With vaccines being administered and many states opening up, we pick out some U.S. stocks that have caught our eye
Stock pickers are always looking for the next gem – or maybe they just need an all-star to keep producing dividends.
WP has cast its eye over some U.S. stocks and with the economy poised to emerge, all being well, from COVID-19, we’ve picked out seven to watch. Lucky number seven, right? Well, hopefully.
Information was collected with reference to the good work of the people at The Motley Fool, Investopedia and Barrons. Stock prices are correct as of June 3, 2021.
In no particular order, here they are:
1, Bristol Myers Squibb
Price: US$64.75
Pharma giant Bristol Myers Squibb develops life-saving drugs in areas such as cancer and immunology. Warren Buffet is a fan; Berkshire Hathaway poured almost $1.8 million into the 134-year-old company in late 2020.
Up about 18% since June 2020, the company reduced its long-term debt by $3.8 billion in the first quarter. Some investors, however, remain concerned about its $47.3 billion total debt, with much of it raised to fund acquisitions. The debt dwarfs its balance sheet of $13 billion cash.
Writing this month, a report by The Motley Fool suggested such fears seem exaggerated considering that the company has generated cash flow from operations of close to $13.9 billion in the past 12 months, despite the COVID-related headwinds. It added that management also increased the quarterly dividend by 8.9%, which has amounted to an annual dividend payout of $1.96 per share for fiscal 2021 and translates into a dividend yield of 3%.
With its solid product portfolio, robust cash flows, and ability to return shareholder value, Bristol Myers Squibb could prove a promising addition to your portfolio.
2, Gap
Price: US$31.76
A pick that may or may not chime with your view on the economic reopening and future of mall visits and online shopping. Gap is, however, a significant global retailer of apparel, accessories, and personal care products, with brands including Old Navy, Gap, Banana Republic, and Athleta.
Despite the pandemic, Gap has been on a tear in 2021 and is poised to go higher given it has more scope for brand awareness and the potential to seize the back-to-school opportunity.
Its stock price is up a whopping 158% in the past 12 months, and has streamlined its offering after selling its Janie and Jack brand to Go Global Retail, an investment platform in the fashion and consumer brand sector. It reported earnings of $0.48 per share in the first quarter of 2021 on revenues of $3.99 billion.
Gap faces supply chain issues from the pandemic but has coped remarkably well on the whole, with future upside.
3, Microsoft
Price: US$245.15
A behemoth that needs little introduction, Microsoft has made itself almost irreplaceable in the modern world. Its cloud computing business is soaring and means the company surpassed top- and bottom-line consensus estimates.
While Microsoft Azure's 19% global cloud services market share trails Amazon Web Services' share of 32%, the former is growing revenue at a faster pace. And the increasing adoption of enterprise cloud-based infrastructure and applications is expected to be a major tailwind for Azure in the coming months.
Its Windows operating system accounts for 75% share in the global desktop operating system market, while exposure to gaming has increased dramatically from 8% in fiscal 2020 (ending June 30, 2020) to over 15% in the first nine months of fiscal 2021.
Given its strength, Microsoft is an attractive investment even at elevated levels.
4, Amazon
Price: $3,190.72
Another giant that has been growing its top and bottom lines at breakneck speed. In Q1 of 2021, revenue and net income soared year over year by 44% and 220% respectively.
The company may also account for almost half of the total U.S. retail e-commerce gross merchandise volume (GMV) in 2021. To the surprise of no one, the pandemic has proved a tailwind for the company, with a huge boost in e-commerce demand in the U.S., including making inroads in demographics and geographies that were previously resistant to e-commerce.
On top of that, its Prime membership now stands at more than 200 million and has proved a great source of recurring revenue at minimal incremental cost. Another real cash generator for Amazon has been its market-leading cloud infrastructure segment, Amazon Web Services (AWS). This business has raked in net sales worth $48.6 billion in the past 12 months.
Looking ahead, both the e-commerce and AWS businesses stand to benefit from the ongoing digital transformation in the world. The company is also investing in an Amazon-controlled logistics and delivery network, a move expected to further improve its margins. Its expensive but the future looks bright.
5, Zoom
Price: $320.22
Ah Zoom. First we loved you, now we’re kind of done with you. But whatever your feelings after another lockdown, Zoom Video Communications seems here to stay as businesses maintain a hybrid model of office and work from home going forward.
Zoom provides a video-first communication platform and web conferencing services, while its cloud platform offers video, voice, content sharing, and chat for mobile devices, desktops, telephones, and room systems.
The platform is synonymous with the pandemic but is set to remain a big part of our working life, albeit not at the levels it enjoyed at the peak of the pandemic when it was trading at about $536. It’s 40% lower than that now but that still represents 57% growth over the past 12 months.
6, AGNC Investment Corp.
Prize: US$18.60
AGNC Investment is an internally-managed real estate investment trust (REIT) that primarily invests in residential mortgage-backed securities (RMBS) whose principal and interest payments are guaranteed by the U.S. government.
In 2020, the company completed $1.4 billion of accretive capital transactions, having a total portfolio of $96.6 billion in agency mortgage-backed securities (MBS) and to-be-announced (TBA) securities.
The pandemic could put AGNC in a tough position, with hundreds of thousands of delinquent mortgages relating to the global pandemic. According to Million Acres website, this puts mREITs in a particularly tough position; if the government decides to extend the mortgage moratoriums, companies servicing mREITs like AGNC might be unable to foreclose. They would then be financially responsible for maintaining the payments to investors despite a large portion of loans not paying.
However, if all goes to plan, and interest rates rise slowly and the economy continues to recover, in three years AGNC could be in an even better position than it is now.
7, Qurate Retail Inc.
Price: US$13.51
In October 2020, Qurate Retail’s price stood at $6.16. Eight years and a 120% increase later, the e-commerce service company looks in rude health. Its strategy is designed to make shopping more engaging and it partners with television networks, e-commerce sites, streaming services, social pages, mobile apps, print catalogs, and in-store destinations to provide video and digital commerce services.
It reaches 218 million homes and operates through seven retail brands, including QVC, HSN, Zulily, and Frontgate. If anything sounds like the “new normal”, this could be it.
