Don't let the fickle whims of sector rotation carry you away from some of this year's hottest stocks. Many of the companies that have come through for investors in a major way in 2020 will continue to pad those gains in the year ahead.
NVIDIA (NVDA +1.67%), DraftKings (DKNG 3.94%), and JD.com (JD +0.86%) have delivered big share price gains lately, but the best could be yet to come. Let's go over why these three recent winners can keep the good times rolling in 2021 for that $2,000 that you've been hoping to invest in the market.
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NVIDIA
The semiconductor pioneer bounced back in a major way in 2020. NVIDIA shares are up 122% through Friday's close, and the news keeps getting better. Growth is accelerating, its co-founder CEO is killing it on all fronts, and the company is positioned perfectly to cash in on the booms in gaming, data centers, and all of the cool applications where artificial intelligence is pitching a tent these days.
It's easy to wonder if the stock has overrun its fundamentals, but now is a good time to point out that NVIDIA is bouncing off a crummy 2019. Revenue declined for four consecutive quarters, but it has rebounded with four straight reports of quarterly top-line growth of 38% or better. This week's report was the heartiest of the streak, as NVIDIA checked in with 57% and 66% growth in revenue and adjusted earnings, respectively.
CEO Jen-Hsun Huang is doing right by everybody. Employees love him, going by his nearly perfect 99% approval rating on employee reviews site Glassdoor. Developers and clients have grown fond of the Kitchen Keynote speeches he has been delivering from his own kitchen throughout the pandemic. Shareholders obviously aren't complaining.
DraftKings
One of this year's hottest debutantes is DraftKings, which has more than doubled since April, when it debuted on the market by merging with a special-purpose acquisition company (SPAC). The leader in wagering on fantasy sports and a rising star in the online sportsbook market, it has impressed investors in its first two quarters as a public company.
Revenue rose 24% for the second quarter, an amazing feat since most of the pro sports leagues didn't get started again until later in the summer. This week, we saw DraftKings come through with 42% in adjusted top-line growth for the third quarter, raising its guidance for all of 2020 in the process.
DraftKings now forecasts $540 million to $560 million in revenue this year, or 25% to 30% in pro forma growth. It initiated its guidance for 2021, and the midpoint of the $750 million to $850 million revenue range that it's targeting implies that its top-line growth will accelerate to 45% next year. With leagues finding a way to get back to business in 2020 and live fans expected to return en masse after a vaccine becomes widely available next year, it's easy to see DraftKings is just starting to heat up here.
JD.com
We'll wrap this up with a trip to China to check out that country's leading online retailer. When you're the top dog -- in terms of revenue -- in the world's most populous nation, you can expect good things to happen, as China embraces the merits of e-commerce.
Net revenue rose 25% last year, and after decelerating to 21% in the first quarter -- when the coronavirus was having its harshest impact on China -- it's back on track. Net revenue climbed by 34% in the second quarter, and in the third-quarter report that JD.com delivered this week, it grew 29%. The bottom line is growing even faster. Adjusted earnings soared 80% in the third quarter.
Analysts can't seem to keep up with JD.com. This was the fourth quarterly report in a row in which its adjusted profit landed at least 30% above where the Wall Street pros were perched. It's certainly risky to be investing in Chinese stocks these days, but given that JD.com's audience is largely homegrown, it's not as susceptible to the international trade issues that could sting some of China's other blue chips.
JD.com has soared 148% in 2020 through Friday's close. With China well into its post-pandemic recovery -- cases peaked there in February -- the recent step-up in top-line growth should be the norm into 2021.
NVIDIA, DraftKings, and JD.com have all more than doubled this year as prime growth stocks. All the ingredients are in place for the gains to keep coming in 2021.
