With 2019 in the books, investors are looking ahead to an exiting 2020 and wondering which are the best stocks to hold through the new year. Last year was bullish for the markets, with the major indexes all closing out the year near all-time highs.
2020 has the potential to be much more volatile. The upcoming presidential campaign and election will have impacts on the market. Tensions in the middle east are flaring, and the sitting U.S. president has just been impeached by the House of Representatives.
The trade war between the U.S. and China appears to be nearing an end, but there is no guarantee that either side will walk away from negotiations if things do not go as planned.
With so much uncertainty in the market, investors are cautious, but give the overall bullish sentiment in the market traders want to keep their money at work.
Here are my top picks for the uncertain year ahead.
Netflix (NFLX)
Streaming video giant Netflix (NFLX) has been sharply rising over the last four months. New entrants into the streaming sector, in particular, Apple (AAPL) and Disney (DIS) spooked the market in 2019 regarding Netflix, but reports showing that neither is a viable substitute for Netflix has brought optimism back into the stock. Netflix has shown good subscriber growth both domestically and internationally, and earnings have risen at an annual rate of 77% over the last five years. Analysts continue to see strong growth for the company moving forward, with forecast profit growth of 42% per annum over the next five years. Netflix has posted six straight positive earnings surprises, and the company will report its next set of quarterly numbers on January 21 with a consensus of $0.52 per share. NFLX trades at $331.65 with an average price target of $377.76.
Amazon (AMZN)
It is hard to bet against Amazon (AMZN). The company is not only the far and away leader in the e-commerce space, but it has also carved out a leadership role in the fast-growing cloud-computing sector. AMZN stock traded sideways in the second half of 2019 before trending higher in mid-December and the stock remains in its upward trend as we move into the new year. Amazon has reported weaker than expected profits in the last two quarters, but sales have been better than expected which has kept the stock from selling off in response to the earnings misses. Amazon will next report quarterly numbers on January 30. Analysts expect a profit of $3.98 per share. The company has managed to grow earnings at an annual rate of 100% over the last five years, and looking ahead forecasts call for profits to rise at an annual rate of 28% over the next five years. The stock has a forward P/E of 70, which is high, but Wall Street has always been willing to buy into AMZN at high valuations due to the company's strong growth. AMZN trades at $1,898.46 with an average price target of $2,182.83.
CarMax (KMX)
Auto retailer CarMax (KMX) is trading in the upper end of its 52-week range, with the stock trading sideways over the last three months. The company has impressed the market with 16.4% earnings growth annually over the last five years, and analysts expect to see profits rise 15% per annum over the next five years. Strong economic conditions, with low unemployment and strong consumer confidence, should keep strength in CarMax's business moving forward. CarMax reported weaker than expected Q3 earnings in December, but revenues easily outpaced estimates. Before the company's recent earnings miss CarMax had a good earnings track record, posting six straight earnings beats. The stock has an attractive valuation, with a forward P/E of 15, which combined with the company's future growth estimates creates a lot of upside potential in the stock. Analysts remain bullish on the stock and continue to see a lot of upside potential. KMX trades at $87.09 with an average price target of $109.11.
