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Worried Coronavirus Will Last Through 2021? Buy These 3 Stocks Now

By Adria Cimino - Dec 29, 2020 at 12:12PM

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These companies weathered the worst of the coronavirus storm -- and are ready for what appears to be the next phase.

Hopes are high that newly authorized COVID-19 vaccines will be the way out of the current pandemic. But with the rollout just beginning in the U.S. and Europe, any possible return to normal will take time.

Meanwhile, coronavirus cases across much of the world are actually rising. In the U.S., the daily counts of new infections have climbed throughout the month of December. And the concern now is that holiday get-togethers will result in even more cases in the weeks to come.

Given this troubling news, it's reasonable to want to construct your investment portfolio with the idea that this health crisis will continue in the new year. That suggests the best stock picks for this scenario are businesses that have proven their strength throughout the pandemic in 2020 as these companies are likely to resist and even flourish in this environment.

Here are three stocks that can manage the coronavirus well in 2021.

The year 2021 is written over blue face masks set on a wooden surface.

Image source: Getty Images.

1. Amazon

At times when people favor staying home and avoiding crowds, they turn to online shopping. Clearly, e-commerce giant Amazon.com ( AMZN 0.35% ) has benefited since the start of the crisis.

Earlier this year, customers were turning to Amazon for essentials during a lockdown. The company's wide variety of services made it a one-stop-shop. Those same customers could also shop for general merchandise and, through Prime membership, watch films and download e-books. All this was exactly what consumers were looking for as they were forced to spend more time at home.

Amazon ramped up staffing to make sure it could meet this growing demand. This year, the company hired more than 400,000 employees worldwide. And its delivery-service partners have recruited about 75,000 new drivers since February.

The retailer's efforts are showing in this year's earnings reports. For example, in the third quarter, revenue rose 37% to more than $96 billion. And net income tripled to $6.3 billion. Both metrics reached their highest levels ever in this most recent quarterly report.

AMZN Revenue (Quarterly) Chart

AMZN Revenue (Quarterly) data by YCharts.

If the coronavirus crisis continues through 2021, consumers will continue to favor online shopping. And that's likely to translate into more revenue and profit increases for Amazon.

2. Target

Like Amazon, Target ( TGT -0.61% ) provided all that customers needed right from the start of the crisis -- essentials and general merchandise. And like Amazon, Target provided the option of a contactless experience. Customers could order online, then select same-day delivery, drive-up, or pickup. These same-day services soared 217% in the third quarter. And digital sales surged 155%.

Customers haven't crowded the aisles at Target's stores throughout the crisis, but these stores still played a central role in the company's success. In the third quarter, for instance, stores fulfilled more than 95% of the companies online sales. This is significant because store fulfillment leads to shipping cost savings for Target. Per unit, it's 90% less expensive for Target than when the retailer ships items from a warehouse.

Target continues to work toward accommodating the customer's preference for contactless experiences. The company doubled the drive-up parking spaces it sets aside in its store lots this holiday season (compared to last year). And Target has made fresh and frozen grocery products available through pick-up and drive-up at more than 1,600 stores. Target's location in the heart of neighborhoods and its focus on contactless-pickup options set it up for success through the next stages of the pandemic.

3. McDonald's

McDonald's ( MCD 0.24% ) didn't have an easy time of it at the start of the coronavirus outbreak. Though 75% of the chain's restaurants remained open during the height of the crisis, potential customers were more focused on stockpiling essentials at home than eating out.

But the recovery is happening quickly. And that's even as cases of coronavirus climbed at times during McDonald's' third quarter.

For example, in that quarter, McDonald's said sales improved from month to month. And at the end of the quarter, U.S. sales rose 4.6% for the period. Overall sales fell only 2.2% after dropping more than 23% in the second quarter.

Though the coronavirus pandemic isn't over, lockdowns and stay-at-home orders are more flexible these days. In many cases, offices and schools are starting to open back up, resulting in more people needing to be out and about on a daily basis.

I expect McDonald's' strengths in drive-thru, delivery, and takeout to keep customers coming back for burgers, fries, and special menus in the coming months. And that should keep investors in this consumer stock happy in the long term. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$3,535.41 (0.35%) $12.25
McDonald's Corporation Stock Quote
McDonald's Corporation
MCD
$260.21 (0.24%) $0.63
Target Corporation Stock Quote
Target Corporation
TGT
$238.13 (-0.61%) $-1.47

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