It’s been a volatile 12 months. However, that goes beyond the stock market and global economy. The political landscape has been volatile too. In the wake of the Capitol Riot on Jan. 6, a number of companies have pulled in their political donations. Are these stocks to buy?
There are a number of very high-quality businesses that opted to halt or pause its donations — that alone doesn’t make them good or bad companies. Obviously, that’s not the point.
We were curious about which companies were a part of the process. In looking through the list, we’ve opted to take a closer look at a handful of names. In these cases, we view these as stocks to buy this year.
Again, these are not stocks we like because of the political climate or their political donations. It’s just an idea that got the ball rolling to look at a long list of names and pick out the winners.
Who knows, maybe you’re specifically looking for stocks that are not getting involved the political sphere. Let’s look at seven of them:
- Amazon (NASDAQ:AMZN)
- Microsoft (NASDAQ:MSFT)
- Boeing (NYSE:BA)
- Visa (NYSE:V)
- Target (NYSE:TGT)
- Nike (NYSE:NKE)
- 3M (NYSE:MMM)
Stocks to Buy: Amazon (AMZN)
Given some of Amazon’s government issues — be it former President Donald Trump’s spat with the company or Amazon’s argument with the Justice Department — it may seem strange to lead off the list with the e-commerce juggernaut.
However, the company has mostly been off the radar and out of the headlines. That’s both politically and in regards to the stock price.
Amazon stock is up just over 100% from its March 2020 low and has climbed 61% over the past 12 months. However, shares are up just 5.8% over the past six months. Essentially, investors rode the stock higher in Q2 2020 on the novel coronavirus wave as they realized online sales were booming.
Since then though, the stock has simply chopped sideways. Personally, I love when a high-quality business consolidates like this after a big run. While it can be frustrating for the impatient, it gives long-term investors an opportunity to accumulate shares during a low-volatility stretch.
Business hasn’t stopped booming at Amazon, but the stock has. That’s an opportunity.
Like other mega-tech names, Microsoft has been quiet too. However, the stock has done a bit better than Amazon, as shares are up 13% in the past six months.
Admittedly, most of those gains have come in the last few weeks. If we knock that six-month stretch back just two weeks (to a new range of mid-July to mid-January), the stock is up just 3%.
The move to new highs was sparked by some pre-earnings optimism. While Microsoft is flat since reporting, bulls likely view that as a mistake.
Perhaps Microsoft (and the rest of these stocks) get washed down in a market-wide decline. But at least investors can buy knowing the business is in good shape.
Microsoft just beat earnings and revenue expectations for the eighth straight quarter. Earnings of $2.03 per share easily topped expectations by 39 cents, while revenue of $43.08 billion grew almost 17% year over year and beat estimates by more than $2.8 billion.
While Microsoft isn’t sneaking by investors with its $1.75 trillion market cap, this was a surprisingly great quarter that will hopefully lead to more upside in the future.
Ironically, Boeing just reported its worst annual result in the company’s history. The company reported its fiscal Q4 results on Jan. 27, disappointing investors with its earnings and revenue. Cash flow was anemic as well.
So why is Boeing on a list of stocks to buy? Because sometimes you have to plug your nose and buy when the news is bad in anticipation that it will get better in the future.
Admittedly, Boeing is not for everyone. However, I think it has what it takes to eventually get out of its rut. Obviously Boeing was a better buy in the $120 to $150 area, but it may not be immune to a pullback of its own.
First, traveling is picking up pace and the airlines are finding their footing. A combination of lockdown fatigue and increasing vaccination rates has led to increases in travel. That trend should remain in place going forward until we get back to normal.
Further, Boeing’s 737 MAX is being deemed safe to fly, including in the U.S. and Europe. Boeing is also a large defense contractor and finally has 2020 in the rearview mirror.
There will certainly be some turbulence, but the future looks brighter for this company.
Visa and Mastercard (NYSE:MA) are essentially a play on the consumer. That makes these two companies very interesting at a time like this. On the one hand, many brick-and-mortar operations were forced to close for lockdown. Further, millions of Americans remain out of work.
That said, the consumer continues to spend. Be it on takeout, online or in store. That’s driving results for Visa. However, overall spending hasn’t recovered to pre-coronavirus levels, which shouldn’t be a surprise to most investors.
The company reported a year of declining growth for 2020. However, revenue slipped just 4.9% (and Visa’s fiscal-year ended in September). Given what the last couple of quarters looked like, a dip in revenue isn’t surprising.
As the world opens back up and consumers get back out in public, credit card companies will be busy. For those interested in the charts, Visa stock does offer a decent buy-the-dip setup at certain times. This is a long-term winner and it should remain that way going forward.
Speaking of the consumer, don’t forget about a company like Target.
During all the lockdowns and panic that we saw during Q1 and Q2 2020, Target was there raking in the cash. With a robust omni-channel operation and its stores being deemed essential, Target was one of the few companies dominating during the pandemic.
The retail world is made up of the haves and the have-nots. In regards to Target, it has certainly cemented itself as the former, rather than the latter. Adding to the bull case, this observation has been true for a while now; it’s not simply the result of the pandemic.
For fiscal 2021, consensus expectations call for almost 20% revenue growth and for 44% earnings growth. Target stock pays a 1.5% dividend yield, which is about 50% more than the 10-year Treasury yield.
Further, the retailer has taken steps to take care of its employees during the pandemic. Obviously billion-dollar entities will always face some form of critique from some onlookers for its size relative to employee compensation. However, the company just announced another wave of bonuses for its employees to go along with a number of enticing benefits.
It’s the fifth time Target has given out bonuses to its frontline workers since the pandemic began. For some investors, this means nothing. For others though, it’s quite relevant.
Like Target, Nike leveraged its online presence to push through the impacts of Covid-19.
Obviously the company was negatively impacted in late Q1 and early Q2 of last year. However, because of its online presence, it was able to see a snap-back recovery in its revenue as consumers turned to its website.
Nike’s direct-to-consumer (DTC) strategy allows it to cut out the middleman and go right to its customers. Further, China recovered faster than most parts of the world. Thankfully for Nike, it has a large presence there, as well.
Despite reporting solid quarterly results in December, the stock is down about 10% from its highs. For some, that’s enough of a dip. For others, they may aim for a larger decline.
Either way, Nike is a great long-term brand and would be a staple in any investor’s portfolio of stocks to buy. Why? For one, analysts expect double-digit earnings and revenue growth in each of the next two years.
Last but not least is 3M Co., which has been interesting lately.
Shares still remain well below the multi-year high. In fact, 3M stock is down 32% from the five-year high and 30% from the three-year high. However, the stock is fresh off new 52-week highs.
Shares hit new highs on Jan. 27 after beating on top- and bottom-line expectations for its fourth-quarter results. Management also resumed guidance, providing a full-year outlook. That adds clarity for investors and they responded by bidding the stock up. While 3M has struggled, a rebound year (or a couple of years) could be on the table now.
It helps that 3M pays a 3.35% dividend yield. More importantly, it has now raised its dividend for 62 consecutive years. That puts 3M in incredibly rare company, as its stream of income is highly dependable.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.