This has been a wild year in the stock markets. After a devastating market crash in March, major stock indexes quickly recovered their losses and rallied into uncharted territory in August, only to suffer yet another market correction due to excessive speculation in tech stocks in the past weeks.
There is no way of knowing whether the ongoing market correction will develop into a full-blown bear market or if stocks will simply bounce back and reach new highs. Regardless of what happens, no investors seem to like the current market uncertainty regarding whether to buy, sell, or stay away altogether. Keep in mind, though, that the stock market has recovered from every single downturn in history. If investors do decide to buy the dip, here are the top three stocks to hold through the current environment.
Tech giant Apple (AAPL 0.90%) had a fantastic second quarter this year, with its revenue up 11% year over year to $59.7 billion and earnings per share at $0.645, up 18% over Q2 2019. The increase was driven by overwhelming consumer satisfaction with its iPhone 11 series. The company's MacBook launches were also well-received, with revenue up 31% year over year to $6.6 billion.
That's not all; the company added 130 million paid subscribers compared to Q2 2019 for its Apple TV, Arcade, News, and credit card services. Currently, the stock is trading for a premium of 7 times sales and 33 times earnings. Overpaying just a little for a superb blue-chip stock, however, is rarely a bad idea. Year to date, the company's shares have proven pandemic-proof, and are up over 45%.
On Aug. 31, Apple's stock went through a 4-to-1 stock split in order to make shares more accessible for purchase. That undoubtedly fueled a spectacular run-up and sell-off, with shares now down close to 20% from all-time-highs.
This year, shares of continuous glucose monitoring (CGM) manufacturer DexCom (DXCM 1.52%) rallied by nearly 80% as the COVID-19 pandemic forced many diabetes patients to turn to at-home management of the chronic condition, sharply increasing the demand for the company's devices. Its mobile gadgets handle insulin delivery for patients and analyze key metrics such as blood sugar levels in real time for healthcare professionals.
Patients with diabetes who use DexCom's CGMs have significantly lower glucose levels in their blood than patients who are treated under regular care, and the company's product provides an estimated $5,000 in health savings per patient per year. Only 15% to 40% of patients with diabetes in the U.S. are using CGMs, paving the way for the company to capture more market share.
DexCom expects to bring in $1.85 billion in revenue this year, considerable growth from the $1.47 billion in sales it generated in 2019. If healthcare investors are looking for a company that can both grow its revenue consistently and thrive against economic downturns brought by the COVID-19 pandemic, DexCom is a top choice.
3. Scotts Miracle-Gro
Scotts Miracle-Gro (SMG 9.43%) is an industry leader in providing lawn, gardening, and indoor agricultural growth products. During the third quarter of 2020, sales were up 28% year over year to $3.24 billion, with sales in its cannabis subsidiary, Hawthorne, up by a whopping 72% from last year. That growth is partly due to the fact that more U.S. states are joining the bandwagon for legalizing recreational and medical marijuana, which stimulated purchases of nutrients and lightings for raising cannabis plants. Another pillar of growth lies in the increasing demand for gardening/stay-at-home projects in the face of COVID-19 related lockdowns and quarantines.
There are six states with recreational pot legalization on the ballot in November. Meanwhile, the U.S. cannabis market is expected to reach $73.6 billion by 2027, up from just $9.1 billion in 2019. That's a huge market opportunity for Scotts Miracle-Gro.
For the entire year, the company expects to generate over $4 billion in revenue and $6.85 in earnings per share, compared to $3.2 billion in revenue and $4.47 in EPS in 2019. Those are some impressive results for a company valued at only 2 times price-to-sales and 26 times price-to-earnings. Scotts Miracle-Gro produces enough profit each year to pay a dividend, with an annual yield of 1.6%. For the past five years, its stock gained an impressive 142%, beating the S&P 500's 69.5% return.