Strike a Balance Between Growth and Stability With These 3 Names Ready to Rally

Investors often feel forced to pick between companies that are dependable, with steady returns but fewer opportunities for growth, and those that have strong growth potential but run the risk of volatility. Though rare, there are some firms that exist at the intersection of both stability and potential for returns. These companies tend to have durable end markets, healthy balance sheets, and are positioned in industries experiencing secular growth trends. Three industries that may benefit from persistent structural demand drivers in the coming years are electric vehicles, advanced chip manufacturing, and water infrastructure. Each of the companies below is positioned to benefit from one of these three themes, offering a combination of durability and potential growth over a multi-year investment cycle.

Allegro MicroSystems, Inc. NASDAQ: ALGM has established itself as one of the top suppliers of magnetic sensing integrated circuits and power semiconductors, shipping more than 2 billion devices each year. These products have numerous applications across industries—including the lucrative data center space—but perhaps the most promising in the years to come is the automotive market. Automotive revenue represented 71% of the company's total sales in its latest fiscal year, thanks to electric vehicle and advanced driver assistance system (ADAS) products, among others. As these two categories in particular are likely to continue to see strong demand going forward, Allegro could capitalize on its industry-leading position. Of course, diversification into other industries is important for stability, and Allegro's recent 32% sequential sales growth in its data center business is encouraging. Data center revenue for the current fiscal year is expected to more than double.

Onto Innovation NYSE: ONTO fills a critical gap. This firm offers optical inspection, defect review, and process control systems to semiconductor maker clients to help improve yields and reduce production errors. Onto does not rely solely on demand for wafer fabrication, giving it some buffer against industry volatility due to suppl...