10 of the Best Stocks to Buy for 2020
The 10 best stocks to buy for 2020.
The 2010s were kind to the average Wall Street investor, as the decade is primed to go down as the first uninterrupted full-decade bull market in history. The U.S.-China trade conflict still looms large entering the 2020s, but the U.S. economy, for the moment, continues to steadily improve. While not every year can see the record highs and 20%-plus gains of 2019, a portfolio of good companies with solid prospects and a handful of defensive-minded names seems as prudent looking forward. Plus, with interest rates still near historic lows, the stock market remains an essential wealth-creation tool. Here are 10 of the best stocks to buy for 2020.
Medifast (ticker: MED)
Health and nutrition products company Medifast specializes in weight loss products, selling bars, meals, shakes and healthy snacks, offering a variety of different plans, 30-day kits and the like. Unfortunately for shareholders, MED's stock price started slimming down in 2019, too, losing 30% through early December as tech issues on its website coincided with deceleration fears. That's great for opportunists, who can now own shares of the health retailer, which also pays a 5% dividend, for just 14 times earnings. An activist investor that formerly owned a large stake agitated for changes, then sold for huge profits (Engaged Capital LLC) is back for another bite. The fund typically lobbies for board seats and may seek to secure an acquisition.
Market capitalization: $1 billion
Alibaba Group Holding (BABA)
China e-commerce giant Alibaba is simply too big -- and too profitable -- for the average investor to ignore. A stock like Alibaba provides a nice mix of growth and security that even conservative long-term investors should consider. Like American counterpart Amazon.com (AMZN), Alibaba dominates e-commerce in its home country, oversees an impressive logistics network, enjoys a growing cloud computing business and is on the forefront of hot growth areas like artificial intelligence. Revenues have grown at an absurd 48% annualized clip over the last five years, and analysts expect sales and earnings to each grow by about 30% in fiscal 2020, which ends in March. Trade war or no, BABA at 21 times forward earnings is too alluring to pass up.
Market cap: $522 billion
Nexstar Media Group (NXST)
Sometimes well-run companies in declining industries like broadcast TV -- especially if they boast real assets, established viewership and impressive reach -- can be deceptively compelling investments. Nexstar is America's largest local TV and media company, owning 197 stations in 115 markets that cover about 63% of U.S. television households. Don't be too quick to knock the business model, which almost singlehandedly made NXST one of the best stocks to buy for 2020. The cash cow is retransmission fees, which Nexstar charges to cable and satellite companies for the right to carry Nexstar's signals. In 2010, those fees totaled $29.9 million, accounting for just 9.1% of company revenue. In 2018, they accounted for 40.5% of revenue -- and clocked in at $1.12 billion. NXST quietly trades for 6 times forward earnings and pays a 1.7% dividend.
Market cap: $4.8 billion
AbbVie (ABBV)
AbbVie, which makes the world's best-selling drug in Humira, went through much of 2019 on a downswing as the market struggled to cope with a proposed $63 billion takeover of Botox-maker Allergan (AGN) at a steep 45% premium. As expected, however, the indignant stance the market initially took to the AbbVie-Allergan tie-up softened, and shares are coming into 2020 well off their 52-week lows. For investors sick of ringing in another new year with interest rates in the gutter, ABBV pays a 5.5% dividend and trades for just 8.8 times forward earnings. The spate of insider buying between June and September, when ABBV traded between $64 and $71 per share, proved a prescient bullish signal, but AbbVie still looks like one of the best stocks to buy for 2020 in the $80s.
Market cap: $127 billion
NMI Holdings (NMIH)
Mortgage insurer NMI Holdings isn't the sexiest stock on the block. But the cliché "never judge a book by its cover" earns its keep with NMIH, which grew revenue from $19 million to $275 million in just five years. Shares rallied 80% in 2019 alone, and at 10 times forward earnings and a price-earnings-growth ratio of 0.48, NMIH still seems cheap. This risk-reward profile is precisely what makes it one of the best stocks to buy for 2020. NMI's industry seems poised to keep growing: homebuyers who can't afford a 20% down payment typically have to buy mortgage insurance from somebody like NMIH, which in turn pays the lender in case of default. As long as underwriting remains sound, NMIH appears poised to cruise higher, collecting monthly payments from homeowners until they own 20% of their home.
Market cap: $2.2 billion
Healthpeak Properties (PEAK)
Technically, Healthpeak Properties is a real estate investment trust, or REIT, but it trades just like a stock. REITs offer exposure to real estate through the stock market, usually pay meaningful dividends and always offer tax advantages for dividend payments. As for PEAK, its focus is on high-quality real estate in the health care area, specifically life sciences, medical offices and senior housing units. The 4.3% dividend not only offers solid tax-advantaged income, but PEAK offers two other upsides: it's not highly correlated with the market at large, and it's well-positioned to benefit from the aging baby boomer demographic. When the market was plunging in late 2018, PEAK rallied; that sort of resilience is valuable in a portfolio.
Market cap: $17 billion
Newmont Goldcorp Corp. (NEM)
If you're the type of investor that likes hunting for homers, NEM likely isn't your cup of tea. But this gold, copper and silver miner still makes the cut as one of the top stocks to buy for 2020 for the simple reason that it's attractively valued and a nice theoretical hedge against recession. When the current record-setting bull market inevitably ends, safe haven asset classes like precious metals should be positioned to benefit. With over 65 million ounces of proven or probable gold reserves, having exposure to the soft metal through NEM stock is a level-headed strategy. NEM pays a 1.5% dividend and tends to have little correlation with the wider stock market -- an important characteristic for the cautious investor.
Market cap: $32 billion
Facebook (FB)
The case for naming Facebook one of the best stocks to buy for 2020 is fairly straightforward: at roughly 2.5 billion users, it's gobbling up the world, and reasonable people could argue that if privacy is dying, individual investors may as well profit alongside Silicon Valley. This marks the fourth consecutive year that FB has been on U.S. News' Best Stocks to Buy list. Since being named as a top stock for 2017, shares of the social media giant rallied more than 70%, surging from $115 to roughly $200, handily beating the S&P 500's 40% return. A great business at a fair price, paying 31 times earnings makes sense for long-term investors; Instagram monetization is in the early stages, and opportunities in Dating, Facebook Marketplace and elsewhere abound.
Market cap: $568 billion
British American Tobacco p.l.c. (BTI)
Corporate tobacco kingpin BTI is no favorite of environmental, social, governance (ESG) investors, but that's far from a death knell for this international so-called "sin stock" behind brands like Camel, Lucky Strike, Newport and Kool. Although BTI added about 21% in 2019 through early December, this constitutes a truly subdued bounce-back from a precipitous fall in 2018 that saw shares hit their lowest levels since 2010 amid worries it was surrendering the vaping market. A sound, still oversold consumer defensive stock that boasts the highest dividend on this list (6.8%), BTI is another pick that can offer hard-to-find income and insulation from the worst of any downturn.
Market cap: $89 billion
Universal Insurance Holdings (UVE)
Property insurer Universal Insurance Holdings is a little-known small-cap stock focusing primarily on the Florida market. Although there's greater risk associated with a smaller company like UVE when compared to British American Tobacco, at current levels it seems the potential reward should more than compensate for that. If analyst expectations for earnings of $3.30 per share in 2020 hold sound -- and assuming no fluctuation in its low P/E ratio of 10.8 -- UVE stock would reach $35.57 by early 2021. These modest assumptions imply upside of roughly 24% from current levels.
Market cap: $950 million
The best stocks to buy for 2020.
-- Medifast (MED)
-- Alibaba Group Holding (BABA)
-- Nexstar Media Group (NXST)
-- AbbVie (ABBV)
-- NMI Holdings (NMIH)
-- Healthpeak Properties (PEAK)
-- Newmont Goldcorp Corp. (NEM)
-- Facebook (FB)
-- British American Tobacco p.l.c. (BTI)
-- Universal Insurance Holdings (UVE)
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