In this market, one would reasonably expect that a list of “hot stocks for 2020” would be thinly populated. After all, the novel coronavirus has caused the S&P 500 to drop more than 20% year to date. It’s tough for individual stocks to rise when the market is plunging.
But, that’s not the case.
If you’re looking for hot stocks for 2020, the best place to start is by looking at the top performing S&P 500 stocks so far this year. Perhaps somewhat shockingly, there are a lot of stocks on that list that are actually up year to date. Even more shockingly, the top five stocks on that list are all up more than 12%.
Indeed, while the S&P 500 is down more than 20% year-to-date, the five hottest stocks in the index this year have averaged a year-to-date gain of almost 20%.
With that in mind, if you’re looking for hot stocks for 2020, consider these five top-performing stocks based on year-to-date gains:
- Citrix Systems (NASDAQ:CTXS) +27%
- Regeneron Pharmaceuticals (NASDAQ:REGN) +22%
- Gilead (NASDAQ:GILD) +16%
- Netflix (NASDAQ:NFLX) +13%
- Clorox (NYSE:CLX) +13%
Hot Stocks for 2020: Citrix Systems (CTXS)
At the top of this list of hot stocks for 2020, we have application virtualization software provider Citrix Systems, which has seen its shares rise a S&P 500 best 27% year-to-date.
For perspective, the S&P 500 is down more than 20% year-to-date, and CTXS stock hasn’t risen 27% or more in a year since 2010.
In other words, this is truly a once-in-a-decade rally in Citrix stock. What’s powering it?
Increased demand for Citrix’s application virtualization software solutions in a world where everyone is working from home. Long story short, it increasingly appears that employees all across the globe will be working from home for at least the next three to four weeks … and probably longer. Citrix’s vitualization solutions enable these employees to work from home more efficiently. As such, the company is looking at supercharged demand over the next month or so.
That makes sense. But does this red hot stock have more upside left? Or is all the good stuff priced in already?
I think there’s more upside left. The virtualization trend won’t go away when the virus goes away. Instead, over the next three to four weeks, employees and employers alike will realize the benefits of virtualization solutions, meaning Citrix will turn this near-term demand boost into longer-running tailwinds. As the company’s products are gradually more widely adopted, CTXS stock will maintain upward momentum.
Regeneron Pharmaceuticals (REGN)
There are two big reasons why biotech giant Regeneron Pharmaceuticals is having its best year since 2015, despite broader financial market turbulence.
First, the company is one of the leaders in the race to come up with a potential coronavirus treatment. Given how widespread this virus has become — and the significant damage it has inflicted on the global economy — a successful treatment should see huge commercial success.
Second, the company’s top-selling drug for macular degeneration — Beovu — is well positioned to meaningfully outperform over the next few quarters, because competitor Novartis (NYSE:NVS) was recently hit with a significant safety setback at the hands of the American Society of Retina Specialists.
But, up 22% year-to-date in a down market, is REGN stock fully priced for these two catalysts?
I think so. Shares seem fully valued here, and the coronavirus upside is highly speculative and, therefore, very risky. I have my doubts about REGN stock sustaining its year-to-date strength over the next few months.
Much like Regeneron, biotech peer Gilead has had a strong showing thus far in 2020 thanks to hope that the company can come up with a coronavirus treatment.
Specifically, Gilead has been experimenting with an antiviral medicine called remdesivir for the past few years. When the coronavirus first emerged, Gilead naturally thought that remdesivir could help combat the virus. Early data suggests that is the case, and many experts around the globe have sounded an optimistic tone that remdesivir will indeed work at scale to treat coronavirus symptoms.
On the back of that optimism, GILD stock has risen 16% year-to-date. But … nothing is confirmed yet.
Confirmation will arrive over the next few weeks, when the company receives more robust trial data on how remdesivir is faring in combating the coronavirus. That data will make or break this stock. If the data is positive, Gilead stock will spike. If it’s negative, shares will tumble.
So, tread carefully with Gilead stock.
Shares of streaming service giant Netflix are up 13% year-to-date in a bad market for one very simple reason: with consumers stuck at home, one of their best options for entertainment is Netflix.
In the first two and a half weeks of March, streaming viewership in the U.S. through connected TV sets rose 24%, while viewership through streaming sticks like Roku’s (NASDAQ:ROKU) rose 16%. So, everyone in America is watching more streaming TV amid the lock-down. Perhaps more importantly, though, Netflix accounted for 37% of viewing hours, making it the No. 1 streaming service in America during the first two weeks of March … by a long shot.
In other words, everyone is watching more Netflix, because they are stuck inside, and because Netflix makes the best content.
It’s unlikely this is just happening in the U.S. Consumers across Europe are probably doing the exact same thing: watching more Netflix.
From this perspective, the coronavirus is actually a good thing for Netflix. And it provides more than a near-term boost. Consumers will sign-up for Netflix during the quarantine, fall in love with the content, and become long-term subscribers.
Thus, I see NFLX stock as both a near- and long-term winner. Current strength in the stock should persist, and lead into long-term strength.
Last, but not least, on this list of hot stocks for 2020, is cleaning supplies maker Clorox.
The bull thesis here is pretty straightforward. U.S. consumers are panic buying everything. The things they are panic buying the most are the things that Clorox sells — hand sanitizers, disinfectant wipes and other household cleaning products. Thus, Clorox has likely seen a huge spike in sales in March, the likes of which is reflected in CLX stock’s 13% year-to-date rally.
Can the rally keep going?
I’m not convinced. I do believe that, even if the coronavirus pandemic blows over by summer, consumer demand for cleaning products like hand sanitizers and disinfectant wipes will remain robust, as consumers continue to exercise caution in their day-to-day lives well after the outbreak passes. But, I also believe that most of that upside is fully priced into shares, with the stock trading at all-time-high valuation levels.
Consequently, I don’t see much more upside potential in CLX stock from its currently elevated levels.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the world’s top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he was long ROKU.