Who’s the Winner for First Half of 2020? & What’s Next for Second Half of 2020?
A lot has happened since start of 2020, with the biggest catalyst of all, “The Great Lockdown”. A coronavirus pandemic that essentially shut down the economy worldwide in March, sending the world’s longest bull market ended, oil prices into negative territory and U.S. and some other countries economy plunged into a recession.
There is no question that the pandemic has completely changed our social norms and instilled an exceptionally high level of volatility into the stock market. Then again, we’ve also witnessed one of the best quarters for the stock market in over two decades. Nasdaq Composite has galloped to new all-time highs, while the S&P 500 has regained a significant portion of what it lost.
For S&P 500, among the top performers included PayPal (NASDAQ: PYPL), eBay (NASDAQ: EBAY), Abiomed (NASDAQ: ABMD), Lennar (NYSE: LEN) and Chipotle Mexican Grill (NYSE: CMG)
Among Dow, the winners are including Apple (NASDAQ: AAPL), Home Depot (NYSE: HD) and Microsoft (NASDAQ: MSFT).
While for Nasdaq, the top leader of course led by Tesla (NASDAQ: TSLA), with others included such as MercadoLibre (NASDAQ: MELI), DocuSign (NASDAQ: DOCU), and Zoom Video Communications (NASDAQ: ZM).
While in Asia market, only one major index in Asia Pacific ended the first half of 2020 in positive territory. China’s CSI 300, which tracks the largest stocks listed on the mainland, has gained 1.64% in the past six months. Southeast Asia’s best-performing market was Malaysia’s FTSE Bursa Malaysia KLCI Index — but even that was more than 5% lower for the year so far.
Though the stock market is liable to remain volatile for the remainder of the year, and possibly beyond, at the same time, it also opened the door for opportunistic investors to dive into some of the market’s best stocks at a discount. Bear in mind, most of the stocks are far from immune to the COVID-19 pandemic but were chosen in regards of its nature of business.
Palo Alto Networks Inc (NYSE: PANW)
With more people than ever working from home, the need to protect enterprise clouds from cyber threats is heightened. Palo Alto is amid a business transformation that’ll see it de-emphasize traditional firewall products in favour of subscription-based cloud protection solutions and support. Since revenue recognition for physical firewall products can be lumpy, moving to a subscription-heavy model will lead to improved margins and considerably better cash flow visibility.
Part of this transformation is being accomplished through organic investments in innovation, with the company aggressively making bolt-on acquisitions to broaden its cloud protection portfolio and appeal to a larger swath of enterprises. Though these investments could weigh on Palo Alto’s bottom line in the near term, the reward for increased cloud-protection market share will be sustainable, high-margin, double-digit growth.
Square Inc (NYSE:SQ)
Square is a software and hardware payment solutions company founded in 2009. To be perfectly clear, Square is far from immune to the COVID-19 pandemic. This is a company whose seller ecosystem has been built around small and medium-size businesses since its founding — and it’s these small and medium-size businesses that have been hurt most by COVID-19. But you shouldn’t focus so narrowly on the performance of a few quarters. What we’ve seen from Square’s seller ecosystem over multiple years is that bigger sellers, in terms of annualized gross payment volume, are using the platform. If Square is successful in continuing to lure larger merchants, its fee potential in the consumption-driven U.S. market goes way up.
Amazon.com, Inc. (NASDAQ: AMZN)
E-commerce giant Amazon has been a significant winner in the COVID-19 pandemic given its virtually insurmountable U.S. e-commerce market share. Amazon controls approximately 40% of all online sales in the United States. While retail margins aren’t the best, Amazon leans on its marketplace as a way to keep consumers loyal to its ecosystem of products and services.
The long term for Amazon still belongs to its infrastructure-as-a-cloud service, Amazon Web Services (AWS). It has been growing considerably faster than Amazon’s traditional retail segment, which is great news since cloud margins are much higher than retail margins. In other words, as AWS grows into a larger percentage of total sales, Amazon’s operating income and cash flow will both increase dramatically. For context, AWS was responsible for 13.5% of total sales in the first quarter but accounted for 77% of the company’s $3.99 billion in Q1 operating income.
Boeing (NYSE: BA)
Obviously, the biggest concern is airliner demand. And that depends entirely on travelers’ appetites and countries lockdown restriction. Should Wall Street see a substantive improvement ahead, BA should continue its present recovery rally.
Meanwhile for China, just as quickly as it burst onto the coronavirus scene in late January, it has faded in late March, with new daily cases approaching near-zero. In other words, while the rest of the world is fighting an escalating Covid-19 problem, China has all but halted the spread of the virus in its own country. All of this is to say that the big surge in Chinese stocks that was supposed to happen in early 2020, is now set to happen in summer 2020. With that in mind, the best Chinese stocks to look at for this big second-half 2020 rebound are Alibaba (NYSE:BABA), JD.com (NASDAQ:JD), Luckin Coffee (NASDAQ:LK), Bilibili (NASDAQ:BILI), and Vipshop (NYSE:VIPS).
Finally, let we note that the stocks below are not necessarily buy nor sell ideas. Instead, for the purposes of this discussion, please treat these names as potential forward indicators. From there, you can make your decisions.