibility that we're already (or still) in a bull market.

With that as the backdrop, here's a closer look at three different stocks that are particularly well-positioned to benefit from bigger-picture bullishness.

1. Upstart Holdings $Upstart Holdings, Inc.(UPST)$

Investors keeping tabs on banking and lending stocks this earnings season likely see a common thread: Loan delinquencies and defaults are creeping higher. Information like FICO credit scores just aren't enough to help lenders figure out which borrowers are safe bets and which ones are likely to not pay. Enter Upstart Holdings (UPST ).

It's a credit-rating company -- sort of. Rather than using a simple factor-based formula to come up with an individual's credit score, Upstart uses an artificial intelligence-powered algorithm to figure out how likely it is or isn't that a person will repay a loan. The company reports that its evaluation approach results in 53% fewer defaults than the lending industry's current loan-making methodology.

There's no denying interest in an alternative credit rating is there. As of May, the company was providing consumers' credit risk assessments to just under 100 banks and credit unions, doubling its customer count from a year earlier. That's a lot, but it still only scratches the surface of the opportunity.

It remains to be seen if the company's alternative risk-grading performance will remain in place in an environment where more borrowers struggle to make their payments. But in some regards, the lending market's growing defaults and delinquencies are the best-possible advertisement for Upstart's services. Banks and other lenders certainly don't want to suffer any more loan losses in the future than they have to.

To this end, while this past year of rising interest rates has been disastrous in terms of Upstart's sales, earnings, and stock performance, analysts expect revenue growth of 43% next year to lead the company well back into the black. That's not a bad catalyst to plug the stock into a new long-term rally.

2. Broadcom $Broadcom(AVGO)$

When investors think of semiconductor stocks, names like Nvidia or Advanced Micro Devices typically come to mind. And understandably so. These are the companies making the splashiest headlines. Being able to make splashy headlines is a double-edged sword, however. When the microchip market is going through a downturn, these headlines can turn really bearish really fast.

Chipmaker Broadcom (AVGO ) doesn't pose this risk to its shareholders. Although its wares aren't the stuff powering AI applications or serving as the central brain of your personal computer, its chips are found everywhere. You're likely relying on one right now, in fact. Disk drive interfaces, Wi-Fi antennas, Ethernet adapters, cable TV boxes, LED displays, and the software needed to make all of this technology work are just a sampling of what's Broadcom produces.

Sexy? No. But that's the point. What Broadcom lacks in thrills, it more than makes up for in consistency. For instance, despite the disruptive turbulence in place at the time, this company grew its top as well as its bottom lines in 2020 as well as in 2021.

That growth trend is still intact too, and should remain so for the indefinite future. While a handful of chipmakers are waving red flags right now, tech market research outfit Gartner is calling for semiconductor market growth of 16.3% next year, kicking off what McKinsey & Co. believes will be market growth from 2021's $600 billion to $1 trillion in 2030.

3. Realty Income $Realty Income(O)$

Last but not least, add real estate investment trust (REIT) Realty Income (O 1.50%) to your list of stocks just waiting to soar during and because of the next bull market.

Like most REITs, Realty Income's most noteworthy feature is its dividend yield. Its payout currently stands at 5%. You could probably find better, but you could certainly find worse.

What you would absolutely struggle to find, though, is another stock or REIT yielding 5% that also dishes out its dividends on a monthly basis. Its monthly dividend has been paid like clockwork for 637 consecutive months (roughly 53 years) now, but better still, it's been raised 121 times since Realty Income went public in 1994. It even boasts 103 consecutive quarterly dividend increases.

All told, its dividend has grown an average of 4.4% per year since going public, outpacing inflation and helping the stock average an annual 14.2% gain per year during the same time frame.

The impressive monthly dividend pedigree isn't the only reason you might want to make a point of stepping into a Realty Income position at the onset of a new bull market, however. Presuming its economic strength driving stocks higher, Realty Income is perfectly positioned to thrive against that backdrop.

Like any other real estate investment trust, Realty Income owns the real estate it rents out. Its holdings, though, aren't residential. They're commercial. Dollar General, Walgreens, and FedEx are among its biggest tenants. If the economy is booming and businesses are thriving, this REIT will enjoy plenty of opportunities to help these businesses expand. Its recent dividend growth could accelerate rapidly as a result.

In this vein, know that the organization's occupancy rate stands at an incredible 99% as of the end of June, with 561 properties being acquired during the three-month stretch, adding 8.3 million worth of rentable square footage to its portfolio. All this means that the tailwind already seems to be in place.

Source: MarketWatch