Top 2020 Stocks
This year has been anything but predictable. In 2020, it’s no understatement to say we’ve experienced a world-altering event.
With a deadly pandemic holding virtually every country in its grip, it’s impressive that several industries have been able to not only weather the storm, but thrive in spite of it. It’s also impressive that many of the top 2020 stocks are the same top tech stocks we’ve been bullish on for years.
Before I go into why two specific industries have been able to thrive despite the current downturn, I should explain why tech stocks in particular are generally exempt from massive market shake-ups.
The fact is, the tech industry often operates on a much larger time frame than most other industries.
For instance, an oil and gas company needs to produce “X” amount of oil per quarter, with “X” being the value that analysts and investors determine to be at or exceeding their expectations. That’s a dramatic oversimplification, but it’s the gist of the business for many industries: deliver your product on time and for a profit and you’ll keep your shareholders happy.
In tech, that’s not really how it works. Consider that many of our favorite tech companies not only experienced many years without profit, they actually ended up running billions of dollars of debt in their early stages.
That’s because the top tech stocks, more than almost any other industry, run on promise. While that applies to all sectors to some extent, with tech, that promise is often loftier and more oriented toward a long-term vision.
The top tech companies aren’t content to just deliver “X” number of gadgets; they want to, in some cases, fundamentally alter the way we live.
Take artificial intelligence (AI) stocks, for example. AI companies aren’t interested in just selling some gizmos to consumers and businesses. No, the majority of AI companies are keen to deliver technology that would radically change the way we live, from self-driving cars, to the Internet of Things (IoT), to machine learning.
All this would, when it comes to pass, create trillions of dollars in revenue for decades to come.
So, yeah, it’s a little different when you’re offering that kind of promise versus industries that are pretty much exclusively focused on impressing investors in the next quarterly report.
Because the top tech stocks are playing the long game, it means they are uniquely suited to survive a rough patch brought on by unforeseen circumstances, with COVID-19 being the mother of all unforeseen circumstances.
With all that in mind, we’re ready to dive into what I believe are two of the best tech industries to invest in right now and, by virtue of that designation, some of the top 2020 stocks.
Electric Vehicle Stocks
Chart courtesy of StockCharts.com
While 2020 will always be remembered for COVID-19 and the massive health and economic crises that followed in its wake, if we were only considering the stock market, it could just as easily be dubbed the year of the electric vehicle stock.
Not one, but two, companies operating in this space have seen 275% growth in their share prices year-to-date: Nikola Corporation (NASDAQ:NKLA) and Tesla Inc (NASDAQ:TSLA).
The rise of these two companies isn’t all that surprising, frankly. In the case of Tesla stock, I’ve been bullish on the company since I began working here about four years ago. Since that time, TSLA stock has risen by well over 300%.
Nikola stock, on the other hand, is a lesser-known but equally impressive tech stock. NKLA stock has seen astounding gains during the coronavirus pandemic.
Shares of the Phoenix-based hybrid truck company skyrocketed off some good news: it’s set to start delivering $10.0 billion in truck sales next year. (Source: “Despite Market Plunge, These 10 Billionaires Gained $23 Billion This Week,” Forbes, June 13, 2020.)
Trevor Milton, the founder and chairman of Nikola Corporation, was able to ride that high and see his shares massively jump in value.
This proves my long-held thesis that there is a huge market appetite for companies that could replicate the success seen by emergent-industry pioneers like Tesla.
Nikola stock hit the market in June with a $12.0-billion market cap, about four times its last private valuation. Again, these numbers speak to an investor optimism that clearly is unconcerned about the long-term impact of COVID-19.
And, much like other young tech companies, despite boasting impressive sales numbers, Nikola doesn’t project to make a lick of profit in 2020 (an example of what I mentioned about tech companies earlier). Still, that didn’t stop the market furor from creating a second billionaire, as CEO Mark Russell also saw his personal wealth greatly expand in June, due to Nikola shares soaring.
To be fair, NKLA stock has seen its value start to plummet, and that’s not all that surprising. The stock price soared well beyond expectations on the back of a tidal wave of hype that was bound to weaken eventually.
With that in mind, Nikola stock is very volatile, but also filled with promise for what the company could accomplish in the coming years.
Tesla stock, on the other hand, is a much safer bet. The company has not only begun to deliver on much of its promise, but is looking to expand its reach in the coming years.
Between new car models and its long-awaited solar-powered battery, TSLA stock could realistically see gains for decades to come as it solidifies itself as the premier electric vehicle stock (and renewable energy stock).
As I wrote earlier, Tesla stock is less likely to be hampered by the COVID-19 outbreak because the real promise of this company lies in the future, making the present calamities not much more than minor inconveniences for long-term investors.
Chart courtesy of StockCharts.com
The second industry to explode in value in 2020 was the 5G industry.
While its gains can’t match those of electric vehicle stocks, we’ve still seen healthy growth from two of our top 5G stocks: Skyworks Solutions Inc (NASDAQ:SWKS) and Qualcomm Inc (NASDAQ:QCOM).
What’s exciting about 5G stocks—and what, in turn, makes them so enticing for investors even during the coronavirus panic—is that the world of telecommunications is all but certain to shift in favor of 5G in the near future.
One study by the GSMA, an organization that represents mobile operators, claims that 79 operators across 39 markets announced plans to launch commercial 5G services as of January 2020. (Source: “5G Is Now Live in 24 markets, GSMA Predicts It’ll Be 20% of Global Connections by 2025 — and Eyes a Big Tech Break-Up,” TechCrunch, March 5, 2020.)
As you’d expect, the technology will land in urban areas first and gradually expand in the coming years.
The GSMA’s study projects that 4G will remain dominant likely until 2023, when we’ll start to see more people switch over to 5G. One hurdle, however, is that the price differential may slow down the transition.
“The number of live 5G markets is increasing by the day and consumers’ awareness of the technology is also growing as hype makes way for reality. However, there is wide variation across the globe in terms of intentions to upgrade to 5G and the willingness to pay more for it,” says the GSMA report. (Source: Ibid.)
But when that shift does eventually take place, we can anticipate 5G stocks to soar in value. What’s more, this technology could be greatly helpful in ushering in advancements in AI, which in turn would bring more growth for the top 5G stocks.
With that timeline pretty firm, it’s no wonder that investors were quick to rally around 5G stocks during the coronavirus pandemic, with QCOM stock and SWKS stock being two prime targets for their investment.
Most investors are looking for the one thing that’s currently in low supply on the stock market: certainty.
People want certainty and the security that follows it, making it easier to assess investment opportunities. While you can never be sure about the fate of a particular security, what you can be certain about (in normal times) is that there isn’t an executioner’s sword hanging over the head of the market, ready to slash downward in swift action.
Right now, the coronavirus is that sword. But, as I’ve explained, it doesn’t pose an equal threat to all industries.
Tech stocks in particular are top 2020 stocks precisely because they operate on timelines that are far removed from COVID-19. Whether the virus is gone tomorrow or lingers for another five months (here’s hoping it doesn’t!) is, ultimately, irrelevant to companies that are staking their value to world-changing technologies that are all but certainly going to hit in the next five, 10, or 15 years or so.
As such, for investors looking to find strong, safe stocks, the top 2020 stocks are rather easy to find among prized tech industries.