Towards the end of each year I like to take a look ahead to the new year and consider which stocks I have the most confidence in for the following year.
For 2019 I made picks across a variety of sectors, and with half the year already in the books it is time to look at these top picks and how they have performed in the first half of the year, as well as look at what the latter part of the year could have in store for these holdings.
Overall economic conditions remain favorable, but there are still a lot of uncertainties in the market. The trade war between the U.S. and China has yet to be resolved, and it remains uncertain whether or not the Federal Reserve will move to cut interest rates in the second half of the year to help keep the economy growing.
The Dow Jones has risen 17% since the day I made my 2019 picks. Let's see how my picks haver fared during the same period.
Tech titan Apple (AAPL) traded sharply lower during the final three months of 2018, but as strength returned to the market at the start of 2019 AAPL, and shares have greatly outperformed the market with shares up 30% year to date. Apple has a lot of China exposure. The company does a lot of manufacturing in the country, and it relies heavily on China's vast retail market. A recent cease-fire between the U.S. and China has somewhat boosted expectations of a possible deal on the horizon, there is still no certainty that a deal will be reached anytime soon. Apple's two quarterly reports this year have outpaced estimates on both the top and bottom line, and the company will next report on July 30. Another strong set of quarterly numbers could easily push the stock back to its 2018 highs. I remain bullish on the stock which currently trades at $204.50 with an average price target of $211.29.
Auto parts retailer AutoZone (AZO) was a top performing stock in 2018, and toward the end of the year shares remained very resilient as the overall market corrected in December. AZO's ability to show strength in a weak market was a primary reason I picked it for my top 2019 picks, and as strength returned to the overall market in 2019 AZO built on last year's strength and has appreciated 40% year to date. The company's two earnings reports this year have topped estimates on both the top and bottom line, and will not report again until August 20. We looked at the stock's valuation back in December when shares were trading with a forward P/E of 13, and while the stock's gains during the year has lifted its valuation, AZO still has a favorable forward P/E of 18 with earnings expected to rise 24% during the current year and 13% per annum over the next five years. AZO's growth should continue to drive shares higher. The stock trades at $1,173.01 with an average price target of $1,111.25.
Payment processor Visa (V) was in a selloff in December with the overall market, but I included the stock in my list of top picks for 2019 because of strong consumer sales growth and Visa's dominant position in the global card network. I saw the December selloff as a good buying opportunity when V was trading at $128.07, and since that time the stock has appreciated 40.5% to $180. At this point the stock's valuation is a concern, with a forward P/E of 29. Earnings have risen 20.8% annually over the last five years, and analysts expect profits to continue to rise at an annual rate of 15.7% over the next five years. The strong growth numbers should allow the stock to build on its recent gains despite the high valuation, but V is definitely priced for perfection so there is an ongoing risk of another selloff on any sign of weakness in future reports. Visa will next report earnings on July 23 with the consensus calling for $1.33 per share. The street expects a positive earnings surprise with a $1.37 whisper number, and analysts have an average price target of $183.55.
Social media leader Facebook (FB) has had a volatile 24 months. Privacy concerns have plagued the company in the wake of the data privacy scandal during the 2016 presidential election cycle. The stock was punished in the latter part of 2018, and shares were trading at $132.88 when I added it to my 2019 picks, and since that time FB shares have gained 55% as strength returned to the overall market. Facebook has around 2.4 billion active monthly users. This tremendous user base allows Facebook to be the only company that can really pose a competitive threat to Google's (GOOGL) stranglehold over online search. Facebook also has WhatsApp and Instagram, both of which have huge potential for long-term revenue growth. The stock is priced for perfection with a forward P/E of 22, but with earnings expected to rise 20% annually over the next five years the stock should continue to move higher. FB trades at $204.10 with an average price target of $212.29.