The Street ended the last month of the year on relatively firm footing. Now, many wonder if they should buy stocks at current levels. For retail investors, it’s next to impossible to time the market constantly. Yet, I believe with due diligence, it is possible to find stocks that will turbocharge portfolios in the new year. As such, today’s article introduces seven stocks to buy in a bull market.
Several scholars from Queen’s University in Canada point out the following:
“[S]tock markets are affected by many highly interrelated factors that include economic, political, psychological, and company-specific variables […] Sentiments can drive short-term market fluctuations which in turn cause disconnects between the price and true value of a company’s shares but over long periods of time, however, the weighing machine kicks in as a company’s fundamentals ultimately cause the value and market price of its shares to converge.”
With that in mind, in 2021 (like in most years) there will understandably be ebbs and flows in prices and indices. There will also be a number of weeks with “risk-off” sentiment. For instance, market participants may become concerned about economic recovery, earnings declines, virus mutations and other issues that we cannot foretell at this point. When those days or weeks come, stock prices may take a breather.
However, robust companies with earnings and profits will continue to create shareholder value quarter after quarter. And for long-term investors, no asset class has brought more robust growth than Wall Street. So, that said, here are seven picks for a bull market:
- Activision Blizzard (NASDAQ:ATVI)
- Barron’s 400 ETF (NYSEARCA:BFOR)
- Roku (NASDAQ:ROKU)
- Siren Nasdaq NexGen Economy ETF (NASDAQ:BLCN)
- Smith & Nephew (NYSE:SNN)
- Twitter (NYSE:TWTR)
- UnitedHealth Group (NYSE:UNH)
Stocks to Buy in a Bull Market: Activision Blizzard (ATVI)
52-Week range: $50.51 to $92.99
Dividend yield: 0.46%
California-based game developer Activision Blizzard holds a number of blockbuster video game titles, such as Call of Duty, Overwatch and StarCraft. More specifically, the company has three main segments: Activision Publishing, (Activision), Blizzard Entertainment (Blizzard) and King Digital Entertainment (King).
ATVI announced its Q3 results in late October. GAAP net revenue was $1.95 billion, compared to $1.28 billion in Q3 2019. That meant an increase of 52.5% year-over-year (YOY). The company also noted that revenue from digital channels was $1.75 billion. A year ago, it had been $1.01 billion.
Content launches as well as increased audience engagement during the pandemic contributed to that revenue growth. In fact, ATVI’s player base grew 23.4% YOY to 390 million monthly active users (MAUs). Similarly, the total time spent in various games increased.
GAAP earnings per diluted share were 78 cents. A year ago, they had been 26 cents. Finally, management raised its full-year 2020 outlook to $3.08 earnings per share (EPS) on revenue of $7.68 billion. CEO Bobby Kotick noted:
“Today, we’re in a position to deliver sustained and significant long-term expansion across our portfolio of fully owned franchises […] As we execute against our content pipeline, extend our key franchises to mobile, introduce new free-to-play experiences and continue to optimize in-game operations, we are positioned to continue converting our growing agent into consistent and long-term revenue and earnings growth.”
ATVI stock’s forward price-earnings and price-sales ratios are 26.44 and 9.05, respectively. The shares hit an all-time high in late December. And, despite the positive news regarding high-efficacy vaccines, the current entertain-at-home conditions will likely remain in the near term. That alongside ATVI’s loyal player base makes it one of the more robust stocks to buy in a bull market.
Barron’s 400 ETF (BFOR)
52-Week Range: $26.12 to $50.20
Dividend Yield: 1.00%
Expense Ratio: 0.65%
Next on my list of stocks to buy in a bull market is an exchange-traded fund (ETF): the Barron’s 400 ETF. Investors who want to have exposure to a fund that follows growth at a reasonable price (GARP) methodology should research this ETF further. Why? Fund managers aim to invest in financially sound companies that could create significant shareholder value over the long-term. The fundamental measures they employ focus on growth, value, profitability and cash flow.
BFOR stock — comprised of 400 holdings — tracks the Barron’s 400 Index, which is equal-weighted. Therefore, a small minority of companies cannot steer the entire index. Plus, it is rebalanced twice a year, every March and September.
The fund started trading in 2013 and has roughly $123 million in assets. In terms of sectors, financials top the list at about 21%, followed by tech at 18.7% and industrials at 17.54%. Top ten stocks make up almost 3.5% of the fund. These holdings include Enphase Energy (NASDAQ:ENPH), Digital Turbine (NASDAQ:APPS) and Meta Financial (NASDAQ:CASH), which owns MetaBank.
Rules-based and fundamentally driven, BFOR could find a great place in many long-term portfolios. In the case of any upcoming profit-taking in its holdings, a decline toward $45 is possible. Such a drop in price would offer a better risk-return profile.
Roku (ROKU)
52-Week range: $58.22 to $363.44
Dividend yield: N/A
Stay-at-home trades have provided powerful tailwinds for ROKU stock, the next pick on my list of stocks to buy in a bull market. For one, Roku’s TVs and Streaming Players make up the two main revenue segments for the company. The streaming platform connects audiences to subscription services offered by Netflix (NASDAQ:NFLX), Disney (NYSE:DIS) and more. Users can even personalize their content selection on the platform.
The company released Q3 metrics back in early November. Revenue increased 73% YOY to $452 million. Both segments saw robust growth. Net income was $12.95 million, compared to a $25.15 million loss over the same period in 2019. These numbers represented a diluted EPS of 9 cents, up from the net loss per share of 22 cents in the previous year. CFO Steve Louden noted:
“We added 2.9 million incremental active accounts in Q3 and ended the quarter with 46 million active accounts, up 43% year over year […] Engagement on the platform continues to grow with Roku users streaming 14.8 billion hours in the quarter, up 54% year over year […] Gross profit grew faster than revenue, up 81% year over year in Q3, to $215 million.”
As a result of these high double-digit growth rates, the shares have done extremely well in 2020 and will continue to do well in the new year. Now having declined toward $330, the margin of safety has also improved for ROKU stock.
Siren Nasdaq NexGen Economy ETF (BLCN)
52-Week Range: $17.69 to $41.68
Dividend Yield: 0.55%
Expense Ratio: 0.68%
My next pick on this list of stocks to buy in a bull market is another ETF, the Siren Nasdaq NexGen Economy ETF. This fund provides access to a range of businesses that could potentially offer long-term growth.
Of course, 2020 has become the year when future-focused businesses as well as investors are taking a closer look at blockchain technologies. Since its inception in 2018, BLCN’s assets have grown to just over $165 million.
The ETF, which has 73 holdings, tracks the returns of the Siren NASDAQ Blockchain Economy Index, which was created jointly between Siren and Nasdaq (NASDAQ:NDAQ). Moreover, it’s sectoral breakdown includes technology at 39.5%, financials at 34.3%, communication services at 10.8% and consumer cyclical at 9.3%.
About 18% of the fund’s assets are concentrated in the top ten holdings. These include names like Square (NYSE:SQ), Galaxy Digital (OTCMKTS:BRPHF) and more.
Smith & Nephew (SNN)
52-Week range: $26.07 to $52.26
Dividend yield: 1.75%
Smith & Nephew is the next entry on this list of stocks to buy in a bull market. SNN is a well-known medical technology group whose operations can be found in over 100 countries. This company is particularly attractive due to changing global demographics. Put another way, the world’s population is aging fast, which could mean increased revenue for SNN’s business.
According to the World Health Organization (WHO), “The number of people aged 65 or older is projected to grow from an estimated 524 million in 2010 to nearly 1.5 billion in 2050, with most of the increase in developing countries.” So, in addition to the various health needs of an older population, more healthcare spending — especially in developing economies — will provide potential tailwinds for SNN stock in the new year and beyond.
Smith & Nephew released Q3 results in late October. Revenue was $1.2 billion, a decline of 3.7% YOY. Yet, there was robust recovery from Q2, when revenue had been down 29.3%.
In Q3, markets in the U.S. and China returned to growth. However, most of the emerging world was still in decline. But CEO Roland Diggelmann reassured that “as global levels of elective surgery recovered […] [Smith & Nephew] delivered a substantial improvement in performance over the previous quarter, led by growth in both the U.S. and China, our two largest markets.”
SNN stock’s forward price-earnings and price-sales ratios are 33.04 and 3.96. Given the likelihood of a possible third wave of the pandemic, investors may want to wait to invest in shares, at least until the group releases Q4 results. A further decline of 4% to 6% would improve the margin of safety and make the stock’s valuation more attractive.
Twitter (TWTR)
52-Week range: $20.00 to $56.11
Dividend yield: N/A
California-based social media platform Twitter is the next pick on this list of stocks to buy in a bull market. In addition to its main platform, the company also owns Periscope.
What’s more, during election season, political readership was exceptionally high. That’s because many political figures, including President Donald Trump, have been using the platform regularly and somewhat infamously.
Twitter released its Q3 metrics in late October. Revenue was $936 million, an increase of 14% YOY. However, net income was $29 million, a 21.6% decrease YOY. Diluted EPS was 4 cents. A year ago, it had been 5 cents. Additionally, focusing on monetizable daily active users (mDAU), CEO Jack Dorsey noted:
“We have grown our daily audience by 42 million in the last year as people all around the world come to Twitter to find out about the topics and events they care about most. I’m pleased mDAU grew 29% year over year to 187 million, driven by global conversation around current events and product improvements.”
TWTR stock’s forward price-earnings and price-sales ratios are 60.24 and 12.4, respectively. But potential investors may want to see what Q4 results look like come late January. That’s because a possible decline toward $50 would offer an improved margin of safety.
UnitedHealth Group (UNH)
52-Week range: $187.72 to $367.95
Dividend yield: 1.43%
The last name on this list of stocks to buy in a bull market continues with that aging demographics trend introduced by Smith & Nephew. That’s because global citizens will increasingly demand a multitude of health services.
UnitedHealth is a major healthcare business that can help answer that call. In fact, it’s one of the 30 members in the Dow Jones Industrial Average. The group has two segments: health benefits (operating under UnitedHealthcare) and health services (operating under Optum). Altogether, it serves individuals, employers and both Medicare and Medicaid beneficiaries.
UnitedHealth released its Q3 results in mid-October. For one, revenue went up by 8% to $65.1 billion, thanks in part to growth in the company’s Optum unit. On top of that, cash flow from operations was $3.1 billion or one times net incomes. Management also raised its annual profit forecast to adjusted net earnings of $16.50 to $16.75 per share.
UNH stock’s forward price-earnings and price-sales ratios are 20.87 and 1.31, respectively. Potential investors should consider buying the dips in the shares.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
