[Editor’s note: “The Top 15 Stocks to Buy in 2020” is regularly updated to include the most relevant information available.]
Heading into a new year, all investors want to know is what stocks they should be buying.
At the beginning of this year, I attempted to answer that question by compiling a portfolio of the top 15 stocks to buy for 2020. In mid-February, that portfolio of stocks was up a whopping 22% year-to-date.
Then, the novel coronavirus outbreak went global. Russia and Saudi Arabia started an all-out oil price war. Financial markets across the globe fell off a cliff. So did my portfolio of top stocks to buy for 2020.
But, I think now may be as good a time as any to double down on these top stocks. Coronavirus headwinds, as strong as they’re blowing right now, will eventually die down. Covid-19 fears have sent these stocks circling the drain, but do they really deserve to be there? Does the market really believe these stocks are worth 20%, 30% or 40% less than they were just weeks ago? No. These are long-term growth stocks and each of them will return to their growth stories when it’s all said and done.
In no particular order, the top 15 stocks to buy for 2020 in March are:
- Facebook (NASDAQ:FB)
- Activision (NASDAQ:ATVI)
- Luckin Coffee (NYSE:LK)
- Beyond Meat (NASDAQ:BYND)
- Netflix (NASDAQ:NFLX)
- Pinterest (NYSE:PINS)
- Canopy Growth (NYSE:CGC)
- Square (NYSE:SQ)
- The Trade Desk (NASDAQ:TTD)
- Etsy (NASDAQ:ETSY)
- Okta (NASDAQ:OKTA)
- JD.com (NASDAQ:JD)
- Stitch Fix (NASDAQ:SFIX)
- Nio (NYSE:NIO)
- Snap (NYSE:SNAP)
Let’s take a deeper look where these top stocks to buy for 2020 are going next.
Top Stocks to Buy for 2020: Facebook (FB)
The bull thesis on global social media giant Facebook heading into 2020 was pretty straight forward. Accelerating digital ad spending trends coupled with a plunge into e-commerce and renewed profit margin expansion would recharge the company’s profit growth trajectory, and push the stock materially higher.
The coronavirus outbreak threw a wrench in that bull thesis. Now, it looks like coronavirus hysteria will cause a mass consumer slowdown, which will lead to reduced ad spending and slower growth rates at Facebook. As such, Facebook stock is actually down 15% year-to-date.
These slowdown fears are overstated. Where coronavirus struck first — in China and South Korea — it has already stopped spreading. Assuming the U.S. follows a similar trajectory, then the coronavirus will stop spreading domestically by April or May. A halt in spread will ease consumer hysteria. Coupled with tons of fiscal stimulus and potential payroll tax cuts, easing hysteria will lead to a rebound in consumer spending, which will lead to a rebound in ad spend, which will lead to a rebound in Facebook stock.
Big picture — recent weakness in Facebook stock is an opportunity to buy before this big growth stock gets back to a winning stride in the summer.
Activision Blizzard (ATVI)
Much like Facebook’s bull thesis, the bull thesis for video game publisher Activision Blizzard at the start of the year was very simple.
The video game market is due for a big year. You have the introduction of new consoles for the first time since 2013. Those new consoles will be the first generation of video game consoles with cloud gaming capabilities. At the same time, the 2020 video game line-up is very robust. You also have the mainstream rollout of commercial 5G, which will provide an upward lift to gaming capabilities, and the launch of multiple new eSports leagues.
Against this favorable backdrop, Activision is optimally positioned to reap the rewards of big growth throughout the market, thanks to the company’s strong content line-up in 2020 behind a new Call of Duty game and important expansions in its World of Warcraft series. At the same time, shares remain relatively discounted at just 24-times forward earnings.
So far, this bull thesis has played out as planned. Activision reported strong holiday quarter numbers at the beginning of February, and management sounded a confident tone about the 2020 release schedule. Shares have consequently risen 2% year-to-date, against a market that’s down double-digits.
Still, the stock remains pretty cheap, and the best growth catalysts are on the horizon. As such, this stock will likely keep grinding higher.
Luckin Coffee (LK)
Often labeled the Starbucks (NASDAQ:SBUX) of China, Luckin Coffee had a strong 2019 showing thanks to big unit expansion, huge revenue growth and significant margin improvements. Heading into 2020, it looked like all of those things — big unit expansion, a favorable shift among China’s youth towards daily coffee consumption, and profit margin improvement — would continue in 2020.
That’s why LK stock quickly surged about 30% higher in the first three weeks of January.
Then, coronavirus concerns hit. Daily life in China came to a screeching halt. Luckin closed a bunch of stores. They operated the rest at reduced hours. The company is now expected to report pretty bad first quarter numbers, and in anticipation of that earnings dud, shares have plunged.
But, the coronavirus is a near-term headwind which is coming to a close. The spread of the virus is dramatically slowing in China, and it increasingly look like the worst of the outbreak is already over.
As such, within the new few months, Chinese consumers will get back to their daily routines. Those routines include a daily (or twice daily) run to Luckin stores. The Luckin growth narrative will resume at full speed. When that happens, Luckin stock will run back to all time highs.
Beyond Meat (BYND)
My bullishness on plant-based meat maker Beyond Meat (NASDAQ:BYND) in 2020 can boiled down to something Bill Gates once said. People tend to overestimate what can be done in a year and underestimate what can be done in a decade.
In 2019, investors overestimated what Beyond Meat stock could do in a year. Heading into 2020, investors were underestimating the magnitude and significance of the plant-based meat mega-trend, and how big Beyond Meat could be in a decade.
So, less than two full months into 2020, Beyond stock is up an enormous 20% in a falling market.
This stock should stay hot from here. The consumption shift towards plant-based meat is only accelerating, thanks to several quick-casual chains rolling out plant-based meat options like Starbucks, increased consumer awareness surrounding plant-based meat’s environmental benefits, and some not-so-subtle reminders that animal-based meat can be dangerous (see the coronavirus).
So long as the company sustains robust growth momentum, the stock will continue to out-perform.
Streaming giant Netflix had a tough 2019 thanks to escalating competition concerns. But, going into 2020, I was bullish on NFLX stock because I believed the company was going to report a series of quarters which proved that those competition concerns were overstated.
One quarter in, one quarter down. Netflix reported strong holiday quarter numbers in late January that included robust subscriber growth and a strong guide for sub growth next quarter. In response, Netflix stock soared.
Sure, coronavirus concerns have hit the stock recently. But, such concerns are overstated, because social distancing and consumers staying at home more is actually a good thing for Netflix, while any economic impact from the virus will be small and short-lived.
Thus, come summer, the trend of Netflix reporting above-consensus quarters should continue, mostly because this company remains the dominant force in the secular growth streaming TV market, with better-than-peer original content, streaming technology, and global reach.
The more big user growth quarters Netflix reports in 2020, the more competition concerns will fade from the scene. The more that happens, the higher NFLX stock will go.
Social media platform Pinterest had a rough 2019 following a red-hot initial public offering. But, this weakness down the stretch in 2019 actually gave the stock a compelling opportunity to have a very strong 2020.
Indeed, Pinterest started off the year with a bang, reporting strong quarterly numbers that sparked a big rally in the stock.
Since then, shares have given up all their gains, and then some, on concerns that the coronavirus outbreak will cause a global economic slowdown, the likes of which will weigh significantly on ad spending trends.
That won’t happen.
Instead, coronavirus anxieties will pass by April or May. Consumers, supported by tons of fiscal stimulus, will re-up their spending. Companies will boost their ad budgets. Pinterest’s revenue growth rates will improve, and as they do, PINS stock will bounce back — especially since shares are heavily discounted at current levels.
Canopy Growth (CGC)
At the start of the year, I laid out five big reasons why beaten-up Canadian cannabis producer Canopy Growth could stage a huge rebound in 2020.
First, demand trends in the legal Canadian market will improve, thanks to new products like edibles and vapes, as well as significant retail store expansion. Second, profit margins at Canopy will also improve, as black-market competition eases thanks to Canopy’s better handle on supply and logistics. Third, improving demand trends on top of improving profit margins will turn widening losses in 2019 into narrowing losses in 2020. Fourth, progress will be made on legalizing cannabis in the U.S. through the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act.
Fifth, and perhaps most importantly, CGC stock is priced for failure. Thus, shares are optimally positioned to rip higher on good news. Calendar 2020 could be a year of good news. Naturally, that means calendar 2020 could be a year of sustained big gains for CGC stock.
Canopy Growth proved all of these points in its third quarter earnings report. Revenue growth trends improved. Margins improved. Losses narrowed.
And yet, CGC stock is down big year-to-date. This is a head-scratching move which the fundamentals simply don’t support.
Over the next few quarters, I fully expect Canopy to continue to report strong numbers, headlined by improving growth and profit trends. As the company does, I also fully expect the stock price to start to match fundamentals, and for shares to meaningfully rebound.
At the beginning of the year, I said that payments processor Square was ready to rip higher over the next 12 months as the company’s revenue growth trajectory meaningfully improved.
For the first two months of the year, everything was going smoothly. It was becoming increasingly obvious through various partnerships and fee structure changes that Square’s revenue growth trajectory was set to improve in a big way. In anticipation of that big improvement, Square stock roared an impressive 30%-plus higher in 2020 through mid-February.
Coronavirus fears have since killed the rally. Specifically, there are fears that containment efforts and coronavirus hysteria will stunt consumer spending, which will have a direct impact on Square’s gross payment volume, revenues, and profits.
That won’t happen in any meaningful way. Instead, it will only happen for a few weeks, and only in certain areas. Come April or May, consumers in Square’s core markets will be spending in full force again.
As such, take advantage of recent weakness in SQ stock. The long-term fundamentals growth narrative here remains very strong.
The Trade Desk (TTD)
Programmatic advertising leader The Trade Desk has posted huge returns over the past several years, and at the start of this year, I believed that 2020 wouldn’t break this cycle of big returns.
So far, though, it has, because investors are concerned that coronavirus hysteria will cause a consumer spending slowdown which will lead to an ad spending slowdown.
Such fears are overstated.
Given how the virus has progressed in China and South Korea, data suggests that strict quarantining does work to thwart the spread of the virus, and quickly. Coronavirus was only “breaking out” in those countries for about two months. Assuming the U.S. follows a similar trajectory, then by April or May, the virus will be done “breaking out” in TTD’s core markets.
Once that happens, consumer spending trends will improve dramatically, boosted by easy monetary and fiscal conditions. Ad spending trends will rebound with just as much vigor. So will TTD stock.
Long term, TTD stock is a big winner, mostly because programmatic advertising is the future of advertising. I’d be a buyer on any and all weakness going forward.
Slowing revenue growth rates and compressing profit margins caused specialty e-commerce platform Etsy to have a disappointing showing in 2019. But, at the start of 2020, I hypothesized that the exact opposite would happen this year.
The thesis, which remains entirely true today, is simple.
Etsy has a visible opportunity to accelerate revenue growth and improve profit margins in 2020. Accelerated revenue growth will be driven mostly by continued tailwinds in e-commerce, and partly by internal improvements. Newly acquired Reverb operates at lower take-rates than Etsy, and management will likely do all they can in 2020 to improve Reverb’s take-rates and therefore improve Etsy’s overall revenue growth rate.
Meanwhile, profit margin improvement will be driven by accelerated revenue growth converging on what is steadily moderating expense growth.
Broadly, then, slowing revenue growth and compressing margins will turn into accelerating revenue growth and expanding margins. This pivot from slowing growth to rebounding growth will provide support for a strong 2020 rally in Etsy stock.
Apparently, the market agrees. Year-to-date, the stock is up 30.8%, which is a huge gain in this market.
Yet, shares are still cheap, so I think the stock still has more room to run.
Back at the start of 2020, I said that shares of cloud security company Okta would sustain robust strength this year behind three major catalysts. All three of those catalysts remain alive and well today. As does the bull thesis on Okta stock, which is up 19.5% year-to-date.
First, I said improving economic conditions will stabilize Okta’s revenue growth trajectory. Sure, the coronavirus outbreak has thrown the global economy for a loop. But, a temporary and not-that-big of a loop. Zooming out, monetary policy remains supportive, trade tensions are easing, corporate confidence is rebounding, and labor markets remain healthy. All of that supports improving economic strength once virus anxiety fades.
Second, I said that big expense growth should moderate in 2020, as Okta gets bigger and spends less on marketing. This is already happening, and it should continue to happen for the foreseeable future as Okta relies more on reputation to drive sales.
Third, I said that interest rates will remain low in 2020, and provide continued support for growth stocks like OKTA. Three months into 2020, yields are at record lows. So long as rates remain low, Okta stock will keep working.
At the beginning of 2020, it looked like China was in major rebound mode, and that this rebound would power e-commerce giant JD.Com to new highs.
The coronavirus outbreak has put this Chinese economic rebound on hold. But, it hasn’t put the rally on JD stock on hold. Year-to-date, shares are up about 18%.
Because, while the coronavirus has hit China’s economy hard, the negative impacts won’t last long. Within the next few months, coronavirus fears will fade, and China’s economy will bounce back, supported by a ton of fiscal stimulus from the People’s Bank of China and easing U.S.-China trade tensions.
When it does, JD.Com’s revenue growth rates will improve, and the company’s margins will, too, as a consequence of margin expansion and cost saving initiatives that are already in place.
Against that backdrop, JD stock will continue to work and move higher.
Stitch Fix (SFIX)
Shares of online personalized styling service Stitch Fix have been decimated so far in 2020. But, the drubbing of SFIX stock looks like a golden buying opportunity.
There is concern that coronavirus anxiety will kill consumer spending in the U.S. In particular, there is concern that it will kill consumer spending on leisure items, like clothes.
In early March, Stitch Fix confirmed those fears with a downbeat revenue guide for next quarter. Stitch Fix stock has since fallen off a cliff.
But, this is a near-term depression. As stated before, coronavirus anxieties will calm down come April or May, and when they do, there’s enough fiscal and monetary stimulus in the pipeline to stoke supercharged consumer spending, especially on things like clothes (which consumers haven’t been buying). This rebound in leisure consumer spend will provide a huge boost for Stitch Fix’s numbers.
That big boost will converge on what is now a hugely discounted valuation, and cause a big pop in SFIX stock from here into the end of the year.
One of my favorite high-risk, high-reward small-capitalization stocks over the past few months has been Chinese premium electric vehicle maker Nio.
There are two parts to the bull thesis on NIO stock. First, the company’s delivery and revenue trends — which were depressed throughout most of 2019 — improved in a big way in late 2019. Excluding a short-term coronavirus hit, they’re set to improve even further in 2020 behind a rebound in China’s economy from significant fiscal stimulus, a pause in electric vehicle subsidy cuts, and a new Nio vehicle launch. As those delivery and revenue trends rebound, NIO stock should rebound, too.
Nio’s second-biggest problem was its cash-light balance sheet, which was at risk of running out of money soon. But that’s an old problem now. Nio just scored 10 billion yuan in financing from Hefei’s city government, shoring up the company’s balance sheet and easing going liquidity concerns.
With funding secured, improving demand and revenue trends in the second and third quarter after coronavirus outbreak fears fade, will power NIO stock higher from current levels.
Although social media platform Snap didn’t start 2020 off on the best foot — the company reported disappointing fourth quarter numbers in early February — the bull thesis on this stock remains alive and well.
That bull thesis boils down to three tailwinds.
First, Snap is attractively positioned to benefit from digital ad market tailwinds in 2020, thanks to its strong choke-hold on the malleable teen demographic. Second, continued product innovation and geographic expansion lay the groundwork for sustained user growth in 2020. Third, and perhaps most importantly, SNAP stock is undervalued given the company’s robust growth prospects both in 2020 and into 2025.
As such, Snap stock should shake off the rust from a disappointing fourth quarter print, and rally significantly higher into the end of year. I’d a be a buyer of the stock on any material weakness going forward.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been rated one of the world’s top stock pickers by TipRanks, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, Luke Lango was long FB, NFLX, PINS, TTD, and NIO.