Analysts and investors were rightfully worried about the health of the economy as the novel coronavirus pandemic hit the U.S. in early spring. Yet as we get ready to finish the year, the Street has a different story to tell. In recent days, many stocks and indices have hit 52-week or even all-time highs. And the bull run could possibly continue in December, too.
Recent research led by John Campbell of Harvard University highlights how:
“Equity investing is an important task for households accumulating financial assets. Because stocks have historically offered a risk premium, households with no initial exposure to the asset class can benefit from holding at least some stocks. The optimal equity allocation depends on market conditions, the equity premium, and many details of the household’s financial situation, including the household’s risk aversion and other risk exposures.”
Here are 7 hot stocks that are only getting hotter:
- Direxion Work From Home ETF (NYSEARCA:WFH)
- iShares US Home Construction ETF (NYSEARCA:ITB)
- Qualcomm (NASDAQ:QCOM)
- Tetra Tech (NASDAQ:TTEK)
- Turtle Beach (NASDAQ:HEAR)
- Verizon Communications (NASDAQ:VZ)
- Wedbush ETFMG Video Game Tech ETF (NYSEARCA:GAMR)
Like Campbell and his research team, we also believe that retail investors benefit from holding onto robust shares for the long-run. The names ahead make a lot of sense in the near term and beyond.
Hot Stocks Only Getting Hotter: Direxion Work From Home ETF (WFH)
52-week range: $49.20 – $62.21
Year-to-date (YTD) change: Up 20.27% (since inception in June 2020)
Dividend yield: 0.32%
Expense ratio: 0.45%
Our first choice is an exchange-traded fund (ETF) that just started trading in June 2020 as a pure “home sweet home” play in the days of the pandemic. The Direxion Work From Home ETF provides exposure to businesses across four major segments of the technology sector, including:
- Cloud Technologies,
- Cybersecurity,
- Online Project and Document Management and
- Remote Communications.
These firms are likely to benefit from the continued and accelerating adoption of remote work technologies for millions of workers in the U.S. and hundreds of millions, if not billions, worldwide. WFH, which has 40 holdings, tracks the Solactive Remote Work Index.
The top ten names in this fund make up around 27% of net assets. Zoom Video Communications (NASDAQ:ZM), America Movil (NYSE:AMX), Elastic (NYSE:ESTC), Oracle (NYSE:ORCL) and Xerox (NYSE:XRX) are the leading firms for WFH.
If you believe the structural shift toward spending more time in the house and working from home are here to stay, then you may want to consider researching the fund further.
iShares U.S. Home Construction ETF (ITB)
52-week range: $22.39 – $60.87
YTD change: Up 25.91%
Dividend yield: 0.46%
Expense ratio: 0.42%
Despite the ongoing pandemic, the housing sector has remained remarkably healthy. Our next choice is another ETF with a focus on residential home manufacturers. The iShares US Home Construction ETF provides buyers exposure to a range of domestic homebuilding stocks. The fund started trading in May 2006.
ITB, which has 46 holdings, tracks the Dow Jones US Select Home Construction index. The most significant sectors by weight are Homebuilding (65.02%), Building Products (14.21%), Home Improvement Retail (10.20%) and Specialty Chemicals (4.54%).
The top ten names comprise over 60% of net assets of 2.1 billion. DR Horton (NYSE:DHI), Lennar (NYSE:LEN), NVR (NYSE:NVR) and Pultegroup (NYSE:PHM) lead the businesses in this fund.
Since the start of the year, the fund has increased by over 25% and hit a record-high in mid-October. Trailing P/E and P/B stand at 16.72 and 2.48, respectively. The fund would offer better value around $52.50.
Qualcomm (QCOM)
52-Week range: $ 58.00 – $153.33
YTD change: Up 65.51%
Dividend yield: 1.78%
San Diego, California-based chip giant Qualcomm is our next stock. And for many InvestorPlace readers, it needs little introduction. QCOM stock’s digital wireless technology is found in a wide range of mobile devices. As the “5G revolution” got underway in recent months, those shares have become hotter than ever.
In November, the company received license from the U.S. government to sell some of its 4G chips to China-based Huawei. This exemption to current trade restrictions has provided further support to the stock price.
Qualcomm released FY2020 Q4 results in early November. Non-GAAP sales of $6.5 billion translated to YoY growth of 35%. Plus record-setting bottom-line results, with non-GAAP EPS coming in at $1.45, were up 86% YoY.
On an annual basis, fiscal 2020 GAAP revenue was $23.5 billion, a decline of 3% compared to fiscal 2019. Net income for fiscal 2020 was GAAP $5.2 billion, up 19% from the previous year. Fiscal 2020 EPS was GAAP $4.52, up 26% compared to FY19. CEO Steve Mollenkopf said:
“We concluded the year with exceptional fourth quarter results and are well positioned for growth in 2021 and beyond. As the pace of disruption in wireless technology accelerates, we will continue to drive growth and scale across our RF front-end, Automotive and IoT adjacencies.”
Forward P/E and P/S ratios are 21.19 and 7.13, respectively. Like many other peers, QCOM is a momentum stock. Therefore short-term volatility is high. But for buy-and-hold investors, this is a dependable name. As 5G tailwinds are likely to stay in the coming quarters, we’d look to buy the dips.
Tetra Tech (TTEK)
52-Week range: $63.61 – $127.19
YTD change: Up 42.53%
Dividend yield: 0.56%
Based in Pasadena, CA, Tetra Tech is a provider of consulting, engineering and technical services, mostly to governments and commercial clients. Its focus is on infrastructure, natural resource management, environment, energy and international development.
Tetra Tech announced robust FY 2020 Q4 results in early November. Net revenue was $590 million, down 8% YoY. Earnings per share was 82 cents on a GAAP basis; meanwhile adjusted EPS came at 91 cents, a 3% YoY increase from the previous year.
On an annual basis, the company announced record EPS of $3.16 for FY2020, representing an 11% increase YoY. Adjusted EPS was $3.26. Fiscal year cash flow of $262 million was also a record, an increase of 26% YoY.
CEO Dan Batrack commented:
“Tetra Tech had a solid fourth quarter to finish fiscal year 2020, generating a 12.6% EBITDA margin, up 80 basis points from last quarter and up 130 basis points from last year’s fourth quarter. We continue to see demand for our differentiated high-end consulting services augmented by technology and advanced data analytics, which drove a sequential increase in net revenue across all four of our client sectors.”
The company will likely enjoy more growth opportunities, driven by its impressive FY 2020 results and the partnerships that the company won as FY 2021 started.
Forward P/E and P/S ratios are 38.69 and 2.25, respectively. Short-term profit-taking could pressure shares in the coming weeks, presenting a better entry point.
Turtle Beach (HEAR)
52-Week range: $4.05 – $22.94
YTD change: Up 118.74%
Dividend yield: 2.63%
White Plains, New York-based Turtle Beach develops and sells gaming audio equipment (such as headsets), plus accessories that can be used across multiple platforms, including video game and entertainment consoles, personal computers and mobile devices. InvestorPlace readers are likely familiar with the Turtle Beach and HyperSound brands.
The group released impressive Q3 results in early November. Top line numbers showed revenues of $112.49 million, up 141% YoY. Net income increased significantly to $17.8 million, or $1.04 per diluted share. That’s a big improvement from last year’s net loss of $3.1 million, translating into a loss of 22 cents per diluted share. Adjusted EBITDA increased to $27.6 million, compared to $0.3 million a year ago.
CEO Juergen Stark said:
“What is most encouraging is that we believe the strong underlying demand continues to be driven by greater overall engagement of existing gamers as well as new and lapsed gamers joining the market as new gaming headset users. In addition, non-gamers continue to buy headsets for at-home work, school and socializing. All of this sets us up nicely for the holiday season and for 2021.”
HEAR stock’s forward P/E and P/S ratios are 6.98 and 0.94, respectively. We believe shareholders can expect further growth during the holiday season as consumers continue to shop for entertainment devices that can be used at home and online.
Verizon Communications (VZ)
52-Week range: $48.84 – $62.22
YTD change: Up 0.80%
Dividend yield: 4.17%
Verizon Communications is one of the leading communications providers in the U.S., offering wireless service and telecom for home and business. This company is well-known for its low customer churn and stable dividends.
In late October, the telecom giant released FY2020 Q3 results . Revenue came at $21.7 billion, down 4.3% YoY. Net income was $4.5 billion, a 16.1% decline YoY. Adjusted EPS remained flat at $1.25, same as the previous year. Investors were pleased to see YTD cash flow from operations of $32.5 billion, an increase of $5.7 billion a year ago.
Management revised earnings guidance upward for the fiscal year. CEO Hans Vestberg said, “We are energized by the transformational technology that our 5G Ultra Wideband and 5G nationwide bring. Our purpose-driven culture paired with our network leadership will shape the future, for the better.”
Forward P/E ratio and P/S ratios are 12.16 and 1.96, respectively. Consistent dividend increases year after year and and robust free cash flow will likely appeal to many passive income seekers. It’s a good time to buy VZ stock.
Wedbush ETFMG Video Game Tech ETF (GAMR)
52-Week Range: $35.50 – $75.18
YTD change: Up 67%
Dividend Yield: 0.79%
Expense Ratio: 0.75%
2020 has been another year wheren the video gaming industry showed significant growth. Many investors have realized this isn’t just a hobby for a small niche of consumers. Recent metrics show, “global video game market size was valued at USD 151.06 billion in 2019 and is expected to grow at a Compound Annual Growth Rate (CAGR) of 12.9% from 2020 to 2027.”
Therefore, our final discussion centers around another ETF, namely the Wedbush ETFMG Video Game Tech ETF. It gives access to global video game and e-Sports sponsors developers, game retailers as well as manufacturers of consoles and chip manufacturers. GAMR has $137 million under management.
The fund, which tracks the EEFund Video Game Tech index, started trading in March 2016. It currently has 89 stocks, and the top ten firms comprise 23% of the fund. The countries represented in the fund are the U.S. (34.9%), followed by South Korea (16.8), Japan (15.8%), Hong Kong (9.6%), and Sweden (7.7%).
Corsair Gaming (NASDAQ:CRSR), Unity Software (NYSE:U), Gravity (NASDAQ:GRVY), Bilibili (NASDAQ:BILI), and Glu Mobile (NASDAQ:GLUU) are the top names in the fund. GAMR has recently seen an all-time high. Long-term investors may consider buying the dips.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil Ph.D. has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination.