My Top 5 stocks for 2020
The past 3 to 4 months had been awesome for the stock market. As you might have already seen from your 401K and other investments. With the market at all time high, election year and geopolitical issues its hard to say what direction the market will go, but here are my top 5 stocks I like for 2020.
1. Boeing, Inc (BA) – Boeing had a very rough 2019. Probably the worst in 100 years. There is so much negativity around Boeing’s two 737 MAX plane crashes, that it is highly unlikely passengers would knowingly fly in that plane regardless of whatever fix, upgrade, etc. So, how do they get out of this? Firstly, fire the CEO. Yes, it does give a good relief to the investors or people to fire the leadership. It gives the sense of a change in leadership regardless whose fault it is. They did fire the CEO late December. The next step is to communicate that they will scrap the 737 Max model and start from scratch towards a new model. This is going to be very costly for the company but probably the only way to recover and keep “The Pride of America”. Scrapping the 737 MAX says Boeing cares about its brand and more importantly the safety of every passenger. For passengers, it provides a sense of safety knowing that they are not flying on a 737 Max. Boeing a great technology company. I have no doubt that they can figure out the solution, but the work they have to do in 2020 is turnaround the negative perception.
I believe Boeing will do all of these and come out flying colors in 2020. Today the stock is trading at $330ish and it could fall to $300 or even $275. However, I believe that it will end the year with flying colors.
2. GE, Inc (GE) – A CEO can make or break the company. Example: Brian Niccol turned around Chipotle in 2018/2019. GE has a lot more work to do compared to Chipotle. But they did the first step right. They hired the best guy for the job. Larry Culp had a tough job last year but he did an amazing job in bring the company from “About to fall” to “Might not fall”. For a company like GE, who had no outside CEO in 80+ years, you can imagine the bureaucracy, investor pressure and heavy competition. In addition, Boeing being their one of the big customers is also in trouble. So, it is hard for Mr. Culp. But I also believe that he is the one who will turn around the company in 2020. We see the changes in 2019 he brought to try to turn around GE – Focus on accounting, reduction of debt and rebuilding the management team, It is also at a very good place to under promise and over deliver.
The stock is trading around $11.50. But this would be a stock that will probably grow aggressively this year with every earnings.
3. Expedia(EXPE) – Expedia is a company which also suffered from a weak leadership. When Dara Khosrowshahi left Expedia 2016, he left a hard job for the predecessor. Under Dara’s leadership the gross value of its hotel and other travel bookings more than quadrupled and its pre-tax earnings more than doubled. He was the one of the highest paid CEO in 2016. Dara brought in a lot of constructive changes in the way travel business was done. But when he left, Mark Okerstrom was named the CEO by the board. In this creative world and a highly competitive industry(travel), creativity was the most important part of the CEO selection. Mark had an operations/deals making background and a competitive industry like travel needs creative. He work focused too much on not-needed rebranding & re-organization. In the travel world where AirBNB was taking over the room-rental market, Dara’s legacy of buying VRBO could have been a gold mine and an exponential growth in the company. But the branding, marketing and execution was done so poorly that it lost an opportunity of lifetime. That’s the failure of the leadership and creativity.
Now, Mark Okerstrom is no longer there. The board has a huge task of hiring a creative and aggressive CEO. Additionally, products like VRBO are setup for failure and losses. I think the board will recognize the mistake they did and probably hire a CEO from outside and give a new look to the organization.
The stock is trading at $109ish. With the changes and the geopolitical issues, it could slip to $95ish but once the new CEO is appointed the company would be heading in the positive direction for 2020. Fundamentally, Expedia’s business is very strong it just needs a good direction and a creative outlook.
4.Cronos Group, INC(CRON) – If you are a Cannabis investor, sorry to hear that you had a terrible 2019. This is a very tough market in my view. Fighting with Federal laws, ethical traders and in general the overflow of the market with cannabis products had made 2019 a very tough year. Cronos is a different organization in my view. While its peers Aurora, HEXO and Canopy has been ramping their production, Cronos had chosen to focus on research and development(cannabinoids). Their approach of hiring contractor’s vs trying to farm themselves (like Aurora, HEXO and Canopy) is going to pay off in a long run. Reason being – distribution has a lot more profit margins and lesser overhead then the production itself. One of the actions which Cronos is also focused on transitioning from Canada to US.
In 2020, Cronos must do the work of becoming a US based company. I believe, they understand the US consumer market and their presence as a US based company is key to their success.
The stock is currently traded $6.50ish and it might fall to $5.50-$6.00 with the noise and the Cannabis market in general. But I believe 2020 is going to be the year of Cronos. The first goal of the organization would be to become profitable from an EPS of -0.03. That will start changing things for Cronos.
5. Beyond Meat (BYND) – Beyond Meat had a great roller coaster ride in 2019. The stock moved from $45 to $230, then moved back to $70 in a very short period. Although, all the hype of meatless food has slowed down and the completion has risen, that does not take away the fact that the public interest in meatless food still exists. With dietary awareness in people, a lot of people are now moving to the meatless food. Mark Cuban, is investing in new company creating plant-based, meat tasting food. I personally hate the idea and I think just like Juul’s issues were not addressed until it became popular and someone revealed its issues, meatless food would be in the market and will grow in 2020. Just because there is a need in the market.
Beyond Meat had tough 2 quarters. But the company has signed various contracts with Subway, McDonalds, etc. I think in 2020, the company will focus on developing new and interesting products and lowering the cost of the production. This will give the company a good edge over its competitors. Their biggest competitor is Impossible Foods. But the market is big enough that it will help both the companies to grow.
While I was writing this blog Beyond Meat was trading $74ish. I believe 2020 will be a substantially growth for Beyond Meat.
These are just my views. None of this is an investment advice. Please use your own analysis and your own thought process before investing.