Each year I try to come up with a list of stocks that I feel offer the best opportunities for investors. 2018 has turned out to be a tough year for investors, with the major indexes struggling to avoid closing the year in a bear market, which has left a lot of investors scratching their heads wondering where to put their hard earned money to work in 2019.
Make no mistake about it... the root causes for this year's market volatility all remain in place, so 2019 could turn out to be another tough year for investors. Interest rates are rising, but Federal Reserve has suggested it slow the pace of increases in 2019 to just two increases from a previously forecast three increases. The recent earnings season was strong, but offered signs of slowing corporate growth.
The trade war between the U.S. and China is ongoing, which will continue to hang over the market, at least for the time being. The U.S. government is currently shut down, which is also causing concern on Wall Street, but this is at least one problem that "should be" short-term. While there is no telling how long it will last with both President Trump and leading Democrats appearing incredibly divided on funding for Trump's border Wall, neither side wants a prolonged shutdown, and a deal should be reached reasonably soon.
Some investors look at the recent market correction with fear, while others see it as a good buying opportunity to pick up high-quality stocksthat are trading at a very discounted price to where they were trading as recently as two months ago.
If you are sitting on some year-end cash that you want to put to work in the market, here are my top five stock picks for 2019 to consider.
iPhone maker Apple (AAPL) has been among the strongest stocks in recent years, but 2018 was not kind to the stock. Investors are concerned about the company's slowing iPhone sales, despite the fact the company has managed to grow iPhone sales with higher average sales prices. Starting next quarter, the company will no longer report iPhone unit sales. This means that investors will have to guess at the actual number of phones the company sales and will be forced to focus on total iPhone revenues instead. Apple is still a growth stock, with profits expected to rise 10 percent next year and by 13% per annum over the next five years. With a forward P/E of of just 10, this looks like a great buying opportunity in the tech giant. AAPL is currently bouncing off its 52-week low and is trading at $152.27 with an average price target of $223.22.
While the majority of the market has struggled to remain positive in 2018, auto parts retailer AutoZone (AZO) has thrived. The company has reported three straight earnings beats, with fiscal first-quarter earnings reported in early December showing 34% year over year growth. AZO started trending higher in May and has managed to show strength through the latter part of the year as the overall market corrected and fell into bear territory. AZO trades at a favorable valuation with a forward P/E of 13 and earnings forecast to rise 11% per annum over the next five years. Analysts remain very upbeat on the stock, with an average price target of $899.55. AZO is currently trading at $826.61.
Credit card operator Visa (V) has sold off over the last month, but the outlook remains very bright for the financial sector. Consumer confidence remains strong, and we are coming off a great holiday shopping season with retail enjoying its best holiday season in the last six years. Sales are reported to have risen 5.1 percent versus last year, a clear sign that consumers are willing to spend despite the wild fluctuations in the stock market over the last several months. Visa has a dominant position in the global card network, making it my top pick in the card sector. I view the recent pullback in Visa as a great buying opportunity. The stock's valuation had risen a bit too high, but with the recent drop in share price V currently has a forward P/E of 20, which is very attractive considering the company is expected to grow earnings by 16.5% next year. V is currently trading at $128.07 with an average price target of $162.25.
Dollar Tree (DLTR)
2018 was a tough year for Dollar Tree (DLTR). The stock sold off sharply during the first half of the year before finding support in September and trading slightly higher over the last three months of the year. While 2018 was tough, it is important to note that the stock actually found its footing while the overall market sold off during the final months of the year. Discount retailers are viewed as defensive plays, and with so much uncertainty in the market, and with the underlying conditions responsible for the volatility still in place it makes sense to own at least one defensive stock. Dollar Tree's tough 2018 has lowered its valuation considerably, and the stock is now trading at less than 12 times its earnings. With earnings expected to rise 7 percent next year, the valuation looks very good, and supports upside in the stock moving ahead as long as the company is able to hit its future estimates. DLTR is trading at $86.92 with an average price target of $96.05.
It is understandable if seeing Facebook (FB) on the list makes you cringe, but there are plenty of reasons to expect the social media giant to recover and trade back to its previous highs. Traders have been rattled by the company's data scandal and the public relations crisis that followed, but I see the recent sell off as incredibly overdone considering the company's business. Facebook has such a huge stranglehold on social media with a massive 2.2 billion active monthly users. The company is easily able to gobble up any new competitors and if it is unable to do so through an acquisition it can simply copy its rivals and introduce its own services to its 2.2 billion users as it did by using Instagram to copy Snapchat. Snapchat was growing rapidly until Instagram copied the platform and stopped Snapchat's momentum. Facebook is also planning to enter online dating. It will have to deal with the fallout of its privacy concerns, but if it can win back user confidence it could quickly become the leader in the huge online dating market. FB is the only real competitor to Google (GOOGL) in online search, and advertisers will continue to turn to the platform thanks to Facebook's huge audience. With the recent drop in the stock, FB is currently trading at least than 18 times future earnings and analysts expect profits to rise by 18% per annum over the next five years. FB is trading at $132.88, well below the $193.56 average price target that analysts have on the stock.