[Editor’s note: This article is regularly updated to include the most relevant information available.]
Heading into a new year, all investors want to know is what stocks they should be buying.
At the beginning of this year, I attempted to answer that question by compiling a list of the top 15 stocks to buy for 2020. Thus far, those stocks have performed pretty well. An amazing 14 of the 15 stocks are up year-to-date, while 13 are up more than market so far in 2020. Indeed, if you had an equally weighted portfolio of these 15 stocks, you’d already up more than 20% year-to-date, versus a mere 4% gain for the S&P 500.
In no particular order, the top 15 stocks to buy for 2020 from that original list, with year-to-date returns, are as follows:
- Facebook (FB) +6.1%
- Activision (ATVI) +7.3%
- Luckin Coffee (LK) +2.6%
- Beyond Meat (BYND) +61.8%
- Netflix (NFLX) +20.1%
- Pinterest (PINS) +22.2%
- Canopy Growth (CGC) +4.1%
- Square (SQ) +31.6%
- The Trade Desk (TTD) +18.7%
- Etsy (ETSY) +20.7%
- Okta (OKTA) +19.5%
- JD.Com (JD) +20.5%
- Stitch Fix (SFIX) + 7.6%
- Nio (NIO) -5.5%
- Snap (SNAP) +5.0%
Without further ado, then, let’s take a look where these top stocks to buy for 2020 are going next.
Top Stocks to Buy for 2020: Facebook (FB)
The bull thesis on global social media giant Facebook (NASDAQ:FB) heading into 2020 was pretty straight forward. Accelerating digital ad spending trends coupled with a plunge into e-commerce and renewed profit margin expansion would recharge the company’s profit growth trajectory, and push the stock materially higher.
So far, so good for Facebook stock. Shares are up a cool 6.1% year-to-date, broadly outpacing the market by about 200 basis points over two months. This steady out-performance should persist, largely because the aforementioned bull thesis remains in tact and shares remain incredibly cheap relative to the company’s robust growth potential.
Big picture — Facebook stock will continue to grind steadily higher into the end of 2020, powered by rebounding profit growth trends and sizable multiple expansion.
Activision Blizzard (ATVI)
Much like Facebook’s bull thesis, the bull thesis for video game publisher Activision Blizzard (NASDAQ:ATVI) at the start of the year was very simple.
The video game market is due for a big year. You have the introduction of new consoles for the first time since 2013. Those new consoles will be the first generation of video game consoles with cloud gaming capabilities. At the same time, the 2020 video game line-up is very robust. You also have the mainstream rollout of commercial 5G, which will provide an upward lift to gaming capabilities, and the launch of multiple new eSports leagues.
Against this favorable backdrop, Activision is optimally positioned to reap the rewards of big growth throughout the market, thanks to the company’s strong content line-up in 2020 behind a new Call of Duty game and important expansions in its World of Warcraft series. At the same time, shares remain relatively discounted at just 24-times forward earnings.
So far, this bull thesis has played out as planned. Activision reported strong holiday quarter numbers at the beginning of February, and management sounded a confident tone about the 2020 release schedule. Shares have consequently risen 7.3% year-to-date.
Still, the stock remains pretty cheap, and the best growth catalysts are still on the horizon. As such, this stock will likely keep grinding higher.
Luckin Coffee (LK)
Often labeled the Starbucks (NASDAQ:SBUX) of China, Luckin Coffee (NASDAQ:LK) had a strong 2019 showing thanks to big unit expansion, huge revenue growth and significant margin improvements. Heading into 2020, it looked like all of those things — big unit expansion, a favorable shift among China’s youth towards daily coffee consumption, and profit margin improvement — would continue in 2020.
That’s why LK stock quickly surged about 30% higher in the first three weeks of January.
Then, coronavirus concerns hit. Daily life in China came to a screeching halt. Luckin closed a bunch of stores. They operated the rest at reduced hours. The company is now expected to report pretty bad first quarter numbers, and in anticipation of that earnings dud, shares have plunged.
But, the coronavirus is a near-term headwind. Like all other epidemics, it will pass, and probably soon. When it does, Chinese consumers will rush back into Luckin stores, and the Luckin growth narrative will resume at full speed. When that happens, Luckin stock will run back to all time highs.
Beyond Meat (BYND)
My bullishness on plant-based meat maker Beyond Meat (NASDAQ:BYND) heading into 2020 boiled down to something Bill Gates once said. People tend to overestimate what can be done in a year and underestimate what can be done in a decade.
In 2019, investors overestimated what Beyond Meat stock could do in a year. Heading into 2020, investors were underestimating the magnitude and significance of the plant-based meat trend, and how big Beyond Meat could be in a decade.
So, less than two full months into 2020, Beyond stock is up an enormous 61.8%.
This stock should stay hot from here. The consumption shift towards plant-based meat is only accelerating, thanks to several quick-casual chains rolling out plant-based meat options, increased consumer awareness surrounding plant-based meat’s environmental benefits, and some not-so-subtle reminders that animal-based meat can be dangerous (see the coronavirus). So long as the company sustains robust growth momentum, the stock will stay hot.
Streaming giant Netflix (NASDAQ:NFLX) had a tough 2019 thanks to escalating competition concerns. But, going into 2020, I was bullish on NFLX stock because I believed the company was going to report a series of quarters which proved that those competition concerns were overstated.
One quarter in, one quarter down. Netflix reported strong holiday quarter numbers in late January that included robust subscriber growth and a strong guide for subscriber growth next quarter. In response, Netflix stock has rattled off a 20% year-to-date gain.
This trend will continue for the rest of 2020. Netflix will continue to report big subscriber growth quarter after big subscriber growth quarter, mostly because the company is still dominating the competition in terms of original content, streaming technology, and global reach.
The more big user growth quarters Netflix reports in 2020, the more competition concerns will fade from the scene. The more that happens, the higher NFLX stock will go.
Social media platform Pinterest (NYSE:PINS) had a rough 2019 following a red-hot initial public offering. But, this weakness down the strefourth quarter ntch in 2019 actually gave the stock a compelling opportunity to have a very strong 2020.
The logic here is pretty simple. Improving economic strength will provide support for increased global digital ad spending in 2020. In this improving market, Pinterest will continue to expand its ad platform to be more relevant and effective for advertisers, much as Snap (NYSE:SNAP) did in 2019. These improved ad capabilities will allow Pinterest to more meaningfully monetize its already large user base, which is woefully under-monetized relative to other social media platforms. Revenue growth rates will improve, and as they do, PINS stock will bounce back.
That’s exactly how things have played out so far for Pinterest. The company reported fourth quarter numbers in early February that included revenue growth stabilization (versus deceleration in prior quarters), a sign that the revenue trend at Pinterest is improving. This revenue trend improvement is largely why shares are up 22.2% year-to-date.
Growth trend improvements will continue for the balance of the year. Meanwhile, the stock remains relatively discounted. This healthy combination will sustain big gains in the stock for the foreseeable future.
Canopy Growth (CGC)
At the start of the year, I laid out five big reasons why beaten-up Canadian cannabis producer Canopy Growth (NYSE:CGC) could stage a huge rebound in 2020.
First, demand trends in the legal Canadian market will improve, thanks to new products like edibles and vapes, as well as significant retail store expansion. Second, profit margins at Canopy will also improve, as black-market competition eases thanks to Canopy’s better handle on supply and logistics. Third, improving demand trends on top of improving profit margins will turn widening losses in 2019 into narrowing losses in 2020. Fourth, progress will be made on legalizing cannabis in the U.S. through the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act.
Fifth, and perhaps most importantly, CGC stock is priced for failure. Thus, shares are optimally positioned to rip higher on good news. Calendar 2020 could be a year of good news. Naturally, that means calendar 2020 could be a year of sustained big gains for CGC stock.
Canopy Growth proved all of these points in its third quarter earnings report. Revenue growth trends improved. Margins improved. Losses narrowed. And, in response to that blockbuster report, CGC stock popped.
All of these favorable trends are set to persist for the rest of the year. As they do, Canopy Growth stock will stay in rally mode.
At the beginning of the year, I said that payments processor Square (NYSE:SQ) was ready to rip higher over the next 12 months as the company’s revenue growth trajectory meaningfully improved.
So far, so good.
Although Square has yet to report quarterly numbers this year, it has become increasingly obvious through various partnerships and fee structure changes that Square’s revenue growth trajectory is set to improve in a big way. In anticipation of this big improvement, Square stock is up an impressive 31.6% year-to-date.
At current levels, the undervaluation in Square stock has disappeared. Shares now fully valued. But, growth trajectory improvements are still on the horizon. As such, while Square stock won’t rally another 32% into the end of the year, shares do have more upside left behind a string of consensus-beating quarters.
The Trade Desk (TTD)
Programmatic advertising leader The Trade Desk (NASDAQ:TTD) has posted huge returns over the past several years, and at the start of this year, I believed that 2020 wouldn’t break this cycle of big returns.
There were five reasons behind my bullishness on TTD stock.
First, ad spending trends globally will re-accelerate in 2020 as companies across the globe up their ad budgets against an improving economic backdrop. Second, U.S. ad spending trends will improve even more than global ad spending trends, thanks to upped political spending in an election year. Third, U.S. digital ad spending trends will meaningfully accelerate, as consumers shift more aggressively to digital channel consumption, thanks to the mainstream rollout of 5G, the introduction of multiple new streaming services and the launch of cloud gaming platforms. Fourth, automation technology will continue to gain mainstream traction. As it does, programmatic advertising adoption uptake rates will remain robust.
Fifth, the “open internet” will continue to gain momentum in 2020, as sustained regulatory pressures on Big Tech will force many of these companies to open up their walled gardens.
All five of those catalysts remain vigorous today. That’s largely why TTD stock is up 18.7% year-to-date. It’s also largely why — coupled with a still attractive valuation — shares aren’t done rallying yet.
Over the next few quarters, the programmatic ad leader will continue to report great numbers, and investors will reward that sustained growth momentum with continued strength in the stock.
Slowing revenue growth rates and compressing profit margins caused specialty e-commerce platform Etsy (NASDAQ:ETSY) to have a disappointing showing in 2019. But, at the start of 2020, I hypothesized that the exact opposite would happen this year.
The thesis, which remains entirely true today, is simple. Etsy has a visible opportunity to accelerate revenue growth and improve profit margins in 2020. Accelerated revenue growth will be driven mostly by broad economic improvements (which will provide support for increased consumer spending and increased ad spending) and partly by internal improvements. Newly acquired Reverb operates at lower take-rates than Etsy, and management will likely do all they can in 2020 to improve Reverb’s take-rates and therefore improve Etsy’s overall revenue growth rate.
Meanwhile, profit margin improvement will be driven by accelerated revenue growth converging on what is steadily moderating expense growth.
Broadly, then, slowing revenue growth and compressing margins will turn into accelerating revenue growth and expanding margins. This pivot from slowing growth to rebounding growth will provide support for a strong 2020 rally in Etsy stock.
Apparently, the market agrees. Year-to-date, the stock is up 20.7%. Yet, shares are still cheap, and the company has yet to report any quarters which confirm the rebounding growth narrative. As such, it appears that the stock has more room to run higher over the next few months, behind a few strong quarters and some multiple expansion.
Back at the start of 2020, I said that shares of cloud security company Okta (NASDAQ:OKTA) would sustain robust strength this year behind three major catalysts. All three of those catalysts remain alive and well today. As does the bull thesis on Okta stock, which is up 19.5% year-to-date.
First, I said improving economic conditions will stabilize Okta’s revenue growth trajectory. Sure, the coronavirus outbreak has thrown the global economy for a loop. But, a temporary and not-that-big of a loop. Zooming out, monetary policy remains supportive, trade tensions are easing, corporate confidence is rebounding, and labor markets remain healthy. All of that supports improving economic strength going forward.
Second, I said that big expense growth should moderate in 2020, as Okta gets bigger and spends less on marketing. We haven’t heard from Okta yet this year, but the idea that Okta should moderate expense growth in 2020 and rely more on size and reputation to drive new client growth remains relevant.
Third, I said that interest rates will remain low in 2020, and provide continued support for growth stocks like OKTA. Two months into 2020, the 10-Year Treasury yield is down more than 20 basis points year-to-date. So long as rates remain low, Okta stock will keep working.
At the beginning of 2020, it looked like China was in major rebound mode, and that this rebound would power e-commerce giant JD.Com (NASDAQ:JD) to new highs.
The coronavirus outbreak has put this Chinese economic rebound on hold. But, it hasn’t put the rally on JD stock on hold. Year-to-date, shares are up more than 20%.
Because, while the coronavirus has hit China’s economy hard, the negative impacts won’t last long. Within the next few months, coronavirus fears will fade, and China’s economy will bounce back, supported by a ton of fiscal stimulus from the People’s Bank of China and easing U.S.-China trade tensions.
When it does, JD.Com’s revenue growth rates will improve, and the company’s margins will, too, as a consequence of margin expansion and cost saving initiatives that are already in place.
Against that backdrop, JD stock will continue to work and move higher.
Stitch Fix (SFIX)
The core of the 2020 bull thesis on online personalized styling service Stitch Fix (NASDAQ:SFIX) revolves around three big ideas.
First, the U.S. economy will improve in 2020, and as it does, consumer spending trends will similarly improve, providing a boost to all retail companies. Second, consumer-facing automation technologies and services will gain more traction. Consumers will be more inclined to adopt a personalized styling service which “automates” the shopping process. Third, the expansion of new features (namely, direct-buy) will help support sustained big revenue growth.
Fast forward two months into 2020. All three of those ideas remain relevant, and Stitch Fix stock is up 7.6% on the year.
So long as these three ideas remain relevant — and I suspect they will for the next few quarters — then Stitch Fix will work, powered by a combination of sustained big growth and multiple expansion.
One of my favorite high-risk, high-reward small-capitalization stocks over the past few months has been Chinese premium electric vehicle maker Nio (NYSE:NIO).
There are two parts to the bull thesis on NIO stock. First, the company’s delivery and revenue trends — which were depressed throughout most of 2019 — improved in a big way in late 2019. Excluding a short-term coronavirus hit, they’re set to improve even further in 2020 behind a rebound in China’s economy from significant fiscal stimulus, a pause in electric vehicle subsidy cuts, and a new Nio vehicle launch. As those delivery and revenue trends rebound, NIO stock should rebound, too.
Nio’s second-biggest problem is its cash-light balance sheet, which is at risk of running out of money soon. But the company will fix the balance sheet in 2020. China’s economy is rebounding, Nio is improving its growth trajectory and China’s central bank just freed up a bunch of lending money. It is quite likely that NIO secures funding in 2020. This funding will shore up the balance sheet, ease cash burn concerns and provide an upward lift for NIO stock.
To be sure, this stock is actually down year-to-date. But, it’s up 111.1% over the past three months. So, year-to-date weakness is just a natural pause in a big rally coupled with some coronavirus friction. That friction will pass. So will the pause. And, into the middle of 2020, Nio stock should resume its upward march.
Although social media platform Snap didn’t start 2020 off on the best foot — the company reported disappointing fourth quarter numbers in in early February — the bull thesis on this stock remains alive and well.
That bull thesis boils down to three tailwinds.
First, Snap is attractively positioned to benefit from digital ad market tailwinds in 2020. Second, continued product innovation and geographic expansion lay the groundwork for sustained user growth in 2020. Third, and perhaps most importantly, SNAP stock is undervalued given the company’s robust growth prospects both in 2020 and into 2025.
As such, Snap stock should shake off the rust from a disappointing fourth quarter print, and rally significantly higher into the end of year. I’d a be a buyer of the stock on any material weakness going forward.
As of this writing, Luke Lango was long FB, ATVI, LK, NFLX, PINS, CGC, TTD, and NIO.