5 Key Stocks to Invest in 2020 and Beyond

Let’s cut to the chase. Here are the four types of stocks that you’ll want to be invested in 2020 and beyond. 

Rome, Italy. Image by Andrea Spallanzani from Pixabay

Tech stocks: e-commerce, cloud

Too many businesses have been impacted by the COVID-19 pandemic — some more so than others. Restaurants, tourism, and retailers have been more greatly impacted. On the contrary, the tech space has outperformed, as most tech companies operate in a growing pie. 

Particularly, you’ll want to invest in tech stocks that have exposure to e-commerce, cloud, or growing markets. Many of these stocks don’t pay a dividend, but investors should consider them for growth. 

Here are some examples: Alibaba (NYSE:BABA), Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG), Amazon (NASDAQ:AMZN), JD.com(NASDAQ:JD), Microsoft (NASDAQ:MSFT), Tencent (TCEHY), etc. They have greatly outperformed the U.S. stock market in different time frames, but the chart below shows the past five years.

Chart
Data by YCharts

Healthcare stocks

Healthcare is also another growth area you’ll want to stay invested in. There’s the megatrend of an aging population.  Additionally, healthy people want to stay healthy and sick people cannot go on without their drugs or medical devices. 

The most conservative investors would look into adding Johnson & Johnson (NYSE:JNJ) opportunistically as a core holding. Bristol-Myers (NYSE:BMY) is another quality dividend payer. JNJ yields 2.6%, while BMY yields 2.9%.

Abbott Labs (NYSE:ABT) and Medtronic (NYSE:MDT) are also A-grade healthcare stocks to consider on dips. 

Defensive dividend stocks

I categorize defensive dividend stocks as ones that generate above-average stable earnings or cash flow and pay a yield of at least 4%. So, utilities like Brookfield Infrastructure Partners (NYSE:BIP, TSX:BIP.UN) would fit the bill.

I’m totally biased, as BIP is my absolutely favourite utility. It’s diversified by geography and asset type. Importantly, it’s led by a proven management team that’s invested in the business alongside the unitholders like you and me. 

It was spun off from Brookfield Asset Management (NYSE:BAM, TSX:BAM.A). Since then, it has delivered market-beating returns and income, while increasing its cash distribution every year. 

Source: F.A.S.T. Graphs. BIP’s dividend history.

Currently, BIP yields 4.3%. Adjusted for the stock split, BIP’s H1 payout ratio was about 65%. Therefore, the dividend is safe. 

Dividend stocks that have strong survivability and turnaround potential

These stocks may appear expensive in the near term but are undervalued for longer-term investment. The big Canadian banks are some of the soundest banks in the world. They will have a dip in earnings this year due to higher provision of credit losses and higher levels of bad loans.

Taking Toronto-Dominion Bank (NYSE:TD, TSX:TD) as an example, assuming it takes two years for the North American economy to improve and its earnings to normalize, the stock can deliver annualized returns of about 16%. Additionally, it offers an above-average dividend yield of about 5% right now. 

Source: F.A.ST. Graphs

Gold for hedging, if you like

Like Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), which started a new position in Barrick Gold (NYSE:GOLD, TSX:ABX) in Q2, investors can also buy some gold shares as a hedge for their stock portfolios. If you like, you can build your gold position to be up to 5% of your stock portfolio.

In the DGI Across North America service, we also coincidentally built a hedging position in a gold miner, Newmont(NYSE:NEM, TSX:NGT) in Q2. Our position has climbed more than 17%.

Barrick Gold stock is trading at a “Buffett premium” now, as the stock has run up after the news of Berkshire buying it. Therefore, we find Newmont to be a better buy still than Barrick today. 

Investor Takeaway

You probably don’t want to be a hero and invest big in high-risk areas that have been hit the hardest by the pandemic. Instead, your money will be a lot safer and likely grow much faster if you focus on growth or defensive spaces.

Consider tech stocks that have core e-commerce or cloud businesses, healthcare stocks, defensive dividend stocks, value/dividend stocks, and maybe gold stocks for hedging. 

The market is generally expensive today, though. So, do not hesitate to wait for a dip or sideways action in these names before buying shares. 

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Disclosure: As of writing, we own shares of AMZN, BABA, BAM, BIP.UN, BMY, BRK.B, JD, NGT, TCEHY, and TD.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

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