The stock market in 2020 has been very stressful, to put it mildly. No one was expecting the year that we would have. We’ve seen precipitous drops followed by mind-boggling gains. And the following four ProShares exchange-traded funds exemplify the year’s strongest themes. Their holdings, too, sport some of the best stocks to buy now for their performance and future outlook.
ProShares Online Retail ETF (NYSEARCA:ONLN) and its Long Online/Short Stores ETF (NYSEARCA:CLIX), both represent the disruption the novel coronavirus has helped accelerate. And both ETFs hold stocks that are among the best stocks to buy for 2020 and beyond. (Note: CLIX has similar holdings but shorts brick-and-mortar retailers.)
The two outliers here are ProShares S&P 500 Ex-Energy ETF (NYSEARCA:SPXE) and its Pet Care ETF (CBOE:PAWZ), two very different funds with unique appeal. Simeon Hyman, ProShare’s Global Investment Strategist, cites SPXE as “appealing to a wide-range of investors — from active traders who have a negative near-term view on a sector, to passive ‘buy-and-hold’ investors who want to tailor their core stock portfolio and avoid a sector they believe may underperform long-term.” Without energy dragging it down, SPXE has gained 7% against the S&P’s 4.65% in 2020.
ProShares’ Pet Care ETF, PAWZ, also packs a strong bite. It’s up 30% this year, and its best-performing holdings will give you a good indication as to why.
Read on to find out more about the best-performing stocks to buy in these four ETFs, which include the following:
- Carrier Global (NYSE:CARR)
- Nvidia (NASDAQ:NVDA)
- West Pharmaceutical (NYSE:WST)
- Trupanion (NASDAQ:TRUP)
- Overstock (NASDAQ:OSTK)
- Fiverr (NYSE:FVRR)
- Wayfair (NYSE:W)
Best Stocks to Buy in ProShares SPXE ETF: Carrier Global (CARR)
Year-to-date performance: 142.92%
If you were to buy ProShares S&P 500 Ex-Energy ETF, you’d get Carrier Global and the S&P 500 with it, but not energy stocks. Considering the year energy has had, it’s not a bad idea to avoid the sector entirely. But when it comes to good years, CARR stock may as well be the poster child – up a staggering 140%-plus.
That’s quite the gain for a stock in an un-sexy industry like HVACR (heating, ventilation, air-conditioning and refrigeration). But Carrier Global has a lot going for it. It was recently spun out of United Technologies in April and is on the verge of a growth renaissance.
A confluence of trends in developing nations — such as middle class growth, data center growth and increased urbanization – is beneficial to HVACR’s top players. This has to do with an excess need for energy combined with a climate-focused need to save energy. The industry’s best will be viewed favorably, which bodes well for Carrier’s high-quality, energy-efficient units.
You might remember that CARR stock, immediately after its spinoff, took the novel coronavirus pandemic head-on. As a result, Carrier’s sales were hit 15% year-over-year in the first half. But things picked up again in June and now CARR stock is firing on all cylinders.
Further, management is increasingly expanding into Asia (another one of those countries with a rapidly rising middle class). And HVAC demand looks to be rock solid.
YTD performance: 118.82%
As the 10th-biggest company in ProShares’ SPXE ETF by market capitalization, Nvidia is a company most will recognize. Despite its triple-digit gain and household name, however, Nvidia stock remains a strong buy for 2020 and beyond. In the past few days, analysts from Needham, Credit Suisse and Raymond James assigned NVDA a “buy” rating, with the highest of their price targets imputing 34.71% upside.
Why all the hoopla? Nvidia has recently all but cemented the semiconductor industry’s biggest deal of all time. The Arm deal could still be blocked, but if it goes through, it’s a strong suit of armor for Nvidia in its fight against Intel (NASDAQ:INTC). While NVDA’s market cap of $321 billion now dwarfs Intel’s $212.7 billion, INTC has roughly seven times the sales of Nvidia.
But present sales are not the reason to buy NVDA stock. Buyers are trading on Nvidia’s ability to ride megatrends such as the next-generation console release, artificial intelligence and an explosion in data centers.
With Arm, Nvidia essentially gains overnight access to millions of smartphones, smart watches and smart thermostats, among other devices. That’s because Arm’s shipped more than 180 million chips worldwide, and NVDA can take advantage of this in myriad ways. For starters, it can leapfrog its competition in data centers, building an impenetrable moat around its business. The same is true of its chips, as integrating Nvidia’s GPUs with Arm’s CPUs could be a game changer for its semiconductors.
West Pharmaceutical Services (WST)
YTD performance: 84.84%
West Pharmaceutical, with its market cap of $16 billion, is middle of the road as far as where it falls in SPXE … but it’s anything but average in today’s Covid-centric world. On Sept. 2, WST stock hit an all-time high, and it did so without being as recognizable as other coronavirus stocks, such as Pfizer (NYSE:PFE) or Sorrento (NYSE:SRNE).
Unless you work in healthcare, you probably have never heard of West Pharma. But as Investors.com notes, WST has a near-monopoly on the syringes and vials coronavirus treatments are housed in. That demand has created tremendous tailwinds for WST stock holders.
Strangely, West Pharma doesn’t provide transparency into the buyers of its containment and delivery vessels, but does note that it doesn’t rely on big contracts with few firms. Instead, we know from its 2019 sales figures, that its biggest 10 customers combined make up less than half of its sales. That insulates WST stock somewhat, and for now, the future looks good for the pharmaceutical company.
West Pharma recently increased its per-share earnings outlook for the full year from a range of $3.52-$3.62 to an adjusted range of $4.15-$4.25. It’s revenue outlook also saw an 11% bump higher, as it continues to be one of the unseen beneficiaries of increased coronavirus treatments.
Best Stocks to Buy in ProShares PETZ ETF: Trupanion (TRUP)
YTD performance: 90.95%
The global pet care industry is booming – with seven out of 10 U.S. households owning pets, according to Hyman. As any pet owner can tell you, the cost of taking care of your furry friend is hefty, with healthcare being particularly costly. Trupanion, the sixth-largest holding in PAWZ, is on the cutting-edge of pet healthcare.
The coronavirus pandemic has accelerated pet ownership, as being home 24/7 has led to more folks being willing to bring a pet into their homes. The Washington Post compares the Covid-induced spike to the “Tickle Me Elmo mania” of the 90s: “What began in mid-March as a sudden surge in demand had, as of mid-July, become a bona fide sales boom. Shelters, nonprofit rescues, private breeders, pet stores — all reported more consumer demand than there were dogs and puppies to fill it.”
With that sharp rise came a sharp increase in Trupanion stock, as the company saw record earnings in the second quarter from the increased insurance signups from new pet owners. As the Motley Fool notes, Trupanion’s business model excels because that insurance revenue is a recurring stream for TRUP stock to tap “well beyond 2020.”
Best Stocks to Buy in ProShares ONLN/CLIX ETF: Overstock (OSTK)
YTD performance: 974.18%
Overstock continues to dazzle. Its near-1000% gain in 2020 is even more impressive when coupled with the cumulative price target analysts have set on OSTK stock — $100. That figure – based on six analysts with 12-month price targets on Overstock – imputes 36.37% upside. Which means even if you missed Overstock’s spectacular run, there’s still reason to get in here.
Here we again see another stock pushed by the tailwinds of the Covid-19 pandemic, with consumers shifting to e-commerce spending during their more-remote lifestyles. But even without the pandemic, Hyman notes that the trend was already in the favor of online retailers. “It is tempting to chalk this up to a temporary impact of the pandemic, but there are signs that this pandemic is accelerating an existing long-term trend and furthering opportunities for e-commerce growth,” says Hyman.
In Overstock’s case, Needham’s Rick Patel notes the firm has also sharpened its focus in several key categories, increased its addressable market through a contract with General Services Administration, and smartly diversified into blockchain with tZERO (it recently had its membership application approved by FINRA). That’s not something many online retailers can boast.
YTD performance: 439.15%
As a writer in the digital media space, Fiverr is a name I’m intimately familiar with. When the service first launched, the hook was that it could connect you with writers, designers, musicians, etc. for just $5. While there’s a lot to be said about undervaluing the work of creatives, it’s difficult to find much of anything for just $5 on Fiverr today. And its service-as-a-product marketplace has absolutely blossomed.
Again, that’s thanks in large part to the pandemic. Work-from-home trends accelerated, and Fiverr reaped the rewards. In Q2, Fiverr’s revenue dwarfed the expectations by coming in $10.6 million higher at $47.13 million. Sequentially, it also outdid itself, with the top line’s YOY growth increasing 82% against 44% in Q1. On the bottom line, FVRR delivered 10 cents per share, far outpacing the expected loss of 6 cents.
And Fiverr deserves all the credit for turning its marketplace into an attractive ecosystem for both sellers and buyers. The company employs a fee structure that charges sellers $1 for sales under $20 and 5% for anything above $20. Buyers pay Fiverr $2 for any service under $40, and 5% for over $40 buys.
These mark two notable tailwinds for FVRR stock: the company benefits from repeated transactions from both buyers and sellers in the near term, and it establishes itself as a go-to destination for creatives and big business alike over the long haul.
YTD performance: 195.12%
Not even Wayfair’s double-digit selloff prior to Labor Day weekend could put a dent in W stock’s near-200% rise this year. And it hasn’t dampened investor enthusiasm either. With W stock now at a more reasonable valuation, it’s poised to continue growing as the Covid-19 pandemic continues to accelerate the online retail trend.
It’s by no stroke of luck that Wayfair’s succeeded in online retail either. The business is a difficult one, and even stalwart retailers who have successfully pivoted to introduce online shopping haven’t fared as well behind the scenes. Consider what Hyman told me previously:
“Even for those legacy brick-and-mortar companies that are having some success in online retail and creating an “omni channel” model, the future may not be so bright. Over the last several years, as Walmart (NYSE:WMT) has successfully grown its online business to the coveted second-place position, its margins have declined. Meanwhile, as Amazon continues to grow, its margins have expanded …”
Rather than simply put its good online, Wayfair is re-creating the physical shopping experience in the virtual world. The company employs augmented reality (AR) to allow shoppers to “see” what their furniture would look like (even how much space it occupies) in their homes. That’s not something you can even do in a brick-and-mortar store.
And it’s exactly why Wayfair has been stealing shoppers away from traditional retailers and online retailers alike … before the pandemic was even here.