It’s rough in the markets right now. Underlying the volatility is uncertainty. The VIX Index (INDEXCBOE: VIX) otherwise known as the Fear Index is unofficial, but an eerily accurate predictor of market sentiment. And the VIX is up 30% in the last month.
Is this uncertainty due to concerns over additional lockdown measures? Is it about the lack of additional coronavirus stimulus? Is the market reacting to a surge in jobless claims? Or is this just the somewhat normal volatility that comes in an election year that promises to be like none in American history.
The answer is all of the above and then some. But does that mean you should stay out of equities? I don’t think so. Where are you going to go? The Fed has promised interest rates are going nowhere fast. And that bit of news is weighing down the bond market.
So stocks it is. But although growth-seeking investors may be tempted to look at the tech sector to see what’s on sale today, I suggest taking a more targeted approach. Rather than looking at a single sector, try to look at solid performers in different sectors that may be ready to surge over the last three months.
The pandemic brought the entire market down. But once investors took a breath they found bargains. And if you had the courage to put your money to work in those stocks, you’ve been rewarded.
Times like these call for the same type of courage. And that’s why we’ve put together this special presentation with seven stocks that look ready to surprise investors with nice end-of-year gains.
Quick Links
- Wayfair
- Johnson & Johnson
- Sony
- MGM Resorts International
- Home Depot
- ROKU
- Starbucks
#1 - Wayfair (NYSE:W)
Wayfair (NYSE:W) stock is up over 200% for the year and some investors may be thinking the run is over. Not so fast. And by that, I mean that you shouldn’t give up on the stock, but you also may not want to expect 200% growth in the next six months.
E-commerce is only going to get stronger. And the appeal of Wayfair is that it is exclusively an e-commerce platform. There are no brick-and-mortar stores for the company to support. This means that Wayfair isn’t a “bargain basement” site. It can offer products at a range of price points, but can still offer a discount.
And the other thing to like about Wayfair is its focus on a specific niche, in this case, furniture.
As more consumers have been spending time at home, there’s been more attention being paid to updating their furnishings. The stock also stands to benefit from the recent surge in new home sales.
Prior to the pandemic, Wayfair was not a profitable company, but it surged into the green in its most recent quarter. In its earnings call, the company was conservatively estimating 20% higher net revenue growth rates. And with the company sitting on $2.4 billion in cash, cash equivalents, and short-term investments while generating $1.1 billion in free cash flow, there’s reason to believe that the growth isn’t over.
About Wayfair
Wayfair Inc provides e-commerce business in the United States and internationally. The company offers approximately thirty million products for the home sector. It offers online selections of furniture, décor, housewares, and home improvement products through its sites consisting of Wayfair, Joss & Main, AllModern, Birch Lane, Perigold, and Wayfair Professional.
Read More - Current Price
- $42.39
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 12 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $60.28 (42.2% Upside)
#2 - Johnson & Johnson (NYSE:JNJ)
News about a Covid-19 vaccine will continue to attract investors. Yes, Johnson & Johnson (NYSE:JNJ) has a promising candidate that seems to check many of the boxes (i.e. single dose, long-term immunity, stores, and ships at refrigerator temperatures). And the company is conducting what is considered a “massive” 60,000 subject clinical trial. Should that go well, JNJ could be the leader in the clubhouse.
However, if you accept the premise that there may be more than one vaccine, then don’t sleep on Moderna (NYSE:MRNA). The company is attempting to bring the first successful messenger RNA (mRNA) vaccine licensed for human use. The science behind the vaccine is promising but unproven. Nevertheless, Moderna is receiving funds via Operation Warp Speed (OWS) and it’s a reasonable bet that they will be given a bite at the apple.
But even if they are shut out of the Covid-19 vaccine, getting a vaccine through clinical trials would be a proof of concept for their process. And that’s good news for the other candidates in its pipeline.
About Johnson & Johnson
Johnson & Johnson, together with its subsidiaries, researches, develops, manufactures, and sells various products in the healthcare field worldwide. The company's Innovative Medicine segment offers products for various therapeutic areas, such as immunology, including rheumatoid arthritis, psoriatic arthritis, inflammatory bowel disease, and psoriasis; infectious diseases comprising HIV/AIDS; neuroscience, consisting of mood disorders, neurodegenerative disorders, and schizophrenia; oncology, such as prostate cancer, hematologic malignancies, lung cancer, and bladder cancer; cardiovascular and metabolism, including thrombosis, diabetes, and macular degeneration; and pulmonary hypertension comprising pulmonary arterial hypertension through retailers, wholesalers, distributors, hospitals, and healthcare professionals for prescription use.
Read More - Current Price
- $153.10
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $175.94 (14.9% Upside)
#3 - Sony (NYSE:SNE)
Turning to the gaming sector, one of the underlying catalysts for the semiconductor sector is the scheduled launch of new gaming consoles. Sony (NYSE:SNE) is getting ready to release the latest version of its PlayStation console, the PlayStation 5. Historically, the company’s stock gets a bump whenever it releases a new console.
But if you want to understand the story for Sony you have to gaze beyond the hardware and look to the cloud. Cloud gaming services are the new path to growth and Sony has been steadily seeing subscriber growth in its PlayStation Plus and PlayStation Now services.
Sony stock is up a modest 10% for the year. By comparison, Microsoft (NASDAQ:MSFT) the maker of the soon-to-be-released new version Xbox is up nearly 27% this year. Granted Microsoft has a much larger cloud business (among other things) than Sony. But it also suggests that SNE stock may have more room to surprise.
About Sony
Sony Corporation designs, develops, produces, and sells electronic equipment, instruments, and devices for the consumer, professional, and industrial markets worldwide. The company distributes software titles and add-on content through digital networks by Sony Interactive Entertainment; network services related to game, video, and music content; and home and portable game consoles, packaged software, and peripheral devices.
Read More - Current Price
- $18.92
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#4 - MGM Resorts International (NYSE:MGM)
For a different play on the gaming sector, you should consider MGM Resorts International (NYSE:MGM). The return of live sports means that sportsbooks are open. This has been a catalyst for gaming stocks like DraftKings (NASDAQ:DKNG) and Penn National Gaming (NASDAQ:PENN).
However, unlike these two stocks, MGM stock is down 35% for the year. Some of that is due to the fact that MGM operates a physical network of casino properties that were shut down. However, MGM shouldn’t be overlooked in the sports betting arena.
Prior to the pandemic, MGM was just launching its BetMGM service. Talk about horrible timing. However, the company gets another chance to launch the product at a time when casino properties are open again. And more importantly, the sports calendar is full.
The National Football League is in full swing. And recently the Big Ten and Pac-12 football conferences announced they will be playing abbreviated college football schedules, which should add additional betting interest.
With DKNG stock up nearly 400% and PENN stock up over 150%. MGM represents a low-risk option that could deliver a high reward.
About MGM Resorts International
MGM Resorts International, through its subsidiaries, owns and operates casino, hotel, and entertainment resorts in the United States and internationally. The company operates through three segments: Las Vegas Strip Resorts, Regional Operations, and MGM China. Its casino resorts offer gaming, hotel, convention, dining, entertainment, retail, and other resort amenities.
Read More - Current Price
- $37.51
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $53.15 (41.7% Upside)
#5 - Home Depot (NYSE:HD)
Home Depot (NYSE:HD) was one of the unquestioned winners during the pandemic. However, putting the company on this list may be seen as a contrarian bet of sorts. Some analysts are suggesting that the stock’s recent pullback was expected and may not be over. And I suppose that may be true if you’re expecting 75% growth as the stock has done since March.
However, when I widen the lens, I see a stock that’s up a more modest 21% for the entire year. And at the beginning of the year, the housing market was still struggling to heat up despite mortgage rates being at attractive levels. That appears to be changing. This means more homeowners will be looking to do projects, especially since there may still be limitations to travel this holiday season.
And because Home Depot has made a successful pivot to omnichannel retail, consumers can have what they needed to be delivered, frequently the same day. The fact that Home Depot competes in an area that is not easy for Amazon (NASDAQ:AMZN) to compete in can’t hurt.
About Home Depot
The Home Depot, Inc operates as a home improvement retailer in the United States and internationally. It sells various building materials, home improvement products, lawn and garden products, and décor products, as well as facilities maintenance, repair, and operations products. The company also offers installation services for flooring, water heaters, bath, garage doors, cabinets, cabinet makeovers, countertops, sheds, furnaces and central air systems, and windows.
Read More - Current Price
- $399.98
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $426.00 (6.5% Upside)
#6 - ROKU (NASDAQ:ROKU)
ROKU (NASDAQ:ROKU) stock is up nearly 30% for the year, but you would think it would be higher. The stock just got a nice bounce when Roku announced it had signed a deal with Comcast (NASDAQ:CMCSA) to put the company’s Peacock streaming service on Roku.
The pandemic lockdowns have created an increased demand for streaming services. And Roku provides an easy way for consumers to view streaming content from any of a number of services. In fact, the thinking is that the Comcast deal will be a catalyst for the company coming to terms with AT&T (NYSE:T) for its HBO Max service.
Roku can be a tricky stock for investors. Overall, analysts have a price target that suggests ROKU stock may drop. And I was skeptical about the stock earlier this month. However, in September the company has received “buy” or “overweight” ratings with price targets that are well above the stock’s current level. Roku is really a question of it’s either going to grow a little or grow a lot.
About Roku
Roku, Inc, together with its subsidiaries, operates a TV streaming platform in the United states and internationally. The company operates in two segments, Platform and Devices. Its streaming platform allows users to find and access TV shows, movies, news, sports, and others. The Platform segment offers digital advertising, including direct and programmatic video advertising, media and entertainment promotional spending, and related services; and streaming services distribution, such as subscription and transaction revenue shares, and sale of premium subscriptions and branded app buttons on remote controls.
Read More - Current Price
- $68.71
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 8 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $84.67 (23.2% Upside)
#7 - Starbucks (NASDAQ:SBUX)
If I told you Starbucks (NASDAQ:SBUX) stock was down 7% the year would you believe it? Yeah, me neither. Not with all the pictures of pumpkin spice lattes on my social media timeline. Granted, that’s a terrible metric for looking at a stock’s performance. However, the company was not immune to the effects of pandemic lockdowns both in the United States and China.
And China is not an insignificant part of this story. The company has formed a partnership with Alibaba (NYSE:BABA) and is benefiting from the struggles of Luckin Coffee (OTCMKTS:LKNCY).
However, in the United States, the company has proven to be nimble. In addition to building out a curbside delivery model on the fly, the company has continued to expand. In the last quarter, the chain opened 130 new locations. And, the business recovered enough for the company to not only payout but increase its dividend. That’s nothing to ignore in this economy.
In a worst-case economic scenario (i.e. more lockdowns), the company is more prepared which should be less bad for SBUX stock. And in an economy that continues to recover, the stock looks even better.
About Starbucks
Starbucks Corporation, together with its subsidiaries, operates as a roaster, marketer, and retailer of coffee worldwide. The company operates through three segments: North America, International, and Channel Development. Its stores offer coffee and tea beverages, roasted whole beans and ground coffees, single serve products, and ready-to-drink beverages; and various food products, such as pastries, breakfast sandwiches, and lunch items.
Read More - Current Price
- $98.26
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 18 Buy Ratings, 8 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $102.81 (4.6% Upside)
September is historically a poor year for stocks. October has provided a couple of the nastiest days in the market’s history. But if history teaches us anything, it’s that the market is remarkably resilient. There are many unknowns as we move into the fourth quarter of 2020, but one thing we’ve seen this year is that the market wants to move higher.
But not all stocks will be part of that recovery. The fourth quarter may continue to be volatile in the tech sector. And banking stocks will be under pressure as the next earnings season gets underway. But there will be winners as well. And one way to look for those winners is to dig deeply into some of the sectors to find value.
That’s the goal here. These seven stocks may not be top of mind on many investor’s lists, but they show the potential to deliver an upside surprise for risk-tolerant investors.
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