Congratulations, investors: We've made it! We survived 2020, which gave us the fastest bear market nosedive in history and the most ferocious rebound rally from a bear market low on record.
With a new year comes new opportunities to make money. Although equity valuations appear stretched, there are a handful of great companies that still offer incredible value for patient investors. To kick off the new year, here are three top stocks that can make you richer in January and beyond.
Investors should strongly consider putting some of their money to work in domain registration and cloud-based technology products company GoDaddy (GDDY -1.69%).
Though GoDaddy may be known best for its risque Super Bowl commercials, this company means business. Today, it has more than 20 million customers, with over 1 million new net additions through the first nine months of 2020.
Being the go-to for domain registrations -- GoDaddy holds a 22% share of the domain registration market -- has its perks. It's helped legitimize the company's brand. It's also encouraged small businesses to create an online presence. The coronavirus pandemic has shown the undeniable importance of having an online footprint in an increasingly digital economy.
But it's not domain registration that's going to drive GoDaddy's double-digit earnings and cash flow growth. Rather, it's the considerably larger addressable opportunities like website hosting and business applications that can drive earnings and cash flow higher. Business applications -- an area that covers email hosting and marketing campaigns -- is the company's smallest segment based on sales, but its fastest-growing division. This higher-margin segment has accounted for 18% of total sales through three quarters of 2020, with sales rising by 17% from the prior-year period.
What's equally exciting is that, with all three segments growing and the company on pace for steady low double-digit sales growth, improvements in operating cash flow should allow GoDaddy to reinvest in innovation, as well as to make earnings-accretive acquisitions. Just last month, GoDaddy announced its intention to buy digital payment platform Poynt for up to $365 million (this figure includes up to $45 million in deferred payments). These bolt-on purchases will only enhance the GoDaddy brand and entice more small businesses to try its hosting and application services.
With GoDaddy profitable on a recurring basis, January looks like the perfect time for investors to take a position.
First Majestic Silver
Despite a stellar year for physical silver in 2020, First Majestic was a laggard (up just 9%). The company's underwhelming operating performance in recent years probably poured cold water on what should have been a hot stock. However, things should change in a meaningful way in 2021.
Beginning with the macro perspective, silver is set to shine. Precious metals typically perform their best in the first 12 to 24 months of an economic recovery. That's because interest rates remain low, the U.S. central bank is willing to use quantitative easing measures to support financial markets, and demand for physical metal picks up as economic activity rebounds. Don't forget that the silver thesis is supported by growing demand from automakers (silver is used liberally in electric vehicles) and solar panel manufacturers. No mining stock generates a greater percentage of total revenue from silver than First Majestic.
More specific to the company, it'll benefit from two core objectives. First, expansion of production capacity at its three core assets -- San Dimas, Santa Elena, and La Encantada -- should yield higher silver, gold (at San Dimas), and byproduct output. I expect that silver equivalent ounce (SEO) output can grow from an estimated midpoint of 22 million SEO in 2020 to closer to 28 million SEO by 2022.
Secondly, First Majestic's prudent cost-cutting will come into play. The company will see significantly lower costs after putting a handful of its higher-cost assets on care and maintenance in recent years. When coupled with efficiency improvements at its three producing assets, it wouldn't be surprising if all-in sustaining costs for 2021 came in as low as $12 per SEO.
After years of underperformance, First Majestic Silver is set to shine.
For the two decades from 1997 to 2017, AstraZeneca's stock was an investment black hole. It generated dividend income for investors, yet its share price hardly moved. But with asthma blockbuster Symbicort's loss of exclusivity in the past, and the company refocusing its efforts on new indications, the new and improved AstraZeneca looks like a bargain.
Big pharma stocks usually don't grow their sales by a double-digit percentage. For AstraZeneca, low double-digit sales growth should be the expectation through the midpoint of the 2020s. The company's robust portfolio of oncology drugs is leading this growth. Tagrisso, Imfinzi, and Lynparza have all achieved blockbuster status (i.e., over $1 billion in annual revenue), with respective constant-currency year-to-date sales growth through September of 39%, 43%, and 53%.
Beyond double-digit constant-currency oncology and cardiovascular sales growth, AstraZeneca is aiming to put more pep in its step with the $39 billion cash-and-stock deal to buy rare-disease drugmaker Alexion Pharmaceuticals (ALXN). Alexion targets ultra-rare indications, and rarely, if ever, faces competition. It also receives little pushback on its high list prices from insurance companies.
More important, Alexion's development of Ultomiris as a next-generation replacement therapy for blockbuster treatment Soliris should lock up another decade of secure cash flow. It's my opinion that AstraZeneca is getting a steal of a deal for Alexion at $39 billion.
Now that growth is back in the picture, AstraZeneca is a pharmaceutical stock you're going to want to own.