Investing
40 Solid Stocks Thriving Through the COVID-19 Recession
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Most companies and investors prefer periods of economic expansion rather than recessions. Unlike the Great Recession, the instant COVID-19 recession caught almost every industry and company by surprise. Even if they saw it coming, it was still overwhelming to even the best management teams. The panic selling from February through March of 2020 simply killed the 11-year bull market in stocks, and the Dow Jones industrial average is still down 20% and the S&P 500 is down 15% from the all-time highs in February.
Even in bear markets and recessions, some nimble companies either have incredibly resilient management teams or just happen to be in the right place at the right time. 24/7 Wall St. has identified nearly 40 companies that have thrived during the COVID-19 pandemic, and the list is over 40 companies including some of their runner-up peers.
These so-called recession winning businesses are proving to succeed in a very difficult economy. There have been over 30 million layoffs, unemployment has skyrocketed, and gross domestic product could be down more than 20% in the second quarter of 2020. It also remains to be seen how the gradual reopening of the economy will influence the number of COVID-19 cases and deaths in the United States.
What has been unique about the COVID-19 recession is that the economic activity came to a sudden halt and had an impact on so many households that many classic defensive stocks did not act defensively at all. Imagine investing in utilities, cell phone carriers, personal products, consumer staples and telecom thinking they would hold up like they have in prior recessions and market panics.
Most of the traditional go-to defensive companies and sectors saw their stock prices fall like a space capsule reentering the earth’s atmosphere. Those classic defensive stocks will be defensive again during market selloffs, but it’s hard to imagine a forced stay-home order where millions lose their jobs overnight and are suddenly not buying what was normal before February.
It is important to filter out some winners from others. For instance, we eliminated all the drug and biotech companies, as well as companies coming out with diagnostics for the coronavirus. Many of those developments remain quite fluid, and some of them certainly will not be successful in the grand endeavor of a vaccine or a meaningful treatment.
We have also included what was working before the coronavirus and how they have done after. Less than a fifth of the S&P 500 is actually showing positive stock performance so far in 2020. Many of these companies are not just up, but they are up big!
Activision Blizzard
> YTD Gain: 20%
Activision Blizzard Inc. (NASDAQ: ATVI) is the largest video game publisher and is worth more than $50 billion. With various Call of Duty titles, Overwatch and Candy Crush, the stay-at-home economy is creating a boom in playtime. It even raised its full-year outlook while other companies are cutting or suspending guidance, and it has new video game console refreshes to look forward to at the end of 2020. It claimed after the March-2020 quarter to have 102 million monthly active users for Activision and 32 million monthly active users for Blizzard.
Amazon
> YTD Gain: 27%
Amazon.com Inc. (NASDAQ: AMZN) is winning all around, with data center growth from AWS and with brick-and-mortar stores it competes against either still closed or gradually reopening. Amazon may have had bad public relations issues from warehouse workers, but its business is booming, with over 100,000 job additions to help deal with the boom. Investors haven’t even bothered to care that its expenses are way up and that it is sacrificing profits to build up within the company where it can.
Apple
> YTD Gain: 7%
Apple Inc. (NASDAQ: AAPL) has proven that it can survive a period in which its supply chain disruption in China and Asia runs into subsequent Apple store closures in Asia and the rest of the world. The drop was larger than it has seen in sales in the modern era, but it showed how resilient Apple’s core customer loyalty is. Its strong earnings gave analysts all the firepower they needed to begin raising estimates and targets all over again, and Apple appears to be heading back to all-time highs around the excitement of its 5G iPhone late this year or early into next year. Apple even announced a dividend hike and continued on with a larger stock buyback program, even when most companies are criticized for spending too much on buybacks. It’s still a top Warren Buffett stock too.
Campbell Soup
> YTD Gain: 6%
Campbell Soup Co. (NYSE: CPB) is back as customers have again become big buyers of prepackaged and canned foods. It remains to be seen if these sales will have a lull as the economies and as restaurants reopen, but the reality is that its all-time high from 2016 is almost 30% higher than the current share price. On top of its trademark Campbell’s brand name, other brands include Goldfish, Lance, Pace, Pacific Foods, Pepperidge Farm, Prego, Swanson and V8.
24/7 Wall St.Citrix Systems
> YTD Gain: 32%
Citrix Systems Inc. (NASDAQ: CTXS) hit an all-time high in May of 2020 due to workspace services, mobility and device management, networking products, managed desktops, cloud and storage, security and other software and app services. It’s as if Citrix was positioned perfectly for a workforce that was going to be sent home and still eventually would come back to work.
Clorox
> YTD Gain: 33%
Clorox Co. (NYSE: CLX) has lived up to being a defensive stock while most other consumer products stocks have either not performed well or are suffering. The driver for Clorox is of course the cleaning and bleaching aspect, wipes and other related products that are still in many cases harder to find than basic consumer products. That said, even today their products are still not meant to be inhaled, consumed or ingested in any form.
Costco
> YTD Gain: 5%
Costco Wholesale Corp. (NASDAQ: COST) proved that the hoarders were buying up everything with a large wave of sales gains initially. Those sales then began to soften as their traditional products were overwhelming the creature comfort items with far higher prices left untouched on the warehouse floors. Costco also has a higher average income customer that may be at least a bit more insulated than lower income groups. Costco remains valued at a large premium for its growth and execution, but investors buying in to Costco’s 787 warehouse locations today are really looking out for when it has 1,200 or more locations globally. It also raised its dividend after the recession had started.
Datadog
> YTD Gain: 80%
Datadog Inc. (NASDAQ: DDOG) hit a post-IPO high in May, as revenues were up 87% from a year earlier. Large customers (over $100K in spending) rose to 960 from 508 in early 2019, and the company launched its security monitoring service to break down walls separating security, development and operations. Valuations are not for the faint of heart here, but that’s the price for projecting better than 50% revenue growth while inside of the eye of the recession.
Digital Realty
> YTD Gain: 11%
Digital Realty Trust Inc. (NYSE: DLR) is a leader in hosting and colocation services. As a real estate investment trust (REIT), it is effectively the landlord of the cloud. It also sports a 3% dividend yield, and its acquisition of InterXion will help Digital Realty grow internationally as foreign companies also look to decentralize their data and storage by hosting on the cloud. Its rival in the cloud, Equinix Inc. (NASDAQ: EQIX), deserves an honorable mention here for growth and investor returns, as do other competitors.
DocuSign
> YTD Gain: 60%
DocuSign Inc. (NASDAQ: DOCU) hit its post-IPO all-time high as well, and the remote signature application provider has managed to do this despite real estate slowing down sharply. The reality is that anyone using DocuSign is amazed at how fast and efficient the service is. As with many software and app-based players, valuations are not for the timid, as revenue growth is expected to remain above 25% despite the recession.
24/7 Wall St.Dollar General
> YTD Gain: 16%
Dollar General Corp. (NYSE: DG) is the king of the dollar store theme, and it was adding jobs while others were cutting them. It also has moved into the “reach-up” price points well above $1.00. It sells many food and private label items used by the public and in many smaller communities. It is the sole supplier that is a national chain. Its stock has risen so much that at all-time highs it now barely has a 0.8% dividend yield. It also has more than 16,000 stores around the nation.
Domino’s Pizza
> YTD Gain: 29%
Domino’s Pizza Inc. (NYSE: DPZ) has managed to come of age to the point that it has been announced to join the S&P 500 after its earnings report was behind it. Millions of Americans already had its app or online ordering before COVID-19 sent everyone home, but it soared during the scare and is likely to remain popular. On top of dominating pizza delivery, Domino’s has been adding many other food items to its menu that come with high margins as well: chicken wings, sandwiches, pasta and desserts. Papa John’s International Inc. (NASDAQ: PZZA) should get an honorable mention, with its shares up 27% year to date and seeing similar gains domestically.
Easterly Government Properties
> YTD Gain: 6%
Easterly Government Properties Inc. (NYSE: DEA) is a REIT that focuses primarily on owning and leasing Class A commercial properties to the U.S. government. The company’s focus keeps it away from just having local government tenants that could face serious shortfalls as tax receipts drop during the recession. It could face problems around future shutdowns and out of office habits, but it works with mission-critical government agencies directly or through the General Services Administration. You can buy a 10-year Treasury for less than a 1% yield, or you can play “the federal government’s landlord” and collect a 4% dividend yield.
eBay
> YTD Gain: 16%
eBay Inc. (NASDAQ: EBAY) has now moved beyond owning PayPal and the marketplaces and auction formats have also helped with other online selling sources in keeping the public out of harm’s way during the public health scare. eBay saw many analysts raising price targets after first-quarter earnings and the company has managed to end its fight with activist investing firm Starboard Value, along with naming a new CEO after completing the sale of StubHub for over $4 billion earlier in 2020.
Electronic Arts
> YTD Gain: 8%
Electronic Arts Inc. (NASDAQ: EA) has been a stay-at-home winner, but it’s always a popular video game maker. With no live sports to watch, it cleans house with its pro sports video game lineup, and it has Apex Legends, Star Wars, The Sims, Battlefield and others, to name a few. EA is very much looking forward to the Xbox and PlayStation refresh cycle coming late this year. EA showed that digital net bookings for the last fiscal rose 9% to $4.052 billion. The company also noted that FIFA 20 has more than 25 million unique players, Madden NFL 20 reached the highest engagement levels ever, Star Wars Jedi: Fallen Order had over 10 million unique players to date, and that Apex Legends was the most downloaded free-to-play PS4 game last year.
Etsy
> YTD Gain: 78%
Etsy Inc. (NASDAQ: ETSY) was a surprise winner of the COVID-19 recession. Making and selling arts and crafts products does not sound all that recession-proof, but many out of work people are looking for bargains, they are looking to sell crafts and handmade goods, and they saw lots of new business from interesting handmade face masks that can make people still look artsy and cute despite wearing a facial mask as do-it-yourself PPE. Etsy’s shift to free shipping seems to have now worked through the kinks that were causing some ripples at the end of 2019 and the start of 2020.
Everbridge
> YTD Gain: 100%
Everbridge Inc. (NASDAQ: EVBG) allows organizations and enterprises (including governments) with mass notifications to individuals or groups ahead of, during and after disasters and other emergencies. The company was already relevant before COVID-19 and now it’s even more relevant. The pandemic has helped its business, but incidents such as severe weather, workplace violence, terrorism, power outages, environmental alerts, mass hacks or IT breaches, infrastructure or equipment failures, missing persons and so on are not going to disappear.
24/7 Wall St.General Mills
> YTD Gain: 16%
General Mills Inc. (NYSE: GIS) is another company that manufactures and markets branded consumer foods across the world. As more consumers are rushing to grocery stores to fill their pantries, the biggest winners from this are companies like General Mills that produce branded products that fill these store shelves. It’s worth pointing out that as many restaurants remain closed or operating under capacity, more people will get their food from the grocery store. General Mills stock is standing near a multiyear high, and if this trend continues it could reach even higher.
Hain Celestial
> YTD Gain: 20%
Hain Celestial Group Inc. (NASDAQ: HAIN) offers a healthy alternative to much of the food being sold during this pandemic. At the same time, the company has a huge portfolio of consumer products, all of which are being stockpiled by consumers. Shares are currently holding near a multiyear high and have been on the rise ever since this pandemic got underway. Consumer goods have proven resilient in this time and could continue on this path to the new normal.
Hormel
> YTD Gain: 7%
Hormel Foods Corp. (NYSE: HRL) stock is holding just below its all-time high as a result of recent consumer trends toward stockpiling food. Considering Hormel is one of the largest producers of canned goods in the Continental United States, it stands to benefit from people clearing the shelves at grocery stores. Also, as long as restaurants are closed or not at full capacity, Hormel offers an alternative.
J.M. Smucker
> YTD Gain: 13%
J.M. Smucker Co. (NYSE: SJM) shares might be down from where they were last year but the prospect is brighter now. With more people staying home and not eating out constantly, brand name goods are moving off the shelves. Even though shares were hit hard in late March, the stock bounced back and then some tearing through April. Again, if the new normal is less consumers going out to restaurants, then J.M. Smucker will be well positioned going into this new economy. And with a name like Smucker, its stock better be good too.
Kroger
> YTD Gain: 15%
Kroger Co. (NYSE: KR) has been an interesting story during this time. From February to late March, this stock was not able to make up its mind. However, since that time it has performed exceedingly well as one of the go-to grocery stores during this pandemic. Even with this influx of business, Kroger offers investors an interesting value proposition and defended its dividend, but don’t take our word for it. Kroger has earned Warren Buffett’s stamp of approval and a place in his portfolio. A nod like this from the Oracle of Omaha is reassuring for any business, and it is sure to provide for many years of great returns down the road if Buffett’s bet is correct.
MarketAxess
> YTD Gain: 31%
MarketAxess Holdings Inc. (NASDAQ: MKTX) has managed to prove that trading in bonds may not be as boring as it sounds. The company operates an electronic trading platform for fixed-income market participants to buy and sell corporate bonds and other types of fixed-income instruments around the globe. This includes credit default swaps, emerging markets and high-yield bonds, eurobonds, U.S. agency bonds, municipal bonds, leveraged loans, Treasuries, green bonds and other types of fixed-income securities. In short, this company is effectively defragmenting bond trading and increasing institutional liquidity with its own trading platform.
Microsoft
> YTD Gain: 15%
Microsoft Corp. (NASDAQ: MSFT) is so far beyond just being that Windows software company. The company still prints money from dominating PCs in business, but individuals have taken to subscribing to its software offerings as well. Microsoft has a coming Xbox refresh due this year; it owns LinkedIn; its Microsoft Teams is ready to be a standalone product, as has been proven in the work-at-home climate; and the real story is Azure, which still looks to be a favorite over Amazon’s AWS in the Defense Department’s $10 billion JEDI contract. Satya Nadella’s strategies proved to work and Microsoft has ample growth opportunities ahead.
Netflix
> YTD Gain: 33%
Netflix Inc. (NASDAQ: NFLX) has proven that there really was room for more than one major streaming service. It has grown despite the impressive growth of Disney+ and the competition from Apple and Amazon. Netflix still has many opportunities to grow outside of the United States, and it turns out that it has created some fabulous movies and multiple multiseason series that keep people glued to their screens. Is it any surprise that use and engagement have risen in 2020? The service is priced well enough that it’s unlikely the millions of people who lost their jobs are going to cut off their Netflix accounts even if their kids insist on the Disney+ service also. With it about 182 million worldwide subscribers, the stay-at-home trend will have pulled forward some of the growth that would have been expected in future quarters. Buts stock rose over 50% since the Disney+ launch date caused so much panic.
24/7 Wall St.Newmont
> YTD Gain: 43%
Newmont Corp. (NYSE: NEM) is the king of gold miners, now that Newmont and Goldcorp are one company. It has perhaps the strongest gold reserves, low all-in sustaining costs for mining gold, and every $100 move up in gold gives that much more in earnings. The company also has been weathering the COVID-19 exposure rather well, and it was able to boost its dividend based on the recent gains. Barrick Gold Corp. (NYSE: GOLD) gets an honorable mention, given many of the same characteristics. Of course, there is also just the good old SPDR Gold Shares (NYSEARCA: GLD) that is the largest gold trust for investors in the world. with close to $60 billion in gold bars.
NortonLifeLock
> YTD Gain: 41%
NortonLifeLock Inc. (NASDAQ: NLOK) is making a name for itself among cybersecurity providers. Scammers and phishing attempts have increased since the onset of the pandemic, looking to play on people’s irrationality and fears. Luckily, NortonLifeLock acts to stop this with its subscription service providing protection for devices and identity threat protection. Although this stock fell hard in early February, it has steadily been on the rise despite pandemic concerns. Dealing with a hack attack or an identity threat on top of worrying about the coronavirus would be too much to deal with at the same time.
Nvidia
> YTD Gain: 30%
Nvidia Corp. (NASDAQ: NVDA) has become king of graphics processors and is set to benefit from artificial intelligence and machine learning, crypto-mining efforts, self-driving cars and many other future tech applications. None of these fields is believed to be a dead-end road after the coronavirus pandemic passes. Its shares just hit an all-time high in May, and one fresh analyst call still sees the shares going much higher. Nvidia has managed this when many tech and chip stocks are still down 10% or 20% from their highs. Chip rival Advanced Micro Devices Inc. (NASDAQ: AMD) has to be given a runner-up nod here, with its 21% gain so far in 2020 and a close to 40% rise from its March lows.
PayPal
> YTD Gain: 30%
PayPal Holdings Inc. (NASDAQ: PYPL) is now no longer part of eBay. The payments platform has seen very soft spending trends bring softness in volumes and revenue in some verticals, but total payment volumes in general are on the rise. With more people shopping at home or online, PayPal is proving to be a stickier payment method than some industry watchers may have feared when so many upstarts were going to be competitive threats. PayPal’s big acquisition of Honey for online coupons on e-commerce websites also added more than 10 million users instantly to its ranks. Leaving Facebook’s Libra crypto effort had zero impact long term.
Peloton
> YTD Gain: 62%
Peloton Interactive Inc. (NASDAQ: PTON) has seen its shares and revenues surge after beating revenue expectations due to more people choosing to exercise at home. Many investors believe that accelerated purchases will represent an even greater shift to home-based fitness over large gyms where viruses and other germs await. It remains debatable how long the behavior change in exercise will last, but if the trend accelerates then Pelton wins with its spin-bike and with its treadmill and newer apps for TVs, tablets and computers.
SBA Communications
> YTD Gain: 19%
SBA Communications Corp. (NASDAQ: SBAC) has been the top performer in cell towers and communications platforms for wireless communications. Many investors are excited about the more widespread 5G launch, and now the unknown of the T-Mobile/Sprint merger has been removed. Crown Castle International Corp. (NYSE: CCI) and American Tower Corp. (NYSE: AMT) both deserve an honorable mention, with single-digit gains in 2020. SBA is roughly half the size of Crown Castle and not quite one-third the size of American Tower.
ServiceNow
> YTD Gain: 29%
ServiceNow Inc. (NYSE: NOW) is another tech stock that has been gaining more ground during this pandemic. For those late to the party, note that ServiceNow provides enterprise cloud services and IT service management, and both of these are absolutely essential. With more companies having their employees work from home, the cloud has become increasingly important as a way to collaborate and do business. ServiceNow stock only recently has hit all-time highs. If work from home becomes the “new normal,” then this company will have a growing steady stream of business for years to come.
Shopify
> YTD Gain: 85%
Shopify Inc. (NYSE: SHOP) has taken the e-commerce and back office for website management to the next level. Shopify was taking off in a major way before the recession, but COVID-19 just forced companies that were still putting off their online focus to address it immediately. The Canadian company helps small and midsize businesses selling products and services look and act almost the same as large companies they would be competing against. It helps with all aspects of the behind-the-scenes on websites and allows for commerce in multiple currencies across multiple geographies. Shopify also has become stronger in fulfillment centers, and it just raised an opportunistic $1.5 billion after a big stock gain to bolster its finances while it builds up for even more growth ahead.
Slack
> YTD Gain: 37%
Slack Technologies Inc. (NYSE: WORK) may have performed poorly after its initial public. It appears as though the competition from Microsoft Teams was real, but there also seems to be ample business to go around to fund future growth. Big businesses, midsize ones and small companies were using slack long before the COVID-19 pandemic, and now more companies have had to rely on their communications and collaborations with their workforce is less centralized.
Virtu
> YTD Gain: 47%
Virtu Financial Inc. (NASDAQ: VIRT) has thrived throughout the market volatility in 2020. In fact, the company is a market maker and high-frequency trading firm that trades U.S. markets and international markets in stocks, options and other instruments. Its first-quarter 2020 revenues were up over 170%, and net trading income was up more than 200% to $802 million. The trading firm now has proven it can operate profitably in good times and bad, despite the volatility. Unlike the public, its trading machines don’t feel panic when the market is falling. It comes with a 4% dividend yield to boot.
Walmart
> YTD Gain: 4%
Walmart Inc. (NYSE: WMT) actuallyhas been one of the biggest winners in the Dow since the pandemic hit. While this mega-chain has been the go-to for many consumers looking to stock up during this time, shares hit an all-time high in mid-April. What separates Walmart from the rest of retailers in the United States, and why it has been able to succeed, is simply its incredible supply chain. Walmart was deemed as a critical business from the start of the coronavirus shutdowns and it has made thousands of job openings when other businesses were furloughing workers. Having a strong balance sheet doesn’t hurt either. The point is that Walmart may have been one of the best-positioned retailers going into this pandemic, but it will for sure come out of this as the top dog in the retail space.
Wayfair
> YTD Gain: 100%
Wayfair Inc. (NYSE: W) found itself in a unique position going into this whole coronavirus crisis. It was riding high on the e-commerce wave that has been building for years, and the pandemic only seems to have accelerated this trend. As it stands, Wayfair provides over 14 million products for consumers for the home sector under various brands, including furniture, housewares, decorative accents and more. With more people stuck at home, it seems to reason that they would like their house looking better for the more time they are now spending in it. The most recent quarterly report only seems to prove this, with revenues up about 20% year over year, and active customers increasing 29% to 21.1 million in the same time.
Wingstop
> YTD Gain: 40%
Wingstop Inc. (NASDAQ: WING) has seen its business take off during the coronavirus crisis. Its international business has suffered, according to its latest update, but it is still adding stores. The company announced almost 20% sales growth in the first quarter, with domestic same-store sales up almost 10%. The company’s digital sales were up 47% in the first quarter alone. It turns out that buffalo wings to go are probably going to stay popular long after the economies are reopened.
Zoom Video
> YTD Gain: 130%
Zoom Video Communications Inc. (NASDAQ: ZM) should have a slogan for its video conferencing solutions that says, “So easy that your little kids can use it!” On top of having major business growth, Zoom is powering countless numbers of schools during the stay at home period, and it is acting like a virtual classroom. Businesses were already being attracted to Zoom, but it is being used by everyone now. Even after the coronavirus panic has passed, this is a simple way for people to stay in touch by video. It has endless upgrade features that it can work on for upsells ahead, including better security within its services.
Due to the vast number of companies covered, there was a break in the year-to-date gains between May 11 and May 12. We also screened out companies that generally lost more than half of their value during the panic and have managed to come roaring back up due to unrelated events.
Our goal was to keep the focus on the stay-at-home and work-at-home winners, along with the so-called new defensive stocks that did perform the way they were supposed to. Companies with difficult business models or that were just coincidental gainers were also screened out.
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