With the new year fast approaching, now is a great time to evaluate your portfolio, rebalance and set yourself up for a profitable 2020. Unlike 2019, when uncertainty took the market lower and offered investors plenty of bargain buys at the start of the year, this year’s market is trading near all-time highs. That makes stock picking difficult, especially as political uncertainty adds a layer of confusion in the year to come.
It’s difficult, but not impossible, to find potential winners in 2020. While the market is near all-time highs, some sectors — like healthcare — have remained relatively untouched by the impressive rally. Investors should also be on the lookout for firms backed by solid financials in case a recession is on the horizon.
Here’s a look at 10 stocks that look likely to deliver in 2020.
Best Stocks: Disney (DIS)
Disney (NYSE:DIS) has already had a good run in 2019, but the mouse looks likely to keep up the good work in the year to come. Disney’s recent streaming service rollout has positioned the firm to make major gains in 2020. More and more subscribers will join and get hooked on the firm’s impressive content library. Credit Suisse sees Disney+ taking on some 20 million subscribers just by the end of the year.
More importantly, though, is Disney’s theme parks — an often underrated part of the firm’s business. Operating income in its parks segment increased by 11% from September 2018 to September 2019. While streaming should help boost DIS over the next decade, the revenue from its theme parks is bankrolling the firm in the near term.
When it comes to retail, Costco (NASDAQ:COST) is one of the best picks out there because of the firm’s unique business model. Costco sells its products more or less at cost and makes the majority of its revenue from membership fees. That’s a good thing as the firm boasts some of the most loyal members on the planet. Renewal rates come in consistently above 90%.
It’s worth noting that COST isn’t a cheap option. But that premium is buying a financially sound company with a low debt-to-equity ratio. Unlike many of its competitors, Costco is still seeing strong in-store traffic. In the coming year Costco should benefit from higher membership fees, as well as new stores in Asia picking up steam, making it a great stock to own moving into 2020.
CVS Health (CVS)
Healthcare stocks have been skittish this year as Democratic candidates argue over how to best overhaul the industry. The prospect of universal healthcare isn’t ideal for healthcare businesses, but any large-scale changes to the industry are unlikely to take effect until 2022 or later should President Donald Trump be defeated.
With that in mind, healthcare is a great place to look for reasonable valuations and CVS Health (NYSE:CVS) is my pick in that industry. CVS’s position as a one-stop shop in the healthcare space makes it a unique play, and the benefits of its Aetna acquisition are just starting to show. Plus, CVS’s setup as a retail pharmacy, a private benefit manager and an insurance network means the firm will be able to offer its clients cost savings. That’s a positive as the industry evolves.
When it comes to chipmakers, Nvidia (NASDAQ:NVDA) stock is hands-down your best bet. 2019 was a bumpy one for the industry as a whole, and 2020 could bring about more of the same as competition remains a concern among investors. However with the U.S.-China trade tension moving in the right direction, chipmakers should see tailwinds in the year to come.
Aside from easing concerns about China, NVDA has several growth catalysts ahead in 2020. The firm’s Tegra SoCs chips have been used in Nintendo’s (OTCMKTS:NTDOY) Switch and Switch Lite devices, both of which have seen strong demand this holiday season. Its data center business is also thriving against competitors and poised for more growth in the New Year.
NVDA’s forecast for the fourth quarter means its upcoming results are likely to disappoint, but that could offer investors a better entry point heading into 2020. But for those looking for a long-term pick in the semiconductor industry, NVDA is it.
Another great long-term bet is Visa (NYSE:V). The credit card firm is likely to benefit from the rise of non-cash payments over the next decade. V has been building up its business to make the most of the growing popularity of electronic payments with several strategic acquisitions in 2019. The firm picked up Earthport (a cross-border payment company), Payworks (a payment gateway firm) and Verifi (a dispute resolution business), all over the past 12 months. The benefits of those purchases should start to pay off in the year to come.
Plus Visa has a history of shareholder friendliness. Though the firm offers a comparatively minuscule dividend yield of 0.7%, Visa management has consistently raised its dividend over the past five years. Plus, the the firm has bought back an average of $2 billion shares each quarter in an effort to return value to its shareholders.
If there was one stock to add to your portfolio ahead of 2020, AT&T (NYSE:T) would be it. The stock has gained roughly 37% this year, but that’s only the tip of the iceberg as the telecom giant continues to execute on its massive turnaround plans.
T is building out a multi-dimensional company that is able to offer customers a variety of bundled products and services. Not only will AT&T be able to offer a 5G network, but its massive library of content through WarnerMedia will also be a draw for customers.
Another benefit to holding T stock in your long-term portfolio is the firm’s generous 5.4% dividend yield. That dividend should soften any turbulence in the year ahead.
Tanger Factory Outlets (SKT)
Retail is a risky place to put your money in 2020, especially if you’re talking about brick-and-mortar stores. However I’d make an exception for Tanger Factory Outlets (NYSE:SKT), whose dividend yield and valuation are simply too good to ignore. SKT’s share price has been on a steady decline throughout the year as worries about dropping store traffic weighed on the sector as a whole.
Tanger’s portfolio of outlet stores offers some security, though, as it provides a shopping experience for bargain hunters. SKT also boasts occupancy rates of more than 90% as retailers take up residence in order to off-load past season inventory. The biggest reason SKT makes the cut as a long-term buy is its 9.5% dividend yield.
2020 could be a great year for Chinese stocks as the nation’s economy has started to show signs of life and trade tension with the U.S. continues to ease. Chinese stocks have already started to come back in favor among U.S. investors. And that trend should continue as long as trade negotiations remain positive.
Baidu (NASDAQ:BIDU) is my pick among Chinese stocks, though it’s worth noting that it is one of the riskier choices on this list. This year BIDU has lost roughly 20% of its value as competition and worries about the Chinese economy weighed on investor sentiment. However, the firm has been investing in artificial intelligence to improve its search functions and voice recognition.
Plus Baidu is also working to develop an autonomous driving platform. This won’t help BIDU stock in the immediate future, but could pay off in the longer term.
The bottom line on Baidu is that although its advertising business has started to slow, the firm is working to diversify its offerings and beef up its search business to make a comeback over the next few years.
Marijuana stocks have been beaten down this year as investor enthusiasm about growth in the sector waned amid regulatory issues. While wide-scale marijuana legalization isn’t likely to happen in the near term, it’s all but inevitable in the long term. Picking a winning marijuana stock right now is a tricky business, but Aphria (NYSE:APHA) looks like the best of the bunch.
The firm has been able to turn a profit, something most other pot stocks are far from doing. And APHA is expected to continue growing in the years to come. Aphria is expected to double its production capacity in the year ahead under a new cultivation license. If the firm can remain profitable while expanding its output, the stock will likely see a bump in the year to come.
Next year could be a big one for oil stocks as oversupply issues diminish. Production growth is expected to slow in the U.S. and other non-OPEC countries, which would be positive for prices. Goldman Sachs’ Brian Singer sees the price of Brent crude rising to $63 per barrel and West Texas Intermediate increasing to $58.50 as inventory levels decline.
To take advantage of the improving environment, investors may want to add one of the majors to their portfolios. Exxon Mobil (NYSE:XOM) looks like a winner after the firm has been investing in increasing its production over the past year.
Exxon also offers a relatively safe 5% dividend yield. That should help cushion the stock should the rise in oil prices not materialize as quickly as expected.
As of this writing Laura Hoy was long XOM, T and NVDA