Stocks are getting a beating today after a top Iranian general was killed in a U.S. airstrike at Baghdad’s airport. But that’s just a blip. After all, stocks have done pretty well in recent times and are sure to continue to do so this year as well. And why not? Investors have enough reasons to be optimistic about the stock market this year.
President Trump has announced a possible “phase one” partial deal with China. And if the negotiations go well at the beginning of 2020, business confidence will improve, driving capital expenditure and in turn stocks.
And as consumer outlays remain healthy, led by record low unemployment rate, investors should expect the economy to continue to expand this year. What’s more, the current low-interest environment should make the cost of borrowing manageable, helping companies invest and grow. This in turn should help the economy gain momentum.
Given the positives, investors shouldn’t steer clear of stocks this year. In fact, one should look for potential avenues to invest as the economy gathers momentum. Let’s take a look —
Biggest Contributor to Dow in 2019 – Apple
Apple Inc. (AAPL - Free Report) has contributed the maximum to the Dow’s total return in 2019. The Dow rose 22.3% in 2019, its best annual gain since 2017. Meanwhile, Apple has gained more than 80%. But does this mean Apple has less room to run this year. Certainly not! Apple’s expected earnings growth rate for the current quarter and year are still a solid 7.9% and 9.9%, respectively.
The iPhone maker will continue to benefit from momentum in its non-iPhone businesses, particularly Services and Wearables, strong adoption of Apple Pay and growing Apple Music subscriber base. In the wearable space, Apple Watch continues to dominate the global smartwatch market. After all, Apple Watch’s market share surged to 48% in the third quarter of 2019 from 45% in the second quarter. Notably, the company expects to be a market leader in the wearables segment heading into 2020 after it recently released AirPods Pro, known for its noise-canceling features.
Needless to say, the company has done so well in 2019 that its goal of $51 billion in services revenues is much within the reach. Apple’s service revenues had grown to $46.29 billion, as of the third quarter. Apple currently flaunts a Zacks Rank #2 (Buy).
Marijuana Industry Will Grow in 2020 and so Will Aphria
Let’s admit that the marijuana industry’s success is dependent on regulatory procedures. And marijuana legalization has already started to ramp-up in several U.S. states. What’s more, legalization of marijuana in the state of Illinois in January could bring positive tidings for the marijuana industry. President Trump’s initiative toward full-scale marijuana legalization, in the meantime, might lead to the legalization of marijuana in more states.
These developments certainly bode well for Aphria Inc (APHA - Free Report) that produces and sells medical cannabis. Individually, the company has been one of the few bright spots in the industry. It registered profits in its last two reported quarters. In fact, in the last reported quarter, its sales jumped nearly 850%, which is definitely a rarity among marijuana stocks. And there is still plenty more room for the company to grow this year, as it recently obtained a cultivation license that will more than double its production capacity. Aphria currently possesses a Zacks Rank #1 (Strong Buy). In fact, the company’s expected earnings growth rate for the next quarter is a whopping 106.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Look to Invest in Digital Payment & Video Game Industries
Needless to say, we are all heading toward a cashless society. Physical forms of payments, including cash and personal checks have lost importance, and paved the way for debit and credit cards, digital wallets and mobile commerce platforms.
E-commerce, in particular, has played a major role in increasing the demand for digital-based payments. Especially, in emerging economies, billions of customers have flocked toward digital payment platforms for money management issues. Another reason why customers are moving toward cashless payments is rise in mobile payments. This has revolutionized the way we spend, helping make contactless payment through smartphones.
Thus, it will be prudent to invest in companies that are making the most of this global shift in payment system. One such name is Global Payments Inc. (GPN - Free Report) that provides payment technology and software solutions for card, electronic, check and digital-based payments. The company’s investments for future growth, a number of acquisitions and successful refinancing of credit facilities bode well for the long term.
Global Payments reached a $21.5-billion merger agreement with rival Total System Services last May. The merger is expected to save the company $325 million annually in the next three years. At the same time, its operating cash flow has been increasing over the years, which provides room for investment. Global Payments currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current quarter and year are a superb 19.6% and 18.9%, respectively.
And when it comes to the video gaming industry, new consoles are due to hit the market ahead of the 2020 holiday season from Sony and Microsoft. To top it, esports, mobile gaming, subscription models, streaming services and significant penetration into the Chinese market will act as long-term catalysts for gaming stocks. Banking on such positives, it will be prudent to take a look at the red-hot gaming stock NetEase, Inc. (NTES - Free Report) .
NetEase has been a leader in providing online gaming services, especially in China. The company saw its total revenues and earnings jump 415% and 275%, respectively, over the past five years, thanks to strong growth in its online gaming business. And with China’s gaming market expected to grow more than three times than what it was in 2017, NetEase’s rise isn’t far from over. As a matter of fact, the company’s expected earnings growth rate for the current quarter and year is a promising 13.5% and 145.3%, respectively. Currently, NetEase sports a Zacks Rank #1.
5G Revolution in 2020 to Benefit Qorvo
From hyper-fast Internet downloads to Internet of Things, the 5G Internet revolution is surely coming to America. And 2020 will possibly be the first year that 5G becomes available to consumers. Keeping this trend in mind, Apple’s next iPhone will be 5G-capable and is due to arrive this year.
And what’s good news for Apple investors could also be good news for Qorvo, Inc (QRVO - Free Report) . This is because Qorvo is one of Apple’s major supplier of radio frequency chip used in iPhone. Benchmark analyst Ruben Roy in fact recently said that Qorvo stock is “well positioned ahead of [the] 5G cycle with both cash flow and profit margins set to improve over the next few years.” Qorvo currently boasts a Zacks Rank #2.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
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