Each year our analysts take part in a “Best Stocks for …” contest. Which stocks were identified for 2020? Let’s find out …
2019 is all but in-the-bag and at this point, and what a year it was for stocks.
If you recall, on Christmas Eve of last year, the S&P was teetering on the verge of a bear market, down nearly 20%.
But emboldened investors who stepped in were rewarded, to say the least … As you can see below, since those Christmas Eve 2018 lows, the S&P has returned nearly 35%. And the Nasdaq? More than 41%.
These returns cap off a decade that’s been truly extraordinary.
As of December, the U.S. economy has expanded for a record 126 straight months. That’s the longest period in the country’s history according to the National Bureau of Economic Research.
But let me phrase it a different way in order to drive home the significance …
The U.S. economy has now started and ended an entire decade without a recession. That’s never been done before.
As for the stock market itself, it’s the longest-running bull in history, with the S&P up roughly 375% from its March 2009 bottom.
But time marches on. And the more relevant question today is what lies ahead?
In today’s Digest, let’s address that question. But in doing so, let’s temporarily change our focus from macro to micro. In other words, forget broad-market predictions for the time-being — for now, let’s look at a handful of specific, elite stocks which five of our top analysts have hand-selected as best-of-breed for 2020.
You see, each year, InvestorPlace holds a “Best Stocks for …” contest. So, while we toast the great year behind, let’s now look ahead to see which stocks are likely to continue treating our money the best.
Let’s jump in.
***John Jagerson and Wade Hansen are bullish on this entertainment juggernaut
John and Wade are our resident “quants.” Simply put, that means they often use real, historical market data to identify patterns and trends. Then they use that information to help make well-informed predictions as to what might happen in the markets going forward.
As they look to 2020, their pick is a market veteran that’s nimbly adapting to today’s technologies.
From John and Wade:
Disney hasn’t always taken advantage of the subscription model to generate consistent revenue. It used to be much more reliant on big, one-time product launches and movie releases.
But it has been slowly building into a subscription model powerhouse during the past few years.
But John and Wade note there’s more to like besides this one revenue generator. They point toward Disney’s stake in Hulu, its massive income stream thanks to its series of movie franchises, and its expanding theme park and hotel business.
The guys finish their review with a technical analysis of Disney’s current market position, culminating with:
The stock recently broke above up-trending resistance just above $150, and we expect this up-trending level to serve as support while DIS stock climbs even higher during 2020.
***Eric Fry sees a lot to like with this copper dominator
Eric is InvestorPlace’s global macro specialist. He’s also considered to be one of the greatest stock pickers of all time by many finance industry insiders, having racked up an astounding 41 1,000%+ stock winners in his career.
Looking to 2020, Eric has chosen a company that’s combining old school commodities with cutting-edge technology. Which group is behind this?
Freeport-McMoRan, one of the world’s largest copper producers, has been testing an artificial intelligence, or “machine learning,” model at its Bagdad copper mine in Arizona.
This machine learning model uses data from sensors around the mine to “tailor” the ore processing method to each of the seven distinct types of ore that come from it.
Eric goes on to note how Freeport will boost copper production in 2020 by ramping up its new underground mining operations in Indonesia, and by bringing the company’s new Lone Star copper development in Arizona into production.
Eric tells us that, combined, these initiatives should result in a major jump in earnings, even if commodity prices remain where they are. But that’s not what Eric expects:
I believe the price of copper is on the verge of a major upside move that will carry it above the five-year high of $332 a pound it hit in late 2017.
***Neil George has identified an election-proof cash-gusher
Neil is InvestorPlace’s resident income expert. Whether through quality dividend stocks, bonds, REITs, or MLPs, Neil helps subscribers find safe income in the markets through his Profitable Investing newsletter.
As Neil looks at the markets in 2020, he sees a potential speedbump — the election. But the stock he has picked should be fine regardless of what happens in November.
My single stock recommendation for 2020 is set up to continue to capitalize on the U.S. economy. But it’s also capable of dealing with potential changes in government.
Neil explains that due to its business structure, his pick …
… can make specific investments in its operations while avoiding federal income taxes. This means shareholders receive more cash.
What’s the company?
It’s a BDC (business development company) called Hercules Capital.
Hercules is an investment company that focuses on financing and guiding technology from start to IPO.
Neil explains that Hercules scouts out innovators in various stages of development. And in turn, it creates financing to fund their development. But beyond just making loans, it also takes equity stakes in the companies either directly or via warrants.
And it’s paid off …
… for 2019 year-to-date, (Hercules) has generated a return of 42% — well above the S&P 500.
As for income, its annual dividend is now coming in at a whopping 9.4%. Despite all of this, it’s valued at just 1.4 times its book value.
***Louis Navellier likes this perfectly positioned housing stock
Louis is a numbers guy. So much, in fact, that he’s created algorithms to run on high-powered computers that use objective criteria to signals what he should buy, when he should buy it, and when he should sell to collect the profits. This way, Louis can eliminate hunches and gut-feeling from investing, which often lead investors astray.
Louis’ 2020 pick has been posting some great numbers, which you’ll see in a moment. But what’s behind those great numbers is a company benefiting from some big tailwinds — lower interest rates and lower construction costs. We’re talking about PennyMac Financial Services.
As to those numbers, here’s Louis:
For the fourth quarter, analysts have upped earnings forecasts by a whopping 53.5% in the past three months. The current consensus estimate calls for 141.3% annual earnings growth and 73.1% annual sales growth.
PFSI stock is up 51% in the past year, which is pretty significant for a mortgage lending company. Yet its trailing price-to-earnings ratio is still below 15. That shows there’s plenty of value — and growth — left for this stock.
***Matt McCall’s favorite pick is a leading biopharma play
Matt is InvestorPlace’s trend, or “thematic” expert. He specializes in identifying major trends that are re-shaping our world, and by extension, the investment markets.
And as you might expect, his pick plays off a market sector poised to experience major growth in 2020 — biotech.
Among the other “hypertrends” predicted by me and Louis Navellier, 2020 could easily go down as The Year of Biotech.
There are so many factors that go into that. For example, next year marks the 20th anniversary of the sequencing of the first human genome, and we’re seeing tremendous advancements in gene therapies. We’re also seeing growing earnings and stronger stock performance of the best plays in this dynamic sector.
So, what’s Matt’s favorite way to play this biotech surge?
Matt explains how the biotech was founded in 2012 by a group of parents, advocates, researchers and FDA members who were frustrated with the lack of focus on severe food allergies. Their goal was to turn oral immunotherapy into a clinically validated, FDA-approved treatment.
According to research, orally administered allergy treatments allow people to build a tolerance against accidental exposure — like being on a plane where peanuts are being served. In other words … the industry’s first preventative treatment for food allergies.
Matt walks through Aimmune’s potential customer base, its 2020 revenue growth predictions, and its pipeline, summarizing with …
The stage is set for Aimmune. Its potential in tackling the unmet needs of allergy sufferers is nearly endless, and 2020 will only be the beginning.
If you’re looking for great stock ideas for 2020, these five are a great place to start.
Wrapping up, here’s to hoping that 2020 is just as strong for the markets as was 2019.
Have a good evening,