The S&P 500 is down 10% this year, and that's after rallying from a big crash in March that saw it fall as much as 30%. The coronavirus pandemic has sent many stocks into freefall, and for good reason -- many companies have had to cut back their operations and lay off workers due to restrictions and lockdowns.
But not all businesses are struggling. The three stocks listed below are still in good shape and are actually up by more than 30% in 2020. Investors should consider buying these stocks that are poised for even bigger gains this year.
1. Veeva Systems
Veeva Systems (VEEV 0.33%) stock is up 42% this year, largely thanks to its cloud business. The healthcare stock offers cloud-based products and services geared toward biopharmaceutical companies and healthcare providers. Its two key products are Veeva Vault and Veeva Commercial Cloud. The former helps companies manage and integrate their content and information safely, and the latter includes a suite of customer relationship management (CRM) applications.
With the healthcare industry running at high capacity amid the pandemic, demand for Veeva's products and services is likely to remain strong for the foreseeable future. Investors will get a better idea of the effect that COVID-19 has on Veeva's business when the company releases its first-quarter earnings later this month. But even a modest boost in activity could lead to a much stronger bottom line; in each of the past eight quarters, Veeva's profit margin has been over 21% of revenue.
Image source: Getty Images.
What may turn some investors away is that Veeva's stock is trading near its 52-week highs and a hefty 100 times earnings. However, when things are going well, it's not uncommon for a stock to be reaching new highs, and that's something investors may expect from Veeva this year as demand for quality healthcare information and secure digital infrastructure is soaring amid the pandemic.
2. Clorox
Clorox (CLX 1.67%) has seen a surge in demand amid the COVID-19 pandemic, making 2020 an exceptional year for the company with its stock up by 35%. The consumer goods company sells a variety of cleaning and household products that drive most of its sales. In particular, the company said its disinfecting products are seeing "extraordinary growth" as consumers look to keep themselves and their homes clean to prevent the spread of COVID-19.
The company released its third-quarter results on May 1 and sales were up 15% from the prior-year period. That's remarkable revenue growth considering that for the previous three quarters, Clorox's sales were declining. And in the company's most recent fiscal year, total revenue increased by a modest 1.5%. The pandemic has turned Clorox into a growth stock, and it's little surprise that its shares are up over 35% this year. Clorox's net income in Q3 totaled $241 million and was also up by 29% from the prior-year period.
As an added bonus, Clorox pays investors a quarterly dividend of $1.06 that yields around 2% per year -- which is in line with what investors can earn with the average S&P 500 stock. But Clorox is also a Dividend Aristocrat, having increased its dividend payments for 42 years in a row. And given how well it's doing this year, it's likely we'll see that streak continue in 2020. The stock currently trades at around 30 times its earnings.
3. Citrix
Citrix Systems (CTXS) is a tech stock that helps people stay connected and working even while they're away from the office. And as more people are working from home, it's another stock that's seen demand for its services rise. The tech company reported its first-quarter earnings on April 23, which showed both sales and profits were above analyst expectations. Like Clorox, Citrix's most recent quarter was a clear anomaly from previous periods, which showed little to no growth. In Q1, Citrix's top line rose by 20% from the prior-year quarter, while profits were up an impressive 64%. During 2019, the company's sales were also up a very modest 1.2% from the previous year, while profits improved by 18%.
While the effect of the pandemic may appear to be a short-term influx of sales for Citrix, social distancing measures could remain in place long after COVID-19 is over. And with companies looking to be leaner and more efficient, using technology to minimize the need for office space could resonate with managers looking to maximize profits. For now, Citrix remains cautiously optimistic. It has raised its guidance for the year, but it's wary of being too bullish as well given the uncertainty that lies ahead for countries and businesses around the world due to the pandemic.
In addition to the stock being up over 37% this year, Citrix began paying investors a modest dividend in 2018. Quarterly payouts of $0.35 are yielding a return of a little less than 1% per year. The stock currently trades at around 27 times earnings.
Which stock should you buy today?
Here's a quick snapshot of how these three stocks have done so far this year:
Image Source: YCharts
All three stocks are performing well so far in 2020, but not all of them offer the same long-term potential. Once the pandemic's over, Clorox will likely see sales start to taper off. And while Veeva's been growing well before the pandemic hit, its high price tag makes Citrix the better buy today. Citrix could see longer-term sales growth even after the pandemic as companies look to be more versatile and flexible in offering their employees more opportunities to work remotely and cut down on overhead in the process.