The coronavirus has fundamentally altered the investing landscape. Many sectors that were already struggling, like energy and brick-and-mortar retail, have seen their slow declines turn into abject free fall.
Other businesses, such as video gaming and work-from-home software companies, are booming. I’ve told you about several such stocks here that initially plunged are now turning into huge rebound stocks.
Over the past several months, I’ve showed you technology stocks like chipmaker NVIDIA Corp. (NASDAQ:NVDA) and video game developer Activision Blizzard Inc. (NASDAQ:ATVI). We’ve also taken a look at retailers that are doing the “stay-at-home” thing right, like Lululemon Athletica Inc. (NASDAQ:LULU) and Kroger Co. (NYSE:KR).
Most of these stocks have reached double-digit gains — and many have even reached their all-time highs.
Those “stay-at-home” stocks were the early rebounders … but they won’t be the last.
As the world recovers from COVID-19 — some nations faster than others — other stocks are now starting to truly rebound from their mid-March lows.
For example, you might not think of Indonesian copper miners or Third World payment processors as natural beneficiaries of the present economic situation. Yet those are some of the off-the-radar rebound stocks that are thriving today.
So today, let’s take a look at two surprising rebound stocks that are making huge comebacks this summer …
Rebound Stock No. 1: The Third World Payment Processor
Trying to buy a good stock in a bad market is usually a recipe for failure. And in early March, that’s exactly what an investment in this foreign payment processor appeared to be: a failure. The stock had crumbled 70% from its high above $50 last September to less than $15.
But since that low, the stock has more than doubled. That makes it one of the best stocks in one of the world’s hardest-hit stock markets.
Year-to-date, this stock has been up as much as 30% year-to-date (though it’s pulled back some with the general market over the past couple of days), even though its home stock market is still down. Its home nation’s struggling stock market is no mystery, as the country is facing one of the world’s worst coronavirus outbreaks. Political uncertainty is also rising.
That’s a grim backdrop for any company. And yet, the company still managed to produce impressive year-over-year growth during the first quarter. A few pertinent highlights would include:
- 24% increase in active merchants on its payment platform
- 27% jump in revenue
- 13% gain in net income
- 10% boost in cash on the balance sheet
Meanwhile, it continues to take market share from its competitors. This steady market-share growth results directly from the company’s strategy to attract millions of small and micro-merchants to its platform.
In a way, this is similar to the rise of Square Inc. (NYSE:SQ) in the United States. Get a strong position with active small businesses, and then use that to build out a broader financial platform.
Like Square, this company is launching an online bank to broaden its business. Its home market is an underbanked country, and thus there’s plenty of room for a disruptive financial services company to reach previously untapped channels.
Additionally, the company seems to be benefiting from the coronavirus in two ways. First, its core customer base of micro-merchants are the kind of entrepreneurs who cannot afford to shelter in place. They must work to eat, and so they are continuing to operate throughout the coronavirus crisis. Second, its platform offers touchless payments. Because of virus fears, touchless payments are gaining steam against cash.
This company is performing extremely well in the midst of challenging macroeconomic conditions. Despite short-term obstacles, shares can reach new highs in 2021.
Now I can’t give you the name of this company. It wouldn’t be fair to the members of my Speculator service, where it’s shaping up to be one of our biggest winning trades.
However, I can tell you the name of our next Rebound Stock …
Rebound Stock No. 2: The Indonesian Copper Miner
Back in March, when the coronavirus pandemic was in full force, this stock tumbled below $5, and traders were scared.
But shortly after Freeport McMoRan Inc. (NYSE:FCX) hit that low, I pointed out that the company’s CEO had been spending millions to buy the stock — and offered an optimistic forecast.
Sure, the coronavirus has depressed short-term economic activity, and thus the demand for base metals. The market, however, only priced in that downside and lost sight of the potential recovery. Fortunately, astute traders were able to take advantage of that mispricing.
While the United States is still struggling to fully control the pandemic, in China and many other countries around the world, economic activity is approaching “normal” levels. As a result, industrial buyers are quickly returning to the copper market.
Thanks to this resurgent demand, global copper inventories are falling and are now far below the five-year average levels for this time of year. And now, the price of copper is up year-to-date. Freeport stock has followed this amazing trajectory. It is now up 18% overall in 2020.
In addition to copper’s run, Freeport-McMoRan is also drawing fuel from a rallying gold price and the surprising announcement that the company has been producing more copper and gold than it had previously forecast. This is notable as many mining operations face production shortfalls due to the virus.
In fact, part of copper’s strength is due to mine closures in Chile and Peru. Yet Freeport-McMoRan has boosted production despite the headwinds.
The unexpectedly strong guidance sent analysts scurrying to revise their earnings estimates. Although a slim annual loss is probably still in the cards for this year, earnings per share should easily top $1 next year, assuming copper and gold prices remain around current levels. The company has invested heavily in new projects that will bring even more production online. This could lift EPS to $2 in the coming years.
Plus, there’s a lot of “blue sky” above that forecast!
The company’s massive investments to increase production at its Grasberg mine in Indonesia are just starting to bear fruit. As a result, companywide annual copper production should jump about 40% over the next two years to 4.2 billion pounds, while gold production should double to 1.8 million ounces.
Those hefty production numbers could produce EBITDA (gross earnings) well over $10 billion and EPS in the range of $2 within two years … even with no change in the prices of copper or gold.
Risks remain, of course. The recovering global economy could sputter once again, and the virus could make a second — or third — wave. But powerful long-term demand trends are likely to push the copper price and Freeport’s shares much higher than they are today.
And that’s why I made Freeport-McMoRan my pick for “Best Stock for 2020” late last year.
Now, as I said above, base metals like copper are set for huge upside as the world recovers from the coronavirus pandemic … and as high-tech batteries in electric vehicles and renewable battery storage require more and more of those metals.
Freeport is a good way to play that rebound.
However, if you’re looking for great ways to play the coming surge, you’ll want to dig a little deeper.
That’s why earlier this week, during The Survive and Thrive Summit, I placed a “bet” on two tiny base metal miners.
In fact, I believe one of these stocks could be the 42nd stock I pick to soar more than 1,000%.
If you missed out on this free event, you can check out The Survive & Thrive Summit for a limited time by going here.
On the date of publication, Eric Fry did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends … before they take off. And when it comes to bear markets, you’ll want to have his “blueprint” in hand before stocks go south.