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Our Company of the Year is a good investment, even a year later

Rick Newman
·Senior Columnist
·3 min read

Target’s stock price doubled in 2019, one of the reasons we named it the Yahoo Finance Company of the Year. But the stock wasn’t out of gas. So far in 2020, TGT has risen another 36%, nearly triple the gain of the overall market. Even amid the coronavirus pandemic, Target (TGT) has proven to be a muscular survivor of the retail apocalypse, with the mix of physical stores, online delivery, popular merchandise, and cachet shoppers want—as we highlighted a year ago.

We’re not investment advisers, and our Company of the Year isn’t a stock pick. But we do scout for companies that are waxing rather than waning, and likely to perform as well after we honor them as before. If this year’s pick, Zoom (ZM), performs like past winners, it will stay hot for the foreseeable future.

Since we began choosing a Company of the Year in 2013, all seven of our choices have had positive gains the following year. Six times out of seven, those stocks outperformed the S&P 500. Including all years, our choices outperformed the S&P by an average of 21.1%.

The one company that underperformed the following year was Square (SQ), our 2018 Company of the Year. The stock rose 17% in 2019, about 6 points below the S&P 500. But look what happened next. Square has soared by 229% in 2020, driven by two factors: rapid adoption of its Cash App mobile payment service, and a surge in bitcoin transactions through Cash App as the price of bitcoin has doubled in recent months. We highlighted both of those new business lines in our 2018 profile of Square.

This 2020 Company of the Year, Zoom, has chalked phenomenal performance, with the stock up 508% this year, through Dec. 4. At one point, in mid-October, it was up 735%. Since the videoconference platform is one of the hottest pandemic plays, the stock cooled off in November and December amid news of a coronavirus vaccine and a possible end to the pandemic in 2021.

See also: 3 reasons Tesla isn’t our Company of the Year

We considered whether Zoom is a one-hit wonder, and concluded it is not. Some remote activities are likely to persist once the virus recedes, since workers and companies have learned they can accomplish more that way than they once believed. Zoom is also rolling out new capabilities to capitalize on its sudden ubiquity and keep growing, such as event hosting and software kits allowing developers to put Zoom features into other apps. There’s also the possibility a bigger company could acquire Zoom—which would be a first for the Yahoo Finance Company of the Year.

Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: rickjnewman@yahoo.com. Click here to get Rick’s stories by email.

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