Author: Sean Williams | October 14, 2019
A number of big events await in 2020
It might be hard to believe, but another year is nearly gone. In roughly two and a half months we’ll be turning the calendar on 2019 and not only ringing in a new year, but a new decade as well.
Although the previous decade ended on a sour note (i.e., the Great Recession), the 2010s have been exceptionally kind to long-term-oriented investors. The iconic Dow Jones Industrial Average (INDEX: ^DJI), tech-heavy Nasdaq Composite (INDEX: ^IXIC), and broad-based S&P 500 (INDEX: ^GSPC) have respectively gained 155%, 252%, and 165% this decade.
And make no mistake about it, expectations continue to remain high that the longest-running economic expansion in our nation’s history can keep chugging along.
Of course, wishful thinking may not be needed for the following 10 companies. These stocks all have major catalysts in 2020 that are bound to make it a true “happy New Year.”
In 2020, the next big thing in telecommunications is the ongoing rollout of 5G networks. While all of the major telecom companies are investing heavily in 5G, it’s AT&T (NYSE: T) that you’ll want to have your eye on.
Back in early July, Cnet.com tested 5G networks, which allow consumers to potentially download hours of video in a matter of seconds, for all four major carriers. Although AT&T’s test was limited to a relatively confined space, its speeds blew its competition out of the water. AT&T tested at 1.8 gigabits per second (Gbps), which was notably higher than Verizon (NYSE: VZ) at 1.3 Gbps, and left both Sprint (NYSE: S) at 489 megabits per second (Mbps) and T-Mobile (Nasdaq: TMUS) at 583 Mbps eating its dust. At the time of the testing AT&T also had 5G networks operating in more cities than Verizon, Sprint, and T-Mobile, combined.
With smartphone developers readying for a data-driven upgrade cycle, AT&T’s high-margin wireless division looks poised to benefit.
2. Curaleaf Holdings
The New Year will also bring good tidings for Curaleaf Holdings (OTC: CURLF) in the cannabis industry.
It’s no secret that legal marijuana is budding before our eyes. A recently released report from data analytics firm Nielsen (NYSE: NLSN) called for sales to more than quintuple in the U.S. from $8 billion to $41 billion between 2018 and 2025 -- and Curaleaf will be at the center of this growth.
Within the next couple of months, vertically integrated multistate operator Curaleaf is expected to close on its acquisition of Cura Partners, which is the owner of the well-known Select brand on the West Coast, as well as its cash-and-stock deal to buy privately-held multistate operator Grassroots. When these deals are complete, Curaleaf will have close to 70 operational retail locations, which is far and away more than any other multistate operator, as well as 131 retail licenses, trailing only Harvest Health & Recreation (OTC: HRVSF).
But the big surprise is that Curaleaf is also on track to be the first cannabis pure-play in North America to reach the $1 billion in annual sales plateau in 2020, according to its management team. Suffice it to say, it could be a green year.
Even though technology stalwart IBM’s (NYSE: IBM) stock has gone virtually nowhere over the past decade, there’s definitely reason to celebrate when the calendar changes over to 2020. That’s because IBM is set to join an exclusive club next year: the Dividend Aristocrats.
Dividend Aristocrats are a select group of a few dozen companies in the S&P 500 that’ve raised their annual dividend for a minimum of 25 consecutive years. In effect, they’re viewed as profitable, time-tested businesses, and they tend to draw healthy investment from mutual funds, index funds, and income investors alike. In April, IBM raised its payout for the 24th consecutive year, putting it on track to become a dividend great in 2020. And in case I’ve failed to mention it, IBM is currently yielding 4.5%, which is more than double the average yield of the S&P 500.
Atop its dividend milestone, IBM continues to gain traction with its cloud services. Cloud sales rose 8% on a currency-adjusted basis over the previous 12 months, and it looks to be on the leading edge of blockchain development. Slowly but surely, IBM is redefining itself once more.
4. Intercept Pharmaceuticals
It’s not just brand-name companies that’ll be ringing in the New Year in style. There’s a very good chance that investors in under-the-radar biotech company Intercept Pharmaceuticals (Nasdaq: ICPT) will have plenty to cheer about.
Earlier this year, Intercept reported its much-anticipated late-stage results from the Regenerate trial involving lead drug Ocaliva as a treatment for nonalcoholic steatohepatitis (NASH). NASH is a serious liver disease that’s expected to be the leading cause of liver transplants by the midpoint of the next decade. However, this $35 billion market currently has no U.S. Food and Drug Administration (FDA)-approved treatments.
In the Regenerate trial, Ocaliva met one of two co-primary endpoints -- a statistically significant reduction in liver fibrosis with no worsening of NASH – which is all that was needed to declare the study a success. Just three weeks ago, Intercept filed a new drug application for Ocaliva as a treatment for NASH, with a request for a Priority Review (six-month) as opposed to the standard 10-month review. With no other treatments on the market, select NASH patients may soon have an FDA-approved option available.
5. Sinclair Broadcasting Group
For some folks, the prospect of another year-plus of political ads is groan-worthy. But when you own television stations galore, like Sinclair Broadcasting Group (Nasdaq: SBGI), it’s a great thing. As of the end of 2018, Sinclair owned more than 190 stations in 89 markets that broadcast in excess of 600 channels.
What makes the New Year such an intriguing time for Sinclair Broadcasting is that it’s more exposed to political ad revenue than any other television station operator. For example, third-quarter ad revenue in 2018 (i.e. midterm ads) came in 60% higher for Sinclair than during the 2014 midterms, and 20% higher than what the company collected in the 2016 presidential elections. Overall, Sinclair generated close to a quarter-billion dollars in ad revenue from political ads in 2018, representing roughly 8% of total sales. That may not sound like much, but with double-digit sales growth expected next year, political ads could provide quite the lift.
Spending on political advertising appears to be one-upped with each subsequent election cycle, and 2020 looks like it’ll be no different.
6. Saudi Aramco
Although it’s not yet a publicly traded company, 2020 should be nothing short of a banner year for the largest oil company on the planet, Saudi Aramco.
To begin with, Saudi Aramco will, sometime over the next year, kick off the largest initial public offering in history. Saudi officials have been tinkering with the idea of selling between a 5% and 10% stake in the currently state-owned company that’s worth $1 trillion to $2 trillion. Thus, the sale of this stake could raise $50 billion, $100 billion, or even more, that Saudi Arabia can use to diversify its economy away from oil dependence.
Further, Saudi Aramco’s refineries were the target of a drone attack in mid-September, which wound up shutting down about half of the country’s oil production. Over the coming weeks and months, repairs will be made to bring Aramco’s production back up to 100%. Thus, things can only get better for the state-owned company as the changing of the calendar year approaches.
Apple (Nasdaq: AAPL), which is currently jostling back and forth with Microsoft (Nasdaq: MSFT) for the title of “largest publicly traded company in the world by market cap,” should also be eager to see the ball drop in Time Square.
While the company has numerous avenues of growth, including wearables, services, and streaming content, 2020 will likely mark the biggest smartphone shift in nearly a decade. Having recently unveiled its new lineup of iPhone 11s, the real focus is on September 2020, which is when Apple should reveal a line of 5G-capable iPhones. With a sizable redesign likely on the horizon, and the ability to download entire movies in a matter of seconds, we could bear witness to one of the strongest consumer upgrade cycles ever.
It’s worth pointing out that with the exception of its recently reported fiscal third quarter, Apple’s smartphone sales have accounted for between 51% and 70% of total quarterly sales since fiscal 2013 began. While smartphones sales could slow-step into its highly anticipated Sept. 2020 5G-capable iPhone release, Apple should have little trouble regaining its smartphone swagger shortly thereafter.
8. Aimmune Therapeutics
One of the most exciting developments of the New Year will be the FDA’s decision in January on whether or not to approve Aimmune Therapeutics’ (Nasdaq: AIMT) novel oral drug Palforzia.
Palforzia brings something unique to the table: A potential lessening of symptoms for children and teens suffering from peanut allergy. There are currently no FDA-approved treatments for peanut allergy, and an estimated 4% to 6% of all children in the U.S. suffer from some level of allergy to peanuts.
In clinical studies, Aimmune’s Palforzia ran circles around the placebo that it was pitted up against. Without getting overly technical, late-stage study patients aged 4 to 17 were administered increasingly larger doses of peanut protein until the end of the test or until an allergic reaction was incited that caused them to stop the study. Overall, 67.2% of the patients taking Palforzia passed the study with only mild symptoms, which compared to just 4% of the placebo group.
Last month, the FDA’s Allergenic Products Advisory Committee voted 7 to 2 in favor of Palforzia’s efficacy data and 8 to 1 in favor of its safety data. Although the FDA is not bound to follow the advice of its panel, things are looking up for adolescent peanut allergy sufferers that an FDA-approved treatment is on the horizon. The FDA is expected to make its decision on Palforzia in January.
9. OrganiGram Holdings
Curaleaf isn’t the only cannabis stock eager to see the calendar change to 2020. New Brunswick-based OrganiGram Holdings (Nasdaq: OGI) should also be very excited about the months that lie ahead.
You see, on Oct. 17, just a few days from now, regulations governing derivative cannabis products -- e.g., edibles, infused beverages, vapes, concentrates, and topicals -- officially go into effect in Canada. About two months later, in mid-December, we’ll begin to see products hitting dispensary shelves for the time first time. Derivatives offer pot growers substantially juicier margins than traditional dried cannabis flower, and they’re a much more attractive way of reaching younger adults.
For its part, OrganiGram has a full assortment of ways it’ll be taking advantage of the upcoming derivatives launch. It’s spent 15 million Canadian dollars to buy fully-automated assembly line equipment to produce 4 million kilos of cannabis-infused chocolate per year.
The company also developed a nano-emulsification technology that speeds up the onset of cannabinoids in beverages. OrganiGram will introduce this product first as a powder that can be added to beverages, but is actively seeking a more established partner to create beverages with this product already infused. Needless to say, the launch of derivatives in Canada should be exciting for OrganiGram.
10. Walt Disney
Last, but not least, the House of Mouse, Walt Disney (NYSE: DIS), should get in on the fun when the ball drops and 2020 officially arrives. Disney has two fourth-quarter catalysts that are likely to carry over into the New Year.
To begin with, Star Wars: The Rise of Skywalker is set for a Dec. 20 release. As you’re probably aware, the Star Wars franchise has a veritable cult-like following that’s translated into some major wins in recent years for Disney. The Force Awakens, Rogue One, and The Last Jedi brought in worldwide gross sales of $2.07 billion, $1.06 billion, and $1.33 billion, respectively, setting up The Rise of Skywalker to be a major studio sales and profit driver for Disney in the upcoming year.
Secondly, Disney is nearing the Nov. 12 launch date for its Disney+ streaming service. In September, Disney announced that its streaming service, which will give users access to Disney’s vast library of movies as well as Disney original shows, will cost a mere $6.99 a month, or $69.99 a year. That’s a direct gut jab to Netflix (Nasdaq: NFLX), whose most popular plan costs $12.99 a month. There’s a good chance that Disney sees strong early subscriber figures in 2020.
Here’s how you, too, can have a happy New Year
Keep in mind that it’s not just publicly traded companies that could have a happy New Year. Every single investor can have themselves a great 2020, and beyond, by sticking to two simples rules.
First off, buy businesses, not stocks. Buy companies that you believe in, and that you feel are changing the world for the better. There are thousands of stock tickers for traders to choose from, but there are only a limited number of truly great businesses.
And second, keep your eyes on the horizon. Invest with the mindset that you won’t be selling any of your holdings for five years, 10 years, or even longer. True wealth creation takes time and is achieved by purchasing great companies and hanging onto them for the long run.
Sticking to your investing game plan is a surefire way to kick off the New Year on a high note.
Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Sean Williams owns shares of AT&T and Intercept Pharmaceuticals. The Motley Fool owns shares of and recommends Apple, Microsoft, Netflix, and Walt Disney. The Motley Fool is short shares of IBM and has the following options: long January 2021 $60 calls on Walt Disney, short January 2020 $200 puts on IBM, short October 2019 $125 calls on Walt Disney, short January 2020 $155 calls on IBM, short January 2020 $155 calls on Apple, long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, long January 2020 $200 calls on IBM, long January 2020 $150 calls on Apple, and long January 2021 $85 calls on Microsoft. The Motley Fool recommends Intercept Pharmaceuticals, OrganiGram Holdings, T-Mobile US, and Verizon Communications. The Motley Fool has a disclosure policy.