Are any fans of Billy Joel’s “We Didn’t Start the Fire” reading this? It sure seems like we entered a new decade and immediately ushered in a modern-day rendition of the contemporary hit. Novel coronavirus cases continue to rise. Flying snakes are in the news. Kanye West just entered the upcoming presidential race. It’s certainly a tough time for many of InvestorPlace.com’s Best Stocks for 2020 competitors.
At the start of the year, I wrote that investors needed to “buckle up.” The U.S.-China trade war and the Brexit were still top of mind, and stocks had ended 2019 on an impressive note. That all changed after the first quarter. Then, I cautioned investors to prepare for a “roller coaster ride” as attention shifted to accounting scandals, U.S.-Iran tensions and the pandemic.
Unfortunately, you can’t take off your seat belts just yet. A reopening rally is underway, but so is a resurgence in coronavirus cases. Some investors are ready for beach parties. Others are hunkering down with stay-at-home plays and vaccine names. How will the picks in our Best Stocks contest fare in Q3?
Our contest participants were looking at big trends like e-commerce, biotech and 5G when they made their picks. Although many picks are still in the red, others are seeing major share-price gains on the back of the pandemic. For some, a rally may be just around the corner.
As we dive into the third quarter, let’s reflect on our contest picks. The 10 participants include:
- Luckin Coffee (OTCMKTS:LKNCY)
- Aimmune Therapeutics (NASDAQ:AIMT)
- Energy Transfer (NYSE:ET)
- Hercules Capital (NYSE:HTGC)
- Disney (NYSE:DIS)
- Roku (NASDAQ:ROKU)
- Freeport-McMoRan (NYSE:FCX)
- PennyMac Financial Services (NYSE:PFSI)
- Apple (NASDAQ:AAPL)
- Wayfair (NYSE:W)
Let’s look at where each of InvestorPlace.com’s best stocks for 2020 stand today, ranked from bottom to top by year-to-date performance through the end of June.
Best Stocks for 2020: Luckin Coffee (LKNCY)
Investor: Larry Ramer
Year-to-Date Change: -96.5%
There’s no easy way around it. Luckin Coffee had a seriously rough second quarter. Despite the fact that an accounting scandal rocked the coffee chain, and that the Nasdaq Composite delisted shares, InvestorPlace’s Larry Ramer still has some confidence in LKNCY stock.
Why? Well, there’s no denying that faked sales are a bad look. But Luckin can’t fake its entire presence in China, or its legitimacy in rivaling Starbucks (NASDAQ:SBUX). Plus, how many Chinese consumers were actually invested in LK stock? For the average coffee fan, day-to-day purchasing habits likely remain unchanged.
And as we all know, brand popularity is quite important.
Ramer certainly knows what he wants from the company moving forward. To start, a reputable CEO would be nice. Next, he’s hoping for partnerships with big-name Western brands like Nestle (OTCMKTS:NSRGY) or Unilever (NYSE:UL). Cutting down the menu and thinking critically about prices would be a nice touch.
Now trading over the counter as LKNCY, and down almost 97% for 2020, the case isn’t easy to make. However, the coffee market opportunity in China is truly massive. With a large physical footprint and an attractive brand, Luckin could turn things around. Will bullish investors drive a rebound in LKNCY stock similar to what we’ve seen in Hertz (NYSE:HTZ) and Carnival (NYSE:CCL)?
Aimmune Therapeutics (AIMT)
Investor: Matt McCall
Year-to-Date Change: -50.1%
When InvestorPlace analyst Matt McCall selected Aimmune Therapeutics for the Best Stocks contest, the novel coronavirus was far from investors’ minds. In fact, McCall was convinced 2020 would kick off a decade of biotech victories that would see AIMT stock soar.
Unfortunately, investors are focusing on the biotech space in 2020 for different reasons.
In January, the U.S. Food and Drug Administration approved Aimmune’s Palforzia drug, making it the first to receive approval for peanut allergies. Without the pandemic, that move could have sent AIMT to the No. 1 spot in a heartbeat.
Why? Well, Palforzia is Aimmune Therapeutics’ big catalyst. The company knows it has a large potential market, and receiving FDA approval is always a big deal. But the biotech world is seeing massive upheaval, and so is Aimmune.
Stay-at-home orders have kept researchers out of labs and companies have chosen to delay clinical trials. Many non-essential healthcare offices have also closed their doors in favor of telehealth offerings. While this has been a great help to telemedicine stocks, patients can’t receive Palforzia via video conference. In fact, the treatment requires allergy sufferers to schedule several in-person appointments. Doctors then expose the patients to small doses of peanuts, helping them overcome the allergy.
As McCall put it, people have suffered from food allergies for years. Starting a new treatment amid a pandemic just isn’t a good idea.
That doesn’t mean McCall is giving up on Aimmune. He thinks that investors should start buying AIMT stock now while prices are low. Once doctors can revisit the rollout of Palforzia, a rally should be in store.
Best Stocks for 2020: Energy Transfer (ET)
Investor: Charles Sizemore
Year-to-Date Change: -44.5%
Even from the beginning of the contest, Charles Sizemore was making a bold bet. With the rise of popularity in environmental, social and governance (ESG) investing, oil stocks were far from market darlings. Combine that with anti-pipeline activity in the U.S. and an oil price war, and you have a year-to-date loss of 44.5% in ET stock.
However, Sizemore picked Energy Transfer because it’s a strong name in the right part of the oil business. He was confident that it could revisit its 2016 Best Stocks victory, especially as macroeconomic sentiment shifted back in favor of oil.
Unfortunately, he didn’t predict that Saudi Arabia and Russia would get into an oil price war that would send crude oil into negative territory. At its peak, analysts were calling for the whole industry to crumble. Although bankruptcies in the space now total $10 billion for 2020, the worst-case scenario never materialized.
For ET stock, that might just be good enough. Sizemore believes that Energy Transfer doesn’t need a “good” energy environment to be profitable. That makes today’s post-crisis levels quite attractive.
So what’s the case moving forward? To start, Sizemore is a big fan of Energy Transfer’s massive yield. That’s not surprising, as distributions are key for master limited partnerships. The other catalyst, however, is one you might not guess.
As former Vice President Joe Biden gears up for November, Sizemore thinks a Democratic win could bring big gains to ET. Pipeline construction will likely dry up (especially with recent court rulings on the Dakota Access pipeline and Keystone XL). No new construction is bad for some players, but for Energy Transfer it means a chance to shore up the balance sheet and raise distributions.
That certainly sounds like a win-win for investors.
Hercules Capital (HTGC)
Investor: Neil George
Year-to-Date Change: -25.5%
If you haven’t been following InvestorPlace.com’s Best Stocks for 2020 contest, you may not have heard about Hercules Capital. InvestorPlace advisor Neil George’s pick is a business development company that focuses on the tech space.
How does it work? Hercules invests in companies at all stages of development, prepping them for IPOs or takeovers. It profits nicely through this process, paying shareholders out along the way.
If you just look at the year-to-date performance of HTGC stock, you’re not likely to feel any inspiration. But as George points out, shares climbed over 40% in the second quarter. That performance beats the S&P 500 and the S&P Information Technology Index.
The surge in Hercules Capital is attributable to its portfolio companies. The pandemic has thrust work-from-home tech stocks into the spotlight as “Zoom” became everyone’s favorite four-letter word. Fortunately for Hercules, WFH names like DocuSign (NASDAQ:DOCU) and Evernote are two of its portfolio companies. These trendy tech plays are driving HTGC stock to success.
Will Hercules be able to end the third quarter in the green? Does it still have a shot at winning the Best Stocks contest? Either way, George thinks it’s a stellar long-term buy. He recommends picking up shares as long as they remain below $12.25.
Best Stocks for 2020: Disney (DIS)
Investors: John Jagerson and Wade Hansen
Year-to-Date Change: -22.9%
Disney could use a little bit of Mickey Mouse’s magic right now. The company is truly an icon, but it has an unfortunate set of businesses amid the pandemic. Its theme parks are closed (at least for now), as are its resort and cruise properties. Disney has had to delay big movie releases like Mulan … several times. And a lack of live sports means its ESPN is nothing but dead weight.
However glum Disney’s reality looks, you can’t bet against Mickey Mouse. Theme parks and hotels will reopen, and movie theaters will eventually draw excited crowds. Plus, as InvestorPlace analysts John Jagerson and Wade Hansen highlight, Disney already took key steps in changing its business model. It moved away from one-off movies in favor of movie franchises and recurring revenue.
Until the world returns to normal, there’s not much Disney can do about its lagging businesses. However, its Disney+ streaming service gives Jagerson and Hansen some hope. Social distancing and stay-at-home orders have greatly increased the popularity of streaming entertainment options. Disney+ is particularly attractive for investors, as the service added 1 million customers per day in late 2019.
It’s likely that Disney+ will see an even bigger uptick in customers as many Americans remain at home. Plus, releases on the service like Frozen II and Hamilton are helping keep the platform relevant months into the pandemic.
Jagerson and Hansen truly put it best: “… as soon as DIS can reopen its theme parks, watch for this stock to start resume its course to infinity … and beyond.”
Infinity and beyond sounds pretty great to me.
Investor: Left Brain Investment Research
Year-to-Date Change: -14.1%
In many ways, the pandemic has been a blessing in disguise for ROKU stock. Sure, its year-to-date performance through the end of June still has it in the negative. But all this time spent at home is accelerating the megatrends underlying Roku’s business.
According to Left Brain Investment Research, the coronavirus amounts to just a “short-term hiccup” for Roku. Consumers are embracing streaming TV now more than ever. In fact, Roku’s CEO said the company’s products and services are more relevant now than ever.
That sure feels true. The shift from old-fashioned TV to streaming TV is happening, and the pandemic will likely accelerate that shift. Why? More consumers are relying on TV to get through long days at home, and the perks of the newer model will win out.
Right now, Roku is cutting back on spending and its growth focus because of the pandemic. But its massive market opportunity and its solid business idea remain. Just think about how other entertainment giants like Netflix (NASDAQ:NFLX) and Disney are investing in this space.
Once things start to ease up and Roku can get back to spending money, look for shares to soar. ROKU stock could still end up winning the Best Stocks contest — it’s just one of the best buys for the world’s new normal.
Best Stocks for 2020: Freeport-McMoRan (FCX)
Investor: Eric Fry
Year-to-Date Change: -11.8%
At the end of the first quarter, InvestorPlace analyst Eric Fry was confident that Freeport-McMoRan would soon rebound. Then, the coronavirus was shuttering mines and constraining the supply of copper. Plus, a massive selloff in the stock market and low copper prices weren’t doing FCX any favors.
But Fry knew that big catalysts were working in Freeport’s favor. Demand would rise as economic activity rebounded. Rising demand would boost copper prices. And rising copper prices would send FCX stock higher — perhaps all the way to $15 before 2020 is out.
This is exactly what happened for FCX stock in the second quarter. According to Fry, one of the biggest reasons behind the rise in demand is copper’s role in the electric vehicle and battery markets. As you likely know, EVs and batteries are two red-hot spaces. Plus, China is already clamoring for more of the red metal, which is an especially good sign.
Don’t give up on FCX stock yet.
PennyMac Financial Services (PFSI)
Investor: Louis Navellier
Year-to-Date Change: 22.5%
Although things have since shifted, PennyMac Financial Services ended the second quarter in the contest’s No. 3 spot. That’s impressive, especially after such a tough quarter.
Luckily for InvestorPlace analyst Louis Navellier and PFSI stock bulls, the company’s opportunity is only improving. PennyMac Financial Services generates and services residential mortgages. Plus, it’s the largest originator of government-backed loans. But why does that matter now?
Well, the Federal Reserve is planning on maintaining near-zero interest rates through 2022. That’s a big catalyst for the housing market, and especially for PFSI stock. And as Navellier recently wrote, the company has less default risk than some of its peers thanks to its government customers.
As the second half of 2020 unfolds, look for PennyMac’s relationship with its sister company PennyMac Mortgage Investment Trust (NYSE:PMT) to play a big role in boosting the company. If you think PFSI has a chance at winning the Best Stocks contest, make sure to buy it on any dips.
Best Stocks for 2020: Apple (AAPL)
Investor: Readers’ Choice
Year-to-Date Change: 23.2%
Our readers are some smart cookies. At the end of 2019, they voted for tech icon Apple to win the InvestorPlace.com Best Stocks for 2020 contest. And now, AAPL has cinched the No. 2 spot. Since the end of June, Apple’s year-to-date performance has improved. It now posts a gain of 30%.
As I recently wrote, it’s all about Apple’s mix of innovation and stability:
“Breaking it down further, AAPL stock represents both stability and innovation. Investors can rely on its potential, and the popularity of its staple consumer tech. But the company isn’t backing down from innovation and market-leading moves either.”
Throughout the rest of the year, Apple can count on its consumer tech like iPhones and AirPods to shelter it from the coronavirus storm. But it will also roll out 5G iPhones that should spark excitement.
If that wasn’t enough, investors can also be thankful that the company is learning from its past. Supply chain disruptions threatened Apple and many of its Big Tech peers at the start of the pandemic. In a move to change that, and to gain more control, Apple will be making its own chips now for its Macs. That sounds like a pretty smart investment.
On behalf of our readers, I’m still rooting for Apple to win in 2020.
Investor: Jason Moser
Year-to-Date Change: 118.7%
Did anyone see this massive move coming? At the end of the first quarter, Wayfair stock was down 42% for the year to date. At the end of the second, it was up more than 118%. And in the last few days, it has boosted its returns even more — now up 145%.
That makes The Motley Fool’s Jason Moser our current Best Stocks winner. He initially picked Wayfair because like all other industries, e-commerce is disrupting furniture and home decor. Luckily for Moser, the coronavirus is only accelerating that disruption.
Stay-at-home orders and remote-work trends meant many Americans were spending more time at home than ever before. It turns out that when you spend hours staring at your stained sofa or outdated coffee table, inspiration strikes. And with a few clicks of a mouse, Wayfair can have that new sofa or coffee table headed right to your door.
If you need another reason to root for Wayfair, know that its market opportunity is just growing. In its first-quarter earnings report, active customers of 21.1 million were up 28.6% from a year ago. Plus, percentage of orders from repeat customers was 69.8%, up from 66% a year ago. It looks like Wayfair is cultivating quite a following.
Right now, Wayfair has secured the lead. But as we’ve seen, a lot can change in just one quarter. What will things look like in just a few more months?
Sarah Smith is a web editor for InvestorPlace.com. As of this writing, she did not hold any of the aforementioned securities.