Large cap growth stocks enjoyed another year of outperformance by a wide margin in 2020. And while there are signs that the recent rotation into value stocks may have some staying power, there are still some compelling growth names out there for investors to consider.
Here we recap a few of those growth names that finished the year in style—and regardless of how the growth versus value story plays out, are poised to carry the momentum well into 2021.
What is a Good Stock to Play Agriculture Growth?
FMC (NYSE:FMC) provides chemicals to the agriculture industry that are used to improve plant health, manage turf, and protect crops from pests. Famers tap into the company's broad product lineup to improve the quality and yield of their crops protecting them from insects, disease, and even those dreaded weeds.
After facing coronavirus-related pressures in 2020, the outlook for the global crop protection market is looking brighter. FMC has witnessed pockets of strength in recent months to show for it. Increased planting of soybean and corn in North America and Brazil is driving healthy demand for its insecticides. Agricultural activity in Australia and India are also on the rebound leading to the increased use of herbicides on commodities like cereals, canola, rice, soybeans, and sugarcane.
Analysts are forecasting FMC's earnings growth to accelerate from 7.5% last year to 12.4% in 2021. The growth driver is expected to be ongoing solid demand for fungicide, herbicide, and insecticide products. New product launches in FMC's core soybean, corn, and cotton markets should be play a starring role in this growth.
An attractive aspect of FMC's business is its diverse geographic revenue sources. It sells to a well-balanced global customer base with three-fourths of revenue derived outside of North America.
India, where FMC holds a 13% market share, represents perhaps its most compelling growth opportunity. Despite having the highest amount of arable land in the world, India's crop yields for wheat, rice, maize, sorghum, and pulses significantly lag those of other major producers. The reason is a low usage of fertilizer and pesticides in addition to an overdependence on Mother Nature for rain. So, as the Indian economy continues to develop, and farmers continue to recognize the value of crop protection products, FMC will be in a great position to capitalize on this growth.
At 18x forward earnings FMC is one of the least expensive large cap growth names. It also comes with a 1.5% dividend yield which trails only Qualcomm among S&P 500 growth stocks. Last month FMC's board bumped its quarterly dividend up by 9% which should reinforce the company's commitment to shareholders and confidence in its growth prospects.
Will Domino's Continue to Deliver Strong Earnings?
Domino's Pizza (NYSE:DPZ) had a nice run in 2020 on the strength of its online sales which accounted for more than two-thirds of revenue. The pizza delivery leader is likely to benefit from a hearty consumer appetite for carryout and delivery again this year.
Domino's has been in an advantageous position since the start of COVID-19 because it doesn't rely on sales from on-premise dining. Its booming e-commerce platform makes it easy for its loyal customer base to order. Besides making value-added enhancements in technology, management deserves credit for not using third-party delivery services when seemingly all other restaurant chains are.
It appears likely that we'll be spending much of this year under restrictions if not lockdown orders as the worsening pandemic and potential for new virus variants outpaces vaccine distribution. And this means it will remain second nature to press a few buttons on our phones and computers to summon our favorite Domino's indulgences.
And let's not forget that the popular pizza chain is a global business with operations in 80 countries—and it generates revenue from both franchising and direct store ownership. This should add up to more big earnings beats similar to what we saw in the last two reports.
Unfortunately, many local pizza shops may continue to struggle this year and more will probably have to hang it up. The 'mom and pop' losses should be Domino's gain—and lead to additional market share gains and growth in the new year.
What is Behind Growth at PerkinElmer?
Finally, PerkinElmer (NYSE:PKI) is a name to keep on the radar for this year due to its exposure to the fast-growing health care diagnostics market. The company's products are used to detect genetic disorders and test for a range of infectious diseases. It also provides diagnostic materials and technologies that are used by pharmaceutical company research labs to discover new drugs.
Sales in PerkinElmer's diagnostics business nearly doubled in the most recently reported quarter because of high demand for its diagnostic tools used to detect COVID-19. It works with laboratories across the world to provide rapid, real-time, and automated coronavirus detection solutions. Demand for the company's testing kits is likely to stay strong in 2021 as diagnostic labs worldwide hustle to keep up with test volumes.
PerkinElmer is also involved with the vast number of companies that are scrambling to develop products that are effective against the coronavirus. From hand sanitizers and PPE to cleaning supplies and disinfectants, businesses of all sizes are focused on protecting their environments. These supplies are likely to stay in strong demand for the foreseeable future, probably even after the pandemic subsides. And this means the growth runway is long for PerkinElmer's product testing and other solutions related to COVID-19 safety.
Yet investors need not worry that PerkinElmer is a one-trick COVID-19 pony. It has been a leader in the diagnostics and research industry for decades. And in the longer run it will derive steady growth from the world's increased focus on virus and disease prevention.
Before you consider Domino's Pizza, you'll want to hear this.
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