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Betting On a 2021 Recovery? Buy These 3 Stocks Now

By David Jagielski - Jan 8, 2021 at 6:30AM

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They didn't all struggle in 2020, but they will definitely all thrive if the economy bounces back this year.

"Never bet against America." That's what billionaire investor Warren Buffett told his followers last year at the annual Berkshire Hathaway shareholders meeting. Always bullish on the country over the long haul, Buffet is a big believer that sooner or later the U.S. will recover from the coronavirus pandemic and this latest downturn. When that turnaround happens, however, is anyone's guess.

But if you're betting on the recovery to take place this year, now could be a great time to consider buying shares of Medtronic ( MDT -0.38% )Delta Air Lines ( DAL -1.80% ), and Apple ( AAPL -1.17% ). A return to some sort of normal could benefit all three of these companies, which have taken plenty of hits during the pandemic.

Stock chart showing numbers getting bigger.

Image source: Getty Images.

1. Medtronic

It's been a mixed bag for the healthcare industry during the coronavirus pandemic, as companies working on vaccines or marketing COVID-19 diagnostics have been hot buys over the past year. But businesses that depend on the regular, day-to-day treatment of patients haven't fared nearly as well. This is the bucket that medical-device-maker Medtronic falls into. 

But Medtronic is starting to see a bit of a recovery. On Nov. 24, 2020, the Irish company released its second-quarter results for the period ending Oct. 30, 2020. Its revenue of $7.6 billion was down 0.8% on a year-over-year basis, but it was a 17.5% improvement from the previous quarter. All of its major segments saw sequential quarterly growth of at least 12%. In a company press release, CEO Geoff Martha said the business is "seeing a faster-than-expected recovery and approaching year-over-year growth."

The problem, however, is that since Q2 results were released, cases of COVID-19 have continued to rise. Medtronic benefited from hospitals slowly resuming their normal operations, as the COVID-19 pandemic wasn't spiraling out of control during Q2 the way that it is today. Wednesday, Jan. 6, was the deadliest day of the pandemic in the U.S. yet, when 3,964 Americans having died of the virus in a single day. With more lockdowns and restrictions in place, hospitals are again going to be pushing back on procedures not related to COVID-19, and that means the next quarter for Medtronic may not be as promising as Q2 was.

However, health officials are administering vaccines, and while COVID-19 cases may get worse in the short term, there's hope that later this year that numbers could come down drastically -- assuming the bulk of the population gets vaccinated. Those investors who don't believe that a recovery is a long shot could start buying up Medtronic shares, even before such a recovery starts to takes place. Over the past year, the healthcare stock is up just over 3%, and it has underperformed the S&P 500 and its 17% gains. But 2021 may be a much better year for Medtronic if the U.S. is able to get the coronavirus under control.

2. Delta

A big contrarian bet right now is Delta. Unlike the healthcare industry, there's no mixed bag of results in the airline industry; every company in it is struggling. With travel down due to the pandemic, until concerns due to COVID-19 are down and people feel more comfortable moving about, airlines will continue to struggle.

But there are signs that air travel could spike even before a recovery happens. Given the pandemic circumstances, demand appears (relatively) strong. There were just under 1.2 million air travelers on Dec. 23, 2020, which was a record high during the public health crisis and even as COVID-19 cases were climbing. But things are still nowhere near normal, as travel on Christmas Eve was one-third the level it was in the previous year.

That's consistent with the decline in Delta's top line, which at $13.1 billion through the nine-month period ending Sept. 30, 2020 was down nearly two-thirds from the $35.6 billion it generated in the prior-year period. That has made for a disastrous bottom line, with Delta's net loss through the first three quarters totaling $11.6 billion -- a stark contrast to the $3.7 billion profit it reported during the same period a year ago.

Down more than 30% over the past year, the Georgia-based company's stock could be one of the first ones to start skyrocketing as the economy recovers. Even a decline in COVID-19 cases could quickly spark an uptick in travel. 

3. Apple

Apple's stock isn't struggling, as it has rallied more than 75% in the past 12 months. But that doesn't mean that all aspects of the $2 trillion company's business are rosy.

In its fourth-quarter earnings, which the California-based company released on Oct. 29, 2020, sales of $64.7 billion for the period ending Sept. 26, 2020 showed minimal year-over-year growth as they rose by just 1%. Its bread and butter, iPhone sales, totaled $26.4 billion and were down 20.7% from the prior-year period. Gains in its other segments helped make up for the near $7 billion gap in revenue, however. Total iPhone sales for the fiscal year were $137.8 billion and declined 3.2% from the previous year.

But those latest iPhone numbers don't include the latest model, the iPhone 12. Sales of the phone only began in October, and investors won't get an insight into how well it's doing until the next earnings report (Jan. 27), which could prove pivotal in how the tech stock does this year. With wait times for the phone sitting at over two weeks, the device is proving to be in high demand even well after its launch -- and that's with the economy still in its lows.

If jobs start coming back and the economy is in much better shape this year, that bodes well for Apple and its high-priced iPhones. The stock performed well last year, but it could do even better if disposable incomes rise and consumers have more money to spend on its products and services, which is why 2021 may still be a great year for Apple if we experience a true economic recovery.

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

Medtronic plc Stock Quote
Medtronic plc
$106.87 (-0.38%) $0.41
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
$418,676.00 (-0.45%) $-1,890.00
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
$277.43 (-0.59%) $-1.66
Apple Inc. Stock Quote
Apple Inc.
$161.84 (-1.17%) $-1.92
Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
$35.98 (-1.80%) $0.66

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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