Top Stocks to Invest in 2020
Black Monday on March 9, 2020, and Black Thursday on March 12, 2020, pulled stock investors out of the market. The pandemic brought down the stock market together with the oil price collapse. Companies are announcing defaults and filing for bankruptcy; analysts predict a global recession. Is it time to invest in stocks? Interestingly, yes.
Reasons to Invest Now
The bearish market is always an excellent chance for investors to buy assets as the price declines and they can be bought significantly cheaper. There are three main reasons why you should invest in stocks now.
The risk-off sentiment causes the crash of the stock market. Investors fear putting money into risky assets, such as stocks, amid the unstable global economic situation. Nevertheless, we may see that the situation may normalize soon. Many countries such as Spain, Italy, and the US have almost passed the peak.
As soon as the market begins to recover, the stock prices will move up. Many analysts claim the stock market has reached the bottom. Thus, now it’s a great chance to buy shares at lows now.
On the one hand, the filing for bankruptcy protection, monetary easing policy by world central banks, and huge loans are scaring investors signaling the global economic recessions.
On the other hand, such measures are supposed to help economies all around the globe to recover as soon as the pandemic disappears. So, the markets are already supported, which reduces economic risks.
Low Interest Rates
As the world central banks have been cutting interest rates, stocks have an excellent chance to reduce the discount rate on future profits. At the same time, low interest rates allow investors to borrow more and inject the cash into the economy, supporting such markets as stock one.
The bearish market gives an excellent opportunity to buy assets much cheaper.
Best European Market Shares to Buy
Let’s consider stocks that are supposed to bring huge potential profits in 2020 despite warnings of the upcoming global economic recession. We will start with the European stocks that may become a good investment although the markets are crashing now.
Volkswagen has been suffering difficult times within the past months, not only because of the current pandemic but due to pollution misdeeds. According to the earnings report, the company’s deliveries fell by 37.9% in March and by 23% in the first quarter 2020.
Nevertheless, it is planning to resume production soon as, for example, China’s large enterprises have already fully returned to production. Besides, the company’s stocks have plunged to lows in September 2010, which is an excellent chance to buy at significant lows.
Airbus is among the aerospace corporations that are announcing defaults and firing thousands of employees. A lockdown and border closure are affecting the aerospace company’s income. Although, the corporation has been going through difficult times, it will have a chance to recover as soon as the borders are open.
Airbus has an American rival – Boeing. If we compare these companies, Airbus has more chances to recover than its US competitor, as the European company has public trust. Boeing stocks have been plunging not only due to the crisis but two aircraft crashes.
On par with Volkswagen, the Daimler AG has been going through difficult times as manufactures are closed all over the world. In the beginning of April, Fitch Ratings downgraded the company’s rating. At the same time, the company tapped the debt market, looking for over an $11 billion credit line.
Nevertheless, Daimler AG has even higher chances to recover after the situation stabilizes than Volkswagen. As for April, 2020, part of the manufacturing sector has been reopening around the globe, allowing it to continue producing.
Top US Market Stocks 2020
The US took first place in the number of virus cases. The economy has been suffering a huge contraction leading the whole world into an economic recession. What companies will be able to recover during the year?
The economy has been suffering a huge contraction leading the whole world to an economic recession. Nevertheless, there are exciting opportunities in the stock market.
The Walt Disney Co
Walt Disney was dramatically hit by the pandemic. The company had to close theme parks and cruise ships. Cinemas are empty, and even the sports channel ESPN is showing e-sports and repeat recent cornhole cups. Disney has already fired thousands of workers. According to the data, the company is losing around $30 million per day. However, it’s a chance for investors to buy stocks at a bottom.
Why are we sure the company will recover? It’s one of the oldest companies in the world. Moreover, it has already placed a security debt of $7 billion that will allow it to stay afloat in challenging times. Rating agency Moody’s claimed the company had over $12 billion of unused credit that can be used in case the impact of the crisis effect becomes worse. The stocks will recover as soon as market sentiment eases.
The Coca-Cola Co
Coca-Cola has been under pressure recently, considering the shutdown of supermarkets, and borders closure. Nevertheless, the company will definitely recover when the virus disappears. The Coca-Cola corporation, the same as Walt Disney, is a blue-chip company that guarantees an ability to operate under any market circumstances.
In March, the company managed to raise $5 billion in the bond market. However, analysts believe it won’t need all of these reserves to recover. Moreover, the state of the Coca-Cola Corporation is not as bad as Walt Disney. Although consumer spending has declined and many shops are closed, people will always purchase beverages, especially spending time at home during a global shutdown.
Also, the company is famous for its obligated dividend payments. For all of these years of existence, the company never missed dividend payments despite plenty of market recessions.
Previously, we talked about the companies that are suffering due to the current crisis. Now, we can talk about the company that used the situation in its favor. Contrary to the companies that are suffering due to the global shop shutdown, Amazon gained profits by offering online services. People can order food and other essentials.
At the same time, it’s a great advertisement for the company. If a person has never visited Amazon’s website before, they will experience low prices, fast delivery, and a wide range of supplements firsthand. Thus, the company’s value is anticipated to rise even after the crisis.
Best Asia Market Stocks 2020
As a leading economy in Asia, China was the first country to feel the economic effects of crisis. Although, the region suffered the longest shutdown amongst others, some companies managed to adapt to the circumstances.
The region suffered the longest shutdown among others, but the companies have the power to recover soon.
Alibaba Group Holding Ltd.
Similar to the American Amazon, Alibaba is surviving the crisis thorugh online sales. Although, retail sales in China plunged by 20% between January and February, the online sales fell by only 3%. At the same time, the demand for an enterprise’s cloud sphere has increased, as many companies had to move to online sales.
The company’s stance is already quite stable. As soon as the situation subsides, the company’s stock will see a robust increase.
Toyota Motor Corp.
Same as other huge manufacturers, Japanese giant Toyota, has been suffering from the manufactures’ shutdown. Although, the stocks met the bottom in the middle of March and rebounded, investors still have a chance to buy shares at good lows. Moreover, the continuation of the quarantine and production difficulties may pull the stock prices even lower.
Nevertheless, the company won’t pull off the road and will continue operating in the market. Toyota Corporation has gone through plenty of crises. This confirms its ability to survive the crisis of 2020.
China Mobile Ltd.
China Mobile’s stocks are securities that are worth buying now as they are stable despite the economic recession. The mobile industry wasn’t affected by the 2020 events a lot. The worst moment passed in the middle of February. After, the stocks started moving up, signaling the strength of the company.
The only thing that may pull the stocks down is the risk the United States would ban China Telecom in the US due to national security risks.
Top New Stocks with Potential in 2020
Although, the current situation is complicated, the companies plan to tap the public market. What about the companies that announced IPO and that are ready to tap the market?
The current situation postponed the company’s plans to go public. However, it will be an attractive company, as soon as it releases its stocks. First, its chief financial officer came from Amazon, which confirms the company’s willingness to expand.
In 2019, the company acquired the booking site HotelTonight and rental platform Gaest.com. The company’s popularity continues to grow day-to-day. Although currently, it has been going through challenging times as people have stopped traveling, the market recovery will just add value to the company.
This company’s value is estimated at $19 billion. It’s the second-largest supermarket operator in the US. The company includes both the Safeway and Jewel-Osco grocery chains. On March 6th, Albertsons applied for S-1 registration with the SEC. The company plans to offer $100 million on the New York Stock Exchange.
Don’t confuse it with Zoom, which offers videotelephony and online chat services. ZoomInfo is a software that provides market intelligence about business people and companies for sales, marketing, and recruitment. The company was planning to go public in 2020. However, the events at the beginning of the year didn’t allow it to implement the plan.
Stock Investment: Types
It’s not enough to know what companies you should invest in. The first thing you should choose is the type of investment.
Buying Shares with Dividends
There are two primary ways to invest in stock with dividends. They are ETFs and individual stocks. You can buy real shares both via an online broker/traditional stockbroker and a financial adviser/investment manager.
ETFs and individual stocks are primary ways to invest in shares with dividends.
ETF is a pool of stocks with dividends that may include up to hundreds of shares. It helps to diversify your risks. Even if the share dividends of one or several stocks move down, it won’t affect the average.
Investing in individual stocks is more complicated as you have to pick the right company by evaluating plenty of factors.
Long-term investment. Although the investment in real stocks is complicated, many investors choose this way because it provides a long-term income.
Big funds. Although, it seems you don’t need to have a big budget to buy real shares, as one share may cost $10, investors of real stocks will never buy only one stock. Thus, to get to get good results, you buy much more, which involves high risk, and readiness to lose your capital.
Lower risks. If you choose a company wisely, you can forget about any market vulnerability. The investment is considered as a long-term action that is not affected by minor factors.
Small profit. Real stock purchase is associated with lower risks as the investment is not strongly affected by market volatility. As a result, an investor gets a smaller profit.
More analysis. When deciding to buy the company’s shares, you need to analyze many factors such as dividend yields, stock’s payout ratio, etc. At the same time, you should know how risky the asset is when diversifying your portfolio.
Taxes. It’s more likely you won’t have to pay fees for trading CFD. Conversely, you will have to do so for holding stocks.
Stressful. You don’t have enough time to analyze the market and make a decision. There is no opportunity to place a small order. At the same time, you have competitors. Investing in real stock is a nervous action. It puts pressure on you while you try to grab shares at the perfect price.
Here, you will definitely need an advisor. Although, you can invest in stocks via brokers, it’s better to have an advisor, especially if you are a newbie. An advisor will represent your interests, help with the procedures, and advise you on the better stock to purchase.
CFD means a contract for difference. CFD is a common term for different financial markets. When trading CFD, you don’t buy or sell a material thing such as a barrel of oil, bullion, or a share in the company, you just speculate on rising and falling prices.
CFD is the easiest way to invest in the stock market.
There are advantages and disadvantages to this type of investment. Usually, traders prefer short- and middle-term trades that bring wealth maximum within a month.
Small budget. The first and the most significant advantage for any trader is the small budget you need to start operating with stock CFD. Additionally, CFDs are traded on margin. So, a broker can offer you leverage that will increase the possibility of raising your funds.
No ownership. Yes, you won’t become a shareholder of Apple or Amazon.
No stress. When trading CFD, you have time to analyze the market, apply various technical indicators, check the fundamental factors, and only after that, you trade. Moreover, you can set as many trades as you wish (considering your deposit). And you spend less time in front of the monitor just placing stop loss and take profit orders.
Higher risks. When trading CFD, most of the traders choose small timeframes, that are famous for their huge volatility. Stock CFD trading is similar to trading in forex. Thus, you trade on frequent market movements catching a chance to earn more. However, the market is vulnerable and influenced by unpredictable events.
Win-win strategy. It doesn’t matter whether the price goes up or down; you can make potential profits both ways. It is opposite to the situation when you hold real shares of the company, and all you can do is hope the price will rise.
The third option to invest in stocks is indexes. An index represents several stocks trading as one unit and serving a specific market or a part of it. Famous examples are:
- S&P500, which represents stocks from the 500 largest US companies;
- Nasdaq Composite Index, which consists of shares from more than 3,300 companies that are listed on the Nasdaq Stock Exchange;
- STOXX 600 that includes stocks of 600 large, medium and small capitalization companies within 17 European countries.
Index trading is similar to CFD trading when you speculate on the price difference.
Let’s take a look at the pros and cons.
Diversification. It’s a great chance to diversify your portfolio as any index consists of plenty of stocks. As a result, a decline in one stock price will be balanced by the rise of another one.
One industry. Usually, indexes are composed of one-sector stocks. This means that if there are problems in the industry, the whole index will move down together with the included stocks.
Stability. Indexes reflect the sentiment of the entire industry. Fewer factors affect their direction. Thus, they are less risky and more stable.
Not real shares. As we stated above, indexes are traded as CFD. So, you catch the market sentiment and trade in the direction of the market but don’t purchase real shares.
No crossroads. Trading indexes, you don’t have to pick up stocks by analyzing plenty of factors.
Too many indexes. On the one hand, it’s an advantage as you can hedge your risks. On the other hand, some stocks have a more significant part in the index than others. That means that if it moves significantly in any direction, the whole index will be affected. As a result, you have to know what stocks are included in the index.
How to Invest in Shares Effectively
You may know the stocks that will skyrocket in 2020. However, if you don’t know how to invest effectively, you won’t succeed ever. Here are the most useful tips for investing in the stock market.
Analysis, risk management and practice are your keys to successful investment.
Fundamental and Technical Analysis
Before you decide to invest in any asset, you should analyze the current market situation. There are two main types of analysis: fundamental and technical.
Fundamental analysis evaluates the intrinsic value of an asset according to the macro- and microeconomic factors. It helps to understand whether the stock is undervalued or overvalued. Speaking of fundamental analysis, we mean management, business model, competitive advantage, industry, balance sheet, and income state.
To predict the stock’s direction, you should evaluate the situation in the industry the company relates to using sector analysis. After that, you should check whether the company has been suffering any difficulties such as mergers and acquisitions, dismissals or illnesses of top management, etc. All of these signal that the company’s stocks will lose their value shortly.
Technical analysis is the type of analysis that considers the previous market movements and builds forecasts on them. To apply technical analysis, you need to learn some technical indicators and chart patterns that determine the price direction. The best technical indicators for the stock market are Volume, Awesome Oscillator, and Fibonacci retracement.
Traders and investors usually undervalue risk management. Nevertheless, none of the predictions will work well if you don’t know how much money you should put in.
- Hedging. The first rule of risk management is to split your funds. Some traders can be too confident in their analysis that they put all of their money into one stock and wait until it brings profit. As a result, they just don’t have spare cash to invest in a better option. Choose several stocks in different sectors and invest in them, keeping some funds in advance. The varied industries will prevent you from taking big losses, in case one of them performs poorly.
- Stop Loss and Take Profit. It doesn’t matter what market you trade in. These two terms are the key to balanced risks. Stop loss will limit your losses in case your forecast was wrong, and the market moved in the opposite direction. Take profit is used to grab the profit before the market turns around. Also, you won’t have to stay in front of the screen waiting until the desired level is reached.
- Return Calculation. Take profit and stop loss levels can also be used to calculate expected return and know how much money to invest. Also, the calculation can be used to choose a more profitable asset to fund.
- Position sizing. Position sizing determines how many units you should trade to reach the desired level of risk. Risk no more than 1-2% of the deposit for one trade.
You won’t be able to make a significant profit until you gain enough practice. The theory is functional, but the practice is the basics. Before you apply your valuable knowledge in the real market, test your skills safely. The demo account fully simulates the real one allowing you to feel the market pulse, while still saving your funds. You can use all the technical tools you need to predict the market direction.
To conclude, there are many ways and options to invest in the stock market. The easiest one is CFD, and the most complicated one is individual stocks. The market situation changes frequently. Thus, you should be ready; the stocks will change their direction, and you will have to adapt to the situation. To be fully equipped, start trading stocks on the Libertex demo account and improve your skills for better results.
Why to trade with Libertex?
- access to a demo account free of charge
- technical assistance to the operator 5 days a week, 24 hours a day
- leverage up to 1:500
- operate on a platform for any device : Libertex and Metatrader 4 and 5