Despite the “tech wreck” that started in October, technology and healthcare still had some of the best stocks to buy in 2018.
Unless, that is, your car broke down.
The last quarter has wrecked a lot of great years. Netflix (NASDAQ:NFLX) was a first-half winner, doubling investors’ money through July, but has since lost 25% of its value.
Even the year’s biggest winners had a bad fourth quarter. Only one is up since October began. The biggest gainer has been crushed these last few months … just not enough to fall off the list.
It’s a reminder of what former Federal Reserve board chair Paul Volcker is reported to have said when a woman asked him, during his time at the Fed, what the stock market would do.
“Madam,” he said. “Prices will fluctuate.”
With that in mind, here are five of the best stocks to buy as we head into 2019 (assuming they continue their success from 2018, of course).
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) has been falling like a rock during the fourth quarter of the year, but still opened for trade on Dec. 11 up 82% from where it was at the start of the year.
AMD’s Ryzen microprocessors have been grabbing hunks of market share from rival Intel (NASDAQ:INTC), and seem poised to grab even more in 2019. Its Radeon graphics cards have held their own against rival Nvidia (NASDAQ:NVDA) and have benefited from the cryptocurrency boom.
That boom busted in 2018, and the realization of that fact hit AMD hard. But graphics will still be at the heart of Artificial Intelligence (AI) applications in 2019, and advanced gaming remains a growing market. Intel is still not expected to catch up with AMD’s current chip line until at least 2020.
CEO Lisa Su gets credit for AMD’s rise, but it was begun by predecessor Rory Read, now President of Dell’s Virtustream unit, who committed the company to what became the Ryzen architecture early in the 2010s.
AMD sales are slowing as the year ends, with analysts expecting it to record revenues of just $1.45 billion, when the company next reports on Jan. 23. That would still give it yearly revenues of about $6.5 billion, against a market cap of about $20 billion.
Still, the expected fourth-quarter revenue would be down 20% from its peak of $1.76 billion in revenue, recorded during the June quarter.
To get on this list in 2019, AMD is going to need to surprise again.
TripAdvisor (NASDAQ:TRIP) is the one company on this list that is up during the fourth quarter, by nearly 20%, giving it a gain of over 76% through Dec. 10.
The company’s strategy of moving from travel advice into hotel bookings has propelled it forward. Its third quarter was especially strong, with profits from booking hotels up 54% year-over-year.
Many people who once routinely looked at TripAdvisor, then booked their trips through Booking Holdings’ (NASDAQ:BKNG) Booking.Com or Expedia Group’s (NASDAQ:EXPE) Expedia, are now staying on the site through the booking process. It took time for the strategy to pay dividends, but now that it has, TripAdvisor is a hot stock. The company is also projecting an increase in revenue for the fourth quarter, ending a string of declines.
CEO Stephen Kaufer continues to try new things to keep the stock price high. The company recently signed a deal with DoorDash to enable food deliveries to hotels, direct from the TripAdvisor site. It continues to gain traction by publishing “best of” lists, even in relatively obscure locations. It also launched a redesign in November, aimed at casual users, with things like lists of where Facebook friends have been vacationing.
To stay on this list of best stocks to buy for the year, however, TripAdvisor needs a strong global economy. Travel is one of the first things to be cut from the budget when times get tough.
Advance Auto Parts (AAP)
One year’s loser can be the next year’s winner. Thus, the most surprising member of the winner’s list this year is Advance Auto Parts (NYSE:AAP), up over 56% so far in 2018.
Advance stock plunged nearly 50% in 2017, and its gains in 2018 still have it 3% lower than where the stock traded two years ago. CEO Thomas Greco formerly ran Frito-Lay for Pepsico (NYSE:PEP) and it took him time to get his plans in place.
The company, which operates a chain of nearly 5,000 stores, opened a new mobile website recently that lets repairmen communicate among each other about parts and repairs, as well as with the company’s staff.
The company also moved its headquarters from northern Virginia to Raleigh, NC, home of Red Hat (NYSE:RHT), which International Business Machines (NYSE:IBM) is in the process of buying, and promised to deliver 450 jobs, most of them in software, with a $12 million state incentive.
Auto parts have proven to be relatively immune to Amazon, and this has helped the entire sector. Advance has built a logistics network to deliver same-day service on parts to repairmen, which is vital to their staying in business.
Advance looks to be in a good position entering 2019, as an economic slowdown is certain to cause more people to fix old cars rather than junk them, and the U.S. auto fleet continues to age.
Abiomed (NASDAQ:ABMD) is an example of a company finally being rewarded for making a better mousetrap. In this case, the mousetrap can save your life.
Abiomed makes Impella, the world’s smallest heart pump, and AbioCor, an artificial heart. The stock has been hammered during the fourth quarter, losing one-quarter of its value, but remains up 68% for the year through Dec. 10.
Abiomed carries a $14.5 billion market cap on less than $600 million in fiscal 2018 revenue, but that revenue is one-third higher than what it was in 2017, and nearly three times higher than the $230 million in revenue recorded in 2015. Net income also more than doubled from 2017, to $112 million, or $2.45 per share.
The company’s strong growth has analysts pounding the table for the stock, whenever it weakens, but with only 45 million shares outstanding, the shares remain vulnerable to swings in the larger market.
Abiomed continues to seek new markets for Impella and recently completed a study showing it can be useful in the immediate aftermath of a heart attack, reducing the severity of the attack and limiting the damage.
If Abiomed stock continues to weaken, it should be a takeover candidate in 2019. If it can keep growing at its present rate, however, it will be able to resist a takeover.
Either way, investors should be winners and it is still among the best stocks to buy right now.
Fortinet (NASDAQ:FTNT), the computer security company, has not only out-gained Netflix in 2018, but it has out-gained it over the last two years, with the stock up 151% against Netflix’ 117%.
Much of that overperformance has happened over the last three months, during which the stock is down 14% while Netflix has shed 24% of its value. But for the year, Fortinet is still up 70% — a stellar performance in any market.
Fortinet calls its niche managed security for large data centers. Other people call it cloud security. The data center security market is expected to grow to $132 billion over the next few years, with increasing margins. This expectation has brought Fortinet’s market cap to $12.7 billion, on expected 2018 revenue of $1.75 billion, up from $1.44 billion in 2017.
Cybersecurity, however, is an area where you must continue heavy investment to stay ahead of the bad guys, and Fortinet has only become highly profitable in the last nine months, exceeding its 2017 net income for each of the last three quarters, with over $200 million in net income expected before the year ends.
Cybersecurity is also an area where products are rapidly becoming services, and Fortinet is benefiting from the trend. Its recent deal with Symantec (NASDAQ:SYMC), signed just this month, combines its next-generation firewall technology and FortiGate security fabric into Symantec’s Web Security Service.
All this makes Fortinet, of all the companies on this list, best positioned to repeat in 2019.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at [email protected] or follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in AMZN, AAPL and MSFT.