The holidays are upon us. Most Christmas shoppers will likely be doing the bulk of their shopping online this year, as COVID-19 continues to put a damper on social activities. While most of us think of clothes, toys, spirits, or golf clubs for Christmas presents, stocks are the gift that keeps on giving. Here are three companies that look good for the end of 2020 and into 2021.
A holiday play
Best Buy (BBY -0.65%) benefited from an increase in demand for home electronics and technology products as the country's labor force was forced to gear up for more remote working during the pandemic. While vaccine hopes are on the horizon, that doesn't necessarily mean that consumer demand for Best Buy's products will weaken. Widespread COVID-19 vaccinations are still pretty far out, meaning that businesses are going to continue to work outside of the office as much as possible. With regular consumers still relatively engaged in a socially distanced environment, a holiday demand for tech is here.
Best Buy is a cheaper holiday retail play than something like Amazon (AMZN -1.43%), which I still include on this list. Best Buy shares trade at around 16 times last year's earnings, and the company has an incredibly healthy online business complementing its brick-and-mortar stores.
In addition to top-line revenue up 6.6% through the first nine months of the year, to $30.32 billion, third-quarter comparable online sales increased 174%. It's this online strength that gives investors reason to believe that Best Buy will do well this holiday season. Digital shopping is where consumers are going to be, and Best Buy's online domestic revenue of $3.82 billion made up 35.2% of the retailer's total domestic revenue. That's a big gain compared to the 15.6% makeup that it represented last year.
Over the past few years, we've watched Best Buy manage to grow sales and earnings in a time when many rivals went down. In the first nine months of this year, net earnings are up 23.3% to $982 million. The company is the preeminent name within this area of retail, and the current trends of social distancing and remote work are only going to help its case for the holiday season and next year.
Dividends are the gift that keeps on giving
Buy your kids dividend stocks and teach them about compound interest, and you'll have given them one of the most important lessons in life.
Medical Properties Trust (MPW 1.12%) is a real estate investment trust (REIT) that currently offers a 5.5% dividend. REITs are required to pay out at least 90% of their net income to shareholders, making them prime investment vehicles if you're hunting dividend yields.
Medical Properties Trust invests in healthcare-related real estate. It's an area of stable demand that is less susceptible to economic shocks than other industries. Based out of Alabama, the company owns real estate in multiple developed countries, including the U.S., Australia, Germany, Italy, Switzerland, and the U.K. Aside from the U.S., these countries all have socialized medicine, making the consumer demand predictable.
Medical Properties Trust's growth has been solid over the last five years, with revenue nearly doubling to $854 million in 2019.
2020 revenues are up 53% through the first nine months of the year, while net earnings were up 31.2% to $321.5 million.
Shares have had quite a run, slightly outpacing the S&P 500 over the last three years. While that pace might not be sustainable for a REIT that pays out most of its earnings, this is a company growing a real estate portfolio that is used by the most indispensable industry in the world. Healthcare is something everyone needs, and everyone wants. This is an underrated, big dividend stock that you can gift to your children.
An unstoppable name
Amazon gained an even bigger edge over many brick-and-mortar rivals this year. Recent retail data showed a 52% decline in brick-and-mortar shopping traffic on Black Friday, while spending on online shopping increased 21.6% year over year to $9 billion.
This lines up extremely well for Amazon. The e-commerce juggernaut has already seen sales take off this year -- not that that's a new thing for the company. Net sales increased 37% year over year in the third quarter alone, to $96.1 billion. Through the first nine months of the year, total net sales were up 34.9% to $260.5 billion.
To not own Amazon is to really close yourself off. The company is involved in so many industries, including content creation, grocery, and most importantly, cloud computing services. With the bulk of its revenue still going into reinvestment, it's hard to make a case against Amazon anymore. There was a time when I scoffed at this stock. The valuation relative to earnings has always been a hot-button issue. The thing is, every time Amazon shares have run up, or the valuation has come into question, the stock has defied the bearish case. Amazon's aggressive reinvestment keeps leading to growth. As long as it keeps doing that, it feels unlikely that the market is going to lose its love for this stock.
Going into a holiday season that will include a lot of online shopping, Amazon shares are a no-brainer Christmas present. Fourth-quarter guidance provided expectations for revenue growth of 28% to 38%.