The 10 best stocks to buy for 2020.
The 2010s were kind to the average Wall Street investor; the era ended as the first uninterrupted full-decade bull market in history. Going into 2020, the U.S. economy was still on solid footing, with the largest looming concern being the U.S.-China trade war. This dynamic informed the annual list of best stocks to buy that U.S. News puts together, and, like the broader market, some of the highlighted stocks were caught flat-footed. That said, with interest rates near zero, the stock market remains an essential long-term wealth-building tool for all financially able Americans. Here’s a look at U.S. News’ picks for 10 of the best stocks to buy for 2020, how they’ve performed in crisis and whether they’re still worth buying.
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. When U.S. News picked MED in early December 2019, shares traded around $90 a pop, paid a huge dividend and enjoyed an important catalyst: An activist investor, Engaged Capital, which had previously made a killing on Medifast, was back to agitate for further changes and a possible sale. That driver still exists, and a sale at today’s prices would fetch considerably more than it would’ve to begin the year. A 2.4% dividend and a forward price-earnings ratio of 15 make MED still look attractive after its run-up, especially with analysts expecting 20% compound earnings growth over the next five years.
Market capitalization: $2.14 billion
Year-to-date performance (through 9/9/20): +63.3%
YTD S&P 500 performance: +5.2%
Alibaba Group Holding (BABA)
Alibaba was uniquely built to thrive, even during a pandemic originating in China, as U.S. News’ original analysis unknowingly highlighted: 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. Asia’s largest diversified e-commerce company continued to put up robust growth numbers in the second quarter, posting 59% year-over-year revenue growth in cloud computing, a 34% increase in overall revenue from the prior year, and mobile monthly active users of 874 million — up 16% year over year.
Market cap: $734 billion
YTD performance: +28.8%
YTD S&P 500 performance: +5.2%
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 196 stations in 114 markets. Although NXST shares have underperformed in 2020 as shareholders worry about sliding advertising revenue in a recession, NXST is quietly putting up really impressive numbers. Last quarter, Nexstar set a record for second-quarter net revenue, which surged 40% on the heels of distribution agreement renewals, the acquisition of Tribune Media stations and heightened political spending. Nexstar simply remains a hidden gem, trading for 12 times earnings and offering a price-earnings-growth (PEG) ratio of just 0.76. The stock also pays a 2.3% dividend, and the company recently added $300 million to its share repurchase plan.
Market cap: $4.4 billion
YTD performance: -15.5%
YTD S&P 500 performance: +5.2%
AbbVie (ABBV)
AbbVie, which makes the world’s best-selling drug 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 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 well off their 52-week lows. For investors sick of ringing in another new year with interest rates in the gutter, ABBV pays a 5.2% dividend and trades for about eight times forward earnings. A dividend aristocrat that has grown its dividend for more than 25 straight years, AbbVie is an attractive pick for income investors and should also enjoy higher growth prospects as Botox sales bounce back with the economy increasingly reopening.
Market cap: $159.2 billion
YTD performance: +7.8%
YTD S&P 500 performance: +5.2%
NMI Holdings (NMIH)
Mortgage insurer NMI Holdings is easily the hardest-hit of the best stocks to buy for 2020 picks, despite growing revenue from less than $54 million in 2015 to $422 million in the trailing 12 months. Shares rallied 85% in 2019 alone, and at about 10 times forward earnings and a PEG ratio of 0.48, NMIH looked cheap going into 2020. That said, NMI’s business is poorly positioned for unprecedented shutdowns, which have put millions of Americans out of work. Homebuyers who can’t afford a 20% down payment typically must buy mortgage insurance from somebody like NMIH, which reimburses the lender for any defaults. Even with sound underwriting, defaults rose from 0.38% at the end of March to 3.76% at the end of August. The upside could be good if the economy quickly recovers, but tread carefully with NMIH.
Market cap: $1.5 billion
YTD performance: -45.2%
YTD S&P 500 performance: +5.2%
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. Healthpeak focuses on high-quality real estate in the health care area, specifically life sciences, medical offices and senior housing units. A healthy dividend, which now stands at 5.2%, as well as a business model well-positioned to benefit from the aging baby boomer demographic over the longer term, made PEAK an attractive pick to start the year. In 2020, PEAK has taken a hit as tenants seek rent suspensions, move-ins dwindle and construction is put on pause. Through late July, new virus cases in its senior housing properties were down over 50% from April highs, a hopeful indicator for its senior housing portfolio.
Market cap: $15 billion
YTD performance: -15.3%
YTD S&P 500 performance: +5.2%
Newmont Corp. (NEM)
Newmont has been a fantastic stock in 2020, fulfilling the rationale for inclusion stated in December’s write-up: 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. Gold often rallies when chaos and fear grip markets, and that phenomenon has held true in 2020, with gold briefly rallying to all-time highs above $2,000 an ounce. With more than 95 million ounces of proven or probable gold reserves, having exposure to the soft metal through NEM stock is a levelheaded strategy. NEM tends to have little correlation with the wider stock market — an important characteristic for the cautious investor. For every $100 increase in gold prices, Newmont adds $400 million to its annual free cash flows.
Market cap: $55 billion
YTD performance: +58.6%
YTD S&P 500 performance: +5.2%
Facebook (FB)
The case for naming Facebook one of the best stocks to buy for 2020 was fairly straightforward: With 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 are up by more than 140%, easily surpassing the S&P 500’s 53% return. Long-term opportunities still exist; Instagram monetization is in the early stages, and opportunities in Dating, Facebook Marketplace and elsewhere abound. Facebook Shops, which allows businesses to sell directly on Facebook and Instagram, is the 2020 rollout most rife with potential.
Market cap: $780 billion
YTD performance: +33.4%
YTD S&P 500 performance: +5.2%
British American Tobacco (BTI)
Corporate tobacco kingpin BTI is no favorite of environmental, social and 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 43% in 2019, this rally still constituted a truly subdued bounce back from a precipitous fall in 2018, when shares hit their lowest levels since 2010 amid competitive vaping worries. A sound, still oversold consumer defensive stock that boasts the highest dividend on this list at around 9%, BTI is another pick that can offer hard-to-find income and insulation from the worst of any downturn. A consensus price target of $44 per share implies the stock is unjustly beaten down, with around 25% upside from current levels. A P/E ratio of about 9 is also comfortably beneath the five-year average of 13.
Market cap: $80 billion
YTD performance: -14.6%
YTD S&P 500 performance: +5.2%
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 with British American Tobacco, at current levels, it seems the potential reward should more than compensate for that. If analyst expectations for earnings of $2.39 per share in 2020 hold true, UVE is currently trading for about 7.7 times forward earnings. While the small-cap insurer has been hit pretty hard in 2020, an impressive string of insider buys indicates people within the company still believe in it. The first half of 2020 saw a ding to earnings from an above-average amount of inclement weather, but the company claims it has seen no material financial impact from the pandemic — although you wouldn’t know that from Wall Street’s disavowal of the stock this year.
Market cap: $577 million
YTD performance: -33.5%
YTD S&P 500 performance: +5.2%
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 Corp. (NEM)
— Facebook (FB)
— British American Tobacco (BTI)
— Universal Insurance Holdings (UVE)
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10 of the Best Stocks to Buy for 2020 originally appeared on usnews.com
Update 09/10/20: This story was published at an earlier date and has been updated with new information.
