New year, new decade, new chances to profit! While it's certain that the stock market can't continue to go up in a straight line, history also shows us that buying great stocks and holding them over the long run is a pretty surefire means to growing your wealth.
What stocks should you buy to grow you wealth in 2020? After scouring the market, I've settled on the following 10 stocks as the likeliest to put extra money in your pocket by the end of the year (and beyond).
Some folks on Wall Street view e-commerce and cloud services giant Amazon.com (NASDAQ:AMZN) as expensive, given its estimated price-to-earnings ratio this year of 68. But they're not digging deep enough. They're ignoring Amazon's historically low price-earnings-to-growth ratio (PEG ratio) of 1.2, implying an undervalued company, at least relative to its growth prospects.
They're also overlooking its cloud services business, which is actually far more important than its dominant e-commerce operations. Through the first nine months of 2019, Amazon Web Services (AWS) grew sales by 37.6%, compared to 15.3% for traditional e-commerce and streaming. Furthermore, AWS is responsible for $6.6 billion in operating income through Q3 2019, compared to $4.1 billion for e-commerce. In other words, AWS is a higher-margin business that's becoming a larger percentage of Amazon's net sales. That's a recipe for a growth surge in cash flow in the first half of this decade.
2. Intuitive Surgical
When it comes to robotic-assisted surgical systems, there's Intuitive Surgical (NASDAQ:ISRG) and everybody else. Intuitive Surgical is so dominant that its competitors could be added up and they wouldn't even come close to the more than 5,400 installed da Vinci surgical systems in hospitals and surgical centers around the world.
The beauty of Intuitive Surgical's business model is that its margins get better over time (think the razor-and-blade model). Although the da Vinci system is pricey (often costing $0.5 million to $2.5 million), it's costly to build, and therefore doesn't generate the best margins. However, as the company's installed base grows, higher margin instrument sales for each procedure, and the servicing needed to keep these systems in top working order, grows as a percentage of total revenue. Already holding significant market share in urology and gynecology, expect Intuitive Surgical to continue to push into thoracic, colorectal, and other general soft tissue procedures.
3. NextEra Energy
With concerns of a recession continuing to haunt Wall Street, companies that provide basic-need goods and services could be extremely popular in 2020. That's why electric utility NextEra Energy (NYSE:NEE) deserves a look.
NextEra is unique in that it's generating more of its electricity from renewable sources, such as solar and wind, than any other utility in the country. These investments in renewables weren't cheap, but historically low lending rates have made these projects more affordable. Further, the long-term costs of utilizing renewables has resulted in substantially lower electricity generation costs and a faster growth rate than its peers.
One last note: NextEra's traditional electricity business is regulated. Though it can't just pass along price hikes whenever it chooses to, it also means that NextEra isn't exposed to wild swings in wholesale electricity pricing. Translation: Investors can expect predictable cash flow year in and year out.
Top stocks can be found in all sizes, even if they don't have a brand name. Cancer-drug developer Exelixis (NASDAQ:EXEL) continues to swim in cash, thanks to its soon-to-be blockbuster drug Cabometyx, which is used to treat advanced forms of renal cell carcinoma (kidney cancer) and hepatocellular carcinoma (liver cancer).
Even with intensified competition in kidney cancer, Cabometyx should continue to deliver annual sales growth of close to 10% through 2022. Just as important, this drug is a cash cow for Exelixis, with roughly $470 million in free cash flow generated over the trailing 12 months. This cash flow suggests that, by the end of 2022, Exelixis could be closing in on $2 billion in cash on hand. That'd represent more than 35% of its current market cap.
Additionally, don't overlook combination studies involving Cabometyx with current competitors' therapies, or the fact that it's restarted its internal research and development. Exelixis is cheap, no matter how you slice the data.
Social media company Pinterest (NYSE:PINS) had a forgettable first year following its initial public offering. I believe that changes in 2020.
You see, Pinterest's latest operating results show improvement more or less across the board. It added 71 million monthly active users to 322 million, which should help its ad-pricing power, and has seen a marked uptick in average revenue per user in international markets. Pinterest has been spending aggressively to court overseas users, and these tactics, along with its increased emphasis on video, are beginning to pay off.
The big catalyst for Pinterest in 2020 should be the shift from losses to recurring profitability by no later than the second-half of the year. Pinterest won't be fundamentally cheap this year, but its supercharged growth rate more than makes up for its lack of traditional value.
6. SSR Mining
Feel free to call me a "homer" given that SSR Mining (TSX:SSRM) is my largest, and one of my longest, portfolio holdings, but this gold and silver miner is set up beautifully for continued success in 2020.
On a macro scale, the low-yield environment has made gold and silver particularly attractive. Since precious metals offer no yield, they tend to struggle when guaranteed income-based assets, such as bonds, see yields rise. But with yields in most markets still historically low, the environment for gold and silver to thrive just about couldn't be more perfect.
As for SSR Mining, it's on the verge of a 30% increase in gold production from its flagship Marigold mine in Nevada (205,000 ounces per year to an estimated 265,000 ounces), and the company has delivered record gold production from the Seabee mine in Canada every year since acquiring it in 2016. As the icing on the cake, SSR Mining has $242 million in net cash and just announced plans to retire $115 million in convertible senior notes. A net-cash position isn't common among gold stocks.
7. Innovative Industrial Properties
Yes, a marijuana stock! However, Innovative Industrial Properties (NYSE:IIPR) isn't like your average pot stock -- it's actually profitable.
Innovative Industrial Properties is a cannabis-focused real estate investment trust that buys marijuana growing and processing facilities, then leases them out for a long time (10 to 20 years). It then reaps the reward of rental income and passes along annual rental increases that often amount to 3.25%. In other words, it's a highly predictable, low-cost business model that's being fueled by multistate operators' inability to receive funding from banks in the United States.
After beginning 2019 with 11 properties, it ended the year with 46. Just as important, the company's average yield on its $489.3 million in invested capital is 13.6%, meaning it'll have a complete payback of its investments in just over five years.
Like Pinterest, social media giant Facebook (NASDAQ:FB) continues to see most of its metrics improving. The difference being that Facebook has been profitable on a recurring basis for some time, and it holds four of the seven most popular social media sites in the world (Facebook, Messenger, Instagram, and WhatsApp).
On Facebook alone, the company logged 1.62 billion daily active users in the third quarter, along with 2.45 billion monthly active users. There isn't a social platform anywhere that advertisers can go to that'll reach as many eyeballs as what Facebook offers. This means unparalleled ad-pricing power, which is further magnified by the fact that Facebook is only scratching the surface on how to monetize a number of its core assets.
9. Livongo Health
As of 2015, more than 30 million Americans had diabetes (a quarter of these folks are undiagnosed), and another 84 million were exhibiting signs of prediabetes. Diabetes is seventh-leading cause of death in the U.S., and Livongo Health (NASDAQ:LVGO) wants to do something about it.
Livongo's suite of wirelessly connected devices helps diabetics, as well as folks with hypertension or who are overweight, incite behavioral changes to improve their well-being. Livongo understands that a lack of action is the greatest threat to diabetics, and its actionable tips are leading to improved patient follow-through.
Over the past year, the company's patient count has more than doubled to 208,000, with sales rising 148% to $46.7 million in its most recent quarter. Best of all, since Livongo leans on subscriptions to drive growth (and seemingly has tens of millions of potential customers), its sales and cash flow are highly predictable.
Finally, charge into 2020 with Visa (NYSE:V) on your side. What you might not realize about Visa is just how dominant it is in the consumption-driven U.S. market. In terms of market share by network purchase volume, Visa controls 53%, which is 31 percentage points higher than its next-closest competitor.
What allows Visa to deliver for investors every year is the fact that it's not a lender. Visa focuses on being a payment facilitator, which means that when the U.S. or global economy slows and credit delinquencies rise, Visa feels almost no affect.
With 85% of the world's transactions still be conducted in cash, Visa also has a long runway with which to grow its business in the Middle East, Africa, and Southeastern Asia.
Here's to a happy, and richer, new year!