If you’re anything like me, then Christmas always has a way of sneaking up on you. And once you get to Christmas, it means that the end of the year is just a week away. For investors, 2020 is ending with as much volatility as it began. And in between, it wasn’t a whole lot calmer.
But whether you’re facing a decision on where to allocate IRA contributions or just looking to spend some time this holiday season rebalancing your portfolio, you may be wondering what stocks to buy in January of next year. It will be a time when there’s a lot of hope, but a real normal will still be months away. What should you do?
My advice to you is to keep it simple. And that’s what I’m trying to do in this special presentation. I’m not trying to trip you up or send you down the rabbit hole on a secret speculative stock. I’m looking at buying into companies that appear to be good buys as the economy recovers.
Quick Links
- Walmart
- FedEx
- CVS Health
- Apple
- Disney
- Starbucks
- Enterprise Products Partners
#1 - Walmart (NYSE:WMT)
In fairness, I could just as easily lead off with Amazon (NASDAQ:AMZN). But the company’s shares are out of the reach of many retail investors. So I’ll go with Walmart (NYSE:WMT), which truthfully is a great e-commerce play in its own rite.
That’s right, I said e-commerce because Walmart is continuing to go all-in on e-commerce. And it’s not just in the United States. The company now has a majority stake in Flipkart and owns a 5% stake in JD.com (NASDAQ:JD). This gives the company access to a solid e-commerce presence in India and China, respectively.
The company’s rising e-commerce sales (digital sales were up over 70% in its most recent quarter) should equate to higher profit margins. And if you can believe it, WMT stock appears to be undervalued with a price-to-earnings (P/E) ratio of just over 22, well below the S&P’s mark of around 36.
Rising earnings and profit add a good valuation and throw in the company’s standing as a Dividend Aristocrat, and there is very little reason to avoid Walmart stock.
About Walmart
Walmart Inc engages in the operation of retail, wholesale, other units, and eCommerce worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club. It operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores under Walmart and Walmart Neighborhood Market brands; membership-only warehouse clubs; ecommerce websites, such as walmart.com.mx, walmart.ca, flipkart.com, PhonePe and other sites; and mobile commerce applications.
Read More - Current Price
- $92.24
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 29 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $93.69 (1.6% Upside)
#2 - FedEx (NYSE:FDX)
I’ve liked FedEx (NYSE:FDX) all year. It’s one of the best plays on the e-commerce wave that’s swept the country. From overnight shipping to the last mile, the company has been seeing revenue and profits grow. And now, the company can add vaccine distribution to its quiver for investors.
But as we all know, a vaccine, while dispensing future hope, does little to mitigate our current conundrum immediately. That’s why Walmart is partnering with FedEx to anticipate what may arguably be a more popular activity than buying Christmas gifts…returning them.
How do you do this in a socially distant world? You offer customers a return service via FedEx in which customers can send back products without leaving their homes. For customers with access to a printer, it’s as simple as printing a label from Walmart’s website or app and scheduling your pickup. Customers without access to a printer can tap Drop Off at FedEx to receive a QR code that will be scanned once they reach their FedEx location.
The company has a P/E ratio of under 30, which suggests it’s trading at a value to the broader market.
About FedEx
FedEx Corporation provides transportation, e-commerce, and business services in the United States and internationally. It operates through FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services segments. The FedEx Express segment offers express transportation, small-package ground delivery, and freight transportation services; and time-critical transportation services.
Read More - Current Price
- $275.73
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 18 Buy Ratings, 8 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $324.88 (17.8% Upside)
#3 - CVS Health (NYSE:CVS)
CVS Health (NYSE:CVS) stock looks to be another winner as the vaccine distribution gets underway. The company, along with Walgreens Boots Alliance (NASDAQ:WBA) is hiring thousands of pharmacists and technicians to undertake the task of administering the vaccine. This is in sharp contrast to the mass layoffs that took place over the summer.
This will not only be taking place at the pharmacy chain’s retail locations. CVS is also one of the companies that will be going to long-term care facilities to ensure the vaccine is administered to those in our most vulnerable population.
To be clear, this may be a short-term play on an undervalued stock. CVS Health faces a genuine threat from Amazon as it moves into the pharmacy space. However, people's need to set foot inside a pharmacy to get a shot may give CVS a chance to prove that its renovation process can pay off with additional revenue.
About CVS Health
CVS Health Corporation provides health solutions in the United States. It operates through Health Care Benefits, Health Services, and Pharmacy & Consumer Wellness segments. The Health Care Benefits segment offers traditional, voluntary, and consumer-directed health insurance products and related services.
Read More - Current Price
- $44.36
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $70.50 (58.9% Upside)
#4 - Apple (NASDAQ:AAPL)
I’ll be upfront and say I haven’t had time to fully absorb the thought of an “iCar” being part of the electric vehicle (EV) mix. That’s not why Apple (NASDAQ:AAPL) makes this list. But it doesn’t hurt. Apple is simply a company that has a whole that is greater than the sum of its parts.
Although there’s no reason to believe Apple will become less reliant on its iconic iPhone anytime soon, the iPhone is just one revenue stream, albeit an important one. The company now has divisions such as Services and Wearables that are catalysts for growth.
All of these parts are connecting consumers deeper and deeper into the Apple ecosystem. And that may be the impetus behind Apple’s foray into the EV sector. If self-driving cars become the norm (and that’s a big if), then consumers will likely be using their Apple devices to pass the time on their commutes. At least that’s the opinion of Goldman Sachs (NYSE:GS).
To be honest, Apple has largely shrugged aside the pandemic, and after a stock split, AAPL stock continues to move higher. And recent price targets by analysts seem to agree with that.
About Apple
Apple Inc designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. The company offers iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of multi-purpose tablets; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, and HomePod.
Read More - Current Price
- $254.49
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 11 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $236.78 (7.0% Downside)
#5 - Disney (NYSE:DIS)
And speaking of a company with multiple revenue streams, I’ve been advising investors to buy Disney (NYSE:DIS), or at least hold onto it, since the pandemic started. The company saw revenue and earnings plummet as it closed theme parks, cruise ships sat idle, and production companies were closed as part of the mitigation efforts to slow the virus.
But there’s been one shining star in the Disney universe. The company’s streaming service, Disney+, continues to grow, and now that Disney is once again producing original content, there will be more reason for consumers to stay engaged with the service. And all of this will buy the company enough time for the economy to reopen and its theme park, resort, and cruise line revenue.
In its final quarter of its fiscal year, Disney’s revenue remained down nearly 23% year-over-year (YOY). However, that was a significant improvement from the YOY drop of over 40% in the prior quarter. The company isn’t firing on all cylinders, and analysts forecast that profits will still be below the pre-pandemic level through 2022.
But I’ll take the under on that forecast. The company just received an upgraded price target that could take DIS stock over $200 in 2021.
About Walt Disney
The Walt Disney Company operates as an entertainment company worldwide. It operates through three segments: Entertainment, Sports, and Experiences. The company produces and distributes film and television video streaming content under the ABC Television Network, Disney, Freeform, FX, Fox, National Geographic, and Star brand television channels, as well as ABC television stations and A+E television networks; and produces original content under the ABC Signature, Disney Branded Television, FX Productions, Lucasfilm, Marvel, National Geographic Studios, Pixar, Searchlight Pictures, Twentieth Century Studios, 20th Television, and Walt Disney Pictures banners.
Read More - Current Price
- $112.03
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 19 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $123.58 (10.3% Upside)
#6 - Starbucks (NASDAQ:SBUX)
On the consumer discretionary front, you can get amped up on Starbucks (NASDAQ:SBUX). Unlike Disney, Starbucks is almost back to pre-pandemic revenue and earnings. Part of that is due to the lessons the company has learned from China.
In response to the threat posed by Luckin Coffee (OTCMKTS:LKNCY), that is, before that company melted down due to fraud allegations, Starbucks has rethought its digital strategy. Now Starbucks Rewards customers can pre-order and pay on the company’s app. Their order is ready when they arrive. This grab-and-go strategy should not only add convenience (and revenue) but increase operating margins because the company will have increased efficiency.
And don’t ignore the fact that Starbucks not only continued to issue a dividend throughout the pandemic, but the company also managed to increase it. That’s no small accomplishment, and it’s a testament to the company’s balance sheet.
Like a few stocks on this list, Starbucks looks a little overvalued right now. There could be some volatility as we launch into 2021. However, recent analyst coverage suggests that SBUX stock has higher to climb.
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
- $87.97
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 18 Buy Ratings, 8 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $103.77 (18.0% Upside)
#7 - Enterprise Products Partners (NYSE:EPD)
The last stock pick I’m offering is that of Enterprise Products Partners (NYSE:EPD). It’s been a volatile year in the energy sector. Rising crude prices are typically a leading indicator of economic growth. And with crude oil prices on the rise, the start of 2021 may bring more of the same. Still, Enterprise manages to keep its profits in line with pre-pandemic levels, and the company’s revenue is starting to recover.
With that as a backdrop, Enterprise Product Partners is a set-it-and-forget-it play for value-oriented investors. The company is a master limited partnership (MLP). This means that the company does not pay federal taxes at the entity level. Those taxes are passed through to individual shareholders (partners). This allows them to offers shareholders an impressive dividend that is currently yielding over 8.7%.
But perhaps an even better benefit than the absence of double taxation is that Enterprise Product Partners has increased its dividend for 21 consecutive years.
About Enterprise Products Partners
Enterprise Products Partners L.P. provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. It operates in four segments: NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services.
Read More - Current Price
- $30.99
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $34.20 (10.4% Upside)
“Next year all our troubles will be far away” make for nice lyrics to a melancholy holiday song. But for investors finding a way to muddle through 2020 hasn’t been easy. But the good news is that 2021 brings the hope of a vaccine and, with that, a return to the activities and interests that bind us together.
During times like these, it’s okay to be a little boring with your choices. Sometimes betting on quality is a good thing. Any of the stocks in this presentation may not deliver the eye-popping performance that you’ll read about in an email newsletter. And some of them may have room to drop.
But investing, as opposed to trading, is a long game. And over the long haul, these are stocks that should continue to reward you with solid performance and, in many cases, a nice dividend.
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