The rapidly spreading novel coronavirus outbreak — which originated in China but has since spread all over the globe — has hit financial markets in a big way in 2020.
Following a near 30% return in 2019, the S&P 500 is down more than 25% so far in 2020. Against that backdrop, you’d expect a list of the “best stocks of 2020” to be thinly populated, with maybe a handful of stocks that have managed to eke out minor gains year-to-date.
That’s not the case.
Instead, some stocks have been very strong in 2020 despite (and in some cases, because of) the coronavirus crisis.
Forget this idea that if the market is down, all stocks are down. That is categorically not the case. In 2020, major U.S. indices deep in a bear market. The best-performing stocks in the S&P 500, though, have an average year-to-date gain of 20% (as of March 19).
In other words, there’s always a bull market somewhere. You just have to find it.
You should start by looking at the best-performing stocks in the S&P right now, which includes the following:
- Regeneron Pharmaceuticals (NASDAQ:REGN) +30%
- Gilead (NASDAQ:GILD) +27%
- Clorox (NYSE:CLX) +24%
- Citrix Systems (NASDAQ:CTXS) +22%
- Kroger (NYSE:KR) +20%
- Akamai Technologies (NASDAQ:AKAM) +13%
- Jack Henry & Associates (NASDAQ:JKHY) +10%
- Rollins (NYSE:ROL) +10%
With that in mind, let’s take a deeper look at each one of these top performing stocks, see why they’ve been so hot, and whether or not they will keep rallying.
Best Stocks for 2020: Regeneron Pharmaceuticals (REGN)
Top Performer: 30% gain
Biotech giant Regeneron Pharmaceuticals has been the best stock in the S&P 500 in 2020, rallying an impressive 35% year-to-date, on the back of strong quarterly numbers, a competitor dropping the ball, and hopes that the company can develop a coronavirus vaccine.
Specifically, the company reported strong fourth-quarter numbers in early February that breezed past revenue and profit expectations. Shortly thereafter, competitor Novartis (NYSE:NVS) was hit with a warning from the American Society of Retina Specialists which said that a side effect of the company’s Beovu treatment is potential vision loss.
That issue was viewed as a win for Reneron’s Beovu competitor, Eylea. Even further, REGN stock has been bouncing recently on hopes that the company can come up with a potential coronavirus treatment.
As far as where the stock goes next, I’m dubious that shares will continue to out-perform. I don’t expect coronavirus hype to stick around much longer. The stock is also sitting at record highs, and in overbought territory.
The business should remain solid for the rest of the year. But, the best of the stock’s 2020 rally may have already happened.
Top Performer: 27% gain
Much like Regeneron, biotech giant Gilead is up 27% in 2020 thanks to a mix of strong operating results and hopes for a coronavirus vaccine.
As always, let’s remain focused on the fundamental picture. Gilead most recently reported fairly strong fourth-quarter numbers in early February, which underscored that the company’s core sales drivers remain vigorous.
GILD stock caught fire in late February, when the company’s antiviral treatment, remdesivir, emerged as the world’s leading candidate for treating the novel coronavirus.
While I do expect coronavirus fears to subside over the next few months, I also expect that some of the easing will be because Gilead’s remdesivir treatment delivers strong clinical test results, and proves to be an effective treatment for suppressing coronavirus symptoms.
If that does happen, then the big Gilead stock rally won’t fade for the remainder of March or April. It will actually heat up.
Top Performer: 24% gain
U.S. consumers haven’t changed that much in the wake of the coronavirus outbreak in the states. But, one thing they have done is stock up on hand sanitizers, disinfectant wipes and other cleaning products.
That’s the type of stuff that Clorox sells. As such, it’s easy to see why CLX stock is up 14% year-to-date, against the backdrop of a 26% decline the S&P 500.
Although I think coronavirus fears will subside, I think supercharged demand for hand sanitizers and disinfectant wipes will stick around for a few quarters, mostly because consumers won’t want to run the risk of getting sick, and disinfecting things with Clorox products is a rather easy, non-intrusive thing to do to stay healthy.
If demand for its products remains robust, then recent strength in CLX stock will stick around for the next quarters.
Citrix Systems (CTXS)
Top Performer: 22% gain
As employees across the globe have been ordered to work-from-home, Citrix stock has exploded higher, rising about 20% year-to-date.
That’s because Citrix gives businesses the tools which allow their employees to access important workflows, processes, and data from anywhere. These are the exact types of tools which every business in the world is going to need for the foreseeable future to enable an effective work-from-home environment.
Naturally, then, demand for Citrix’s solutions should rise rapidly in the coming weeks, and maybe even months. As this happens, CTRX stock should keep rising.
While this tailwind may appear short-term, I’d argue that it could turn into a long-term tailwind. In essence, I see new customers coming to Citrix over the next few months, and liking their experience so much that they stick around and turn into long-term customers.
If so, then this could be the beginning of a longer-term uptrend in CTRX stock.
Top Performer: 20% gain
Panic buying is in the air, and that’s been a good thing in 2020 for Kroger, whose stock has risen about 20% year-to-date.
Yes, the coronavirus pandemic isn’t an immediate threat to most Americans. Even if it was, it would result in mild symptoms for most Americans. But you try telling a mom of three that.
She’s not going to listen. Instead, she’s running out to grocery stores, and stocking up on food, water, and… toilet paper (I don’t get it, either).
But, what I do understand is that so long as coronavirus fears are prevalent, Americans will keep panic buying, Kroger stores will stay packed, and Kroger stock will keep rising.
So, this rally in KR stock isn’t done just yet. So long as the virus keeps spreading, this stock will keep rallying.
Akamai Technologies (AKAM)
Top Performer: 13% gain
For Akamai Technologies, it’s a win when consumers and employees stay home, and that’s why AKAM stock is up 13% year-to-date.
The logic is fairly straightforward. On one end, Akamai provides remote internet infrastructure tools which enable employees and students to successfully work/learn at home. On the other end, the company provides the infrastructure on which streaming services operate — and those streaming services are due to see a huge demand increase with everyone in the world cooped up at home.
Net net, coronavirus is actually a tailwind for Akamai Technologies.
Will this tailwind last? Not forever. But it will last for the next few months. And during that stretch, increased demand for Akamai’s services and infrastructure will lead to a higher stock price.
Jack Henry & Associates (JKHY)
Top Performer: 10% gain
It appears that financial services solutions provider Jack Henry & Associates is up 10% year-to-date as investors are optimistic that this company’s new digital banking solutions will see increased demand in a stay-at-home environment.
Specifically, Jack Henry provides a wide variety of technology solutions to financial institutions of all shapes and sizes. One of those solutions — which was recently announced — is a bank anywhere solution. Currently, four of Jack Henry’s banking customers are in live production with this solution.
Investors clearly believe that many more banks will follow suit in the coming weeks and months, as the stay-at-home economy pushes consumers to mobile and digital banking solutions (as opposed to physical ones).
I think this will happen, too. That means next quarter’s numbers could be really good. I fully expect JKHY stock to rally into that print on expectations for strong numbers, implying that recent strength in the stock has staying power for another few months.
Top Performer: 7.81% gain
Oddly enough, pest control giant Rollins has been the S&P 500’s third best-performing stock year-to-date, with ROL stock initially up 18.7% in 2020. In the wake of the Covid-19 outbreak, it has rolled its gains back to a still-impressive 7.81% gain.
It’s hard to pinpoint a specific catalyst for why Rollins stock has been so hot. Instead, it appears that investors are rolling into the stock as a defensive play. After all, as a domestic-focused pest control company, Rollins likely won’t see demand for its services take a meaningful hit anytime soon because of the coronavirus outbreak.
But, I suspect that — given how the virus is already calming down in China and South Korea — coronavirus fears in the U.S. will ease significantly in the coming months. Assuming so, then all those investors who piled into Rollins stock as a defensive play against the coronavirus crisis, will likely flee from the stock as coronavirus fears subside.
That could put serious downward pressure on shares come mid-2020.
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, Luke Lango did not hold a position in any of the aforementioned securities.