If you sometimes feel overwhelmed by the sheer volume of investments choices available, you are far from alone. From growth stocks to dividend stocks to value stocks and beyond, choosing the right investing style and combination of assets for your portfolio isn't easy.
While there's no single correct strategy for investing in the stock market, two fundamental pillars of most smart approaches to the market are a long-term mindset and diversification. And regardless of your personal investing approach or your appetite for risk, some stocks are simply great all-around buys.
Here are three stellar companies that should be high on any investor's list of stocks to buy in the new year.
Sometimes, a company appears that's perfectly suited to its moment, and for 2020, one of those was certainly Zoom (NASDAQ:ZM). Its shares soared from just under $69 per share at the beginning of the year to more than $406 at the time of this writing -- a roughly 500% gain. During a year when hundreds of millions of people have been avoiding close in-person contact with anyone outside their own households, the video communications platform provider has become the go-to solution for everything from virtual get-togethers and holiday celebrations to business conferences. Investors have rewarded it accordingly.
Although two COVID-19 vaccines have received emergency use authorizations from the Food and Drug Administration and early distribution of them is already taking place, it could be many months before they are widely available to the general population and enough people are inoculated that we'll approach herd immunity. With this timeline in mind (not to mention the growing number of companies that have already decided to keep their employees working remotely permanently, or intend to allow them to do so), the concern among some investors that Zoom may fade into irrelevancy in 2021 appears unfounded. Top analysts certainly think so. On average, they project about 131% earnings growth annually for the company over the next five years.
Zoom's rapid growth didn't start with the pandemic. In its fiscal 2020 (which ended Jan. 31), the company reported 88% year-over-year revenue growth. But the pandemic has served to stimulate the impressive growth analysts expect to see from Zoom over the next few years. In the first three quarters of the company's fiscal 2021 (which ended April 30, July 31, and Oct. 31) Zoom achieved year-over-year revenue surges of 169%, 355%, and 367%, respectively.
But even after all those gains, it's not too late to buy into this top stock.
Although Mastercard (NYSE:MA) hasn't been immune to the volatility besetting the financial services industry in 2020, the company's long-term outlook remains strong. And its share price has essentially rebounded back to where it was trading in mid-February, before the bottom fell out.
Mastercard's net revenues in the first quarter grew 3% on a year-over-year basis, but the impact of the pandemic was clear in its second- and third-quarter numbers. Net revenues fell 19% and 14%, respectively, during these periods. A severe drop in travel-related spending was one of the key headwinds leading to those revenue declines.
On the other hand, CEO Ajay Banga has said that "Mastercard has been focused on helping merchants, banks, fintechs, governments and consumers with products and services to navigate the pandemic," and that the company is "seeing encouraging progress in the trajectory of domestic spending."
Despite those issues, the company still paid shareholders $402 million worth of dividends in the third quarter alone. At the end of the period, the company also had $10.2 billion in cash and cash equivalents on its balance sheet, $31.6 billion in total assets, and about $13 billion in long-term debt. Although Mastercard's dividend yield isn't much to write home about (0.53% at current share prices), the company recently increased its quarterly payout by 10% and authorized $6 billion worth of share buybacks.
Travel spending won't recover to pre-pandemic levels for some time, but given the company's solid cash position, its dividend is safe, and it has enough liquidity to cover current liabilities.
Before the pandemic hit, Mastercard was on a growth streak. In 2017, 2018, and 2019, its revenues rose by 16%, 20%, and 13%, respectively. Those who can be patient with Mastercard's near-term challenges can still enjoy the combination of growth and value this stock has to offer the long-term investor.
Companies like Vertex Pharmaceuticals (NASDAQ:VRTX) that specialize in the treatment of rare genetic disorders have an edge over many other healthcare stocks in the pandemic economy. Vertex is one of the leading developers and manufacturers of cystic fibrosis drugs. The star in its portfolio, Trikafta, is approved to treat roughly 90% of all individuals who have cystic fibrosis.
The company has delivered consistent, exceptional revenue growth: In 2017, 2018, and 2019, its sales rose by 29%, 40%, and 37%, respectively. Its financial performance has been even more impressive this year. Product revenues grew 77% year over year in the first quarter, and 62% in the following two quarters.
Besides its triple-drug combo Trikafta, Vertex Pharmaceuticals has three other approved cystic fibrosis treatments on the market: Orkambi, Kalydeco, and Symdeko/Symkevi. These drugs also rake in high profits for the company, although not at the same level as Trikafta. Vertex is currently engaged in numerous high-profile partnerships with the goal of growing its portfolio of gene-editing therapies both within and outside the cystic fibrosis treatment space. These include a collaboration with Moderna and another with CRISPR Therapeutics.
In the company's third-quarter report, its CEO, Dr. Reshma Kewalramani, stated: "As we extend our leadership in CF, we are also advancing a broad pipeline of innovative therapies .... Our pipeline spans multiple diseases, and multiple important clinical readouts are expected from now through the end of 2021, each of which we expect will hold transformative potential for patients and further growth for Vertex."
The future looks bright for Vertex Pharmaceuticals, and it's not too late for investors to profit from buying its stock. If you're looking for a healthcare company to add to your portfolio in the new year, this one is a no-brainer buy for long-term and reliable growth.