In the midst of the coronavirus pandemic in 2020, the stock market did a remarkable thing. First, it suffered through the fastest 30% decline in history, but then it turned right around and climbed out of the bear market in just 33 days, marking the shortest bear market for the S&P 500 index ever. While some stocks participated robustly in the comeback, others continued to suffer throughout the year. With the stay-at-home orders and closures ordered during the pandemic, many businesses had to quickly adapt their models just to stay afloat, while others resorted to raising additional funds for survival.
The good news in 2021 is that cases seem to be dropping in response to the widespread distribution of a number of vaccines. If this course continues, a more normal recovery could be underway for many companies in the second half of the year. Here’s a look at some big names that might enjoy a solid recovery this year if the much-awaited “return to normalcy” comes to fruition.
Norwegian Cruise Line Holdings (NCLH)
- Stock price as of March 24: $25.31
Norwegian Cruise Line had the misfortune in 2020 of offering a product that no one could use. The cruise line’s fleet of 17 vessels had to effectively shut down for the entire year, as travel bans and other government restrictions made cruise ships off limits. Revenue obviously plummeted as a result, yet expenses remained high as the company had to continue maintaining the ships. Recently, the company announced there would be no sailings until June 2021 at the earliest, with some ships laid up for an even longer period. Yet, future bookings remain high — as do prices — and consumers will no doubt return once the all-clear is given — whenever that may be. In the meantime, even factoring in recent gains, NCL’s stock remains 58% below its all-time high of $63.76.
- Stock price as of March 24: $56.34
ExxonMobil is another company that saw demand for its primary products dry up in 2020. With the world in various modes of shutdown throughout 2020, the demand for fuel from both consumers and businesses plummeted. Ultimately, however, energy seems like a good bounceback candidate, as air travel is already beginning to recover and the return of the summer road trip seems possible. Add to that the expanding energy needs of companies around the world as things get back to normal and ExxonMobil seems like a prime beneficiary. The stock is down about 50% from its all-time high of $104.38, and while you wait for a recovery, you can enjoy earning a dividend of over 6% from the oil giant.
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US Foods Holdings (USFD)
- Stock price as of March 24: $36.45
US Foods Holdings is the second-largest U.S. food-service distributor, owning 10% of the market. Although not as well-known as industry leader Sysco, US Foods Holding is still a dominating force in a fragmented industry. It’s no surprise that the company suffered in 2020, as restaurants all but shut down across the country and the demand for the services of US Foods Holdings shrank dramatically. As Americans begin to dine out again and restaurants fully reopen, US Foods Holdings should see a recovery in its revenue stream.
Bank of America (BAC)
- Stock price as of March 24: $36.90
Bank of America seems poised to bounce back due to a number of factors. For starters, loan demand is likely to rise as economic activity picks up and businesses require capital again. Next, the bank may benefit from rising interest rates going forward, as it profits on the spread between long-term and short-term interest rates. With trillions of dollars of stimulus money flooding into the economy and pent-up consumers eager to spend again, inflation seems at least possible, and perhaps even likely. This combination of economic factors often drives up interest rates, potentially benefiting Bank of America.
Southwest Airlines (LUV)
- Stock price as of March 24: $57.70
Southwest Airlines, like most travel companies, suffered greatly in 2020, as demand for flights all but vanished. Although the airline shutdown wasn’t as complete as it was with the cruise lines, revenues at Southwest Airlines still fell nearly 60% in 2020. As the economy recovers, however, Southwest should reap big dividends. Already in 2021, airline passenger counts are exceeding 1 million per day, topping 1.5 million on March 21. Domestic carriers like Southwest may benefit more than international or business-oriented airlines at first, as short hops and leisure travel seems likely to recover more rapidly than expensive business trips.
Teva Pharmaceuticals (TEVA)
- Stock price as of March 24: $11.26
Teva Pharmaceuticals may be due for a recovery in 2021, but it won’t be a bounceback from coronavirus-related problems, as is the case with many of the companies on this list. Rather, the company has had fundamental and legal problems for years. Why might Teva “return to normal” this year? A number of factors. First, the company still generates over $16 billion in revenue per year, and it projects at least $2.50 in earnings per share in 2021. In other words, it’s not a company that is headed for bankruptcy. However, the company has been punished from a valuation standpoint, now trading at about 4.5x next year’s expected earnings. The turnaround specialist CEO the company brought aboard in 2017 has been rapidly slashing debt and working to resolve the company’s regulation issues. If the overhang of the lawsuits against the company gets resolved, the stock may get a pop back to a more normal valuation.
Restaurant Brands International (QSR)
- Stock price as of March 24: $65.50
Consumers might not be familiar with the name Restaurant Brands International, but they surely know one or all of the company’s major brands: Tim Hortons, Burger King and Popeyes. The quick-serve restaurant company has more than 27,000 locations in over 100 countries and generates about $31 billion in annual revenue. In 2020, the company managed to escape with an earnings decline of just over 18%, which would be catastrophic under normal conditions but seems heroic for a restaurant company in the midst of a global pandemic. As the economy gradually recovers, Restaurant Brands International should see additional traffic at its stores.
Booking Holdings (BKNG)
- Stock price as of March 24: $2,202.73
As a travel-based company, Booking Holdings took a huge hit in 2020. Travel bookings slowed to a crawl, and refunds and cancellations were the norm. Revenues in 2020 fell to $1.24 billion, down from $3.34 billion in 2019. Just as with the airlines and cruise lines, Booking Holdings will clearly benefit from a return to normalcy in the economy, as bookings will rise for everything from cruises and flights to lodging. There may even be a surge in late 2021, as many consumers have been hoarding their stimulus payments and may unleash pent-up demand for travel after more than a year of being in various stages of lockdown.
Occidental Petroleum (OXY)
- Stock price as of March 24: $27.06
Occidental Petroleum suffered from crashing oil prices and lower demand for its products throughout 2020. In Oxy’s 2020 fourth-quarter earnings release, the company reported a steep 37.2% decline in revenue from the year before. However, behind the scenes, Oxy has been making moves to prepare it for the anticipated upswing in business and consumer demand. In 2020 alone, the company shed $2.4 billion in debt, and it has been dramatically reducing its operating costs. As a result, analyst earnings estimates have begun moving up, with the consensus forecast rising 9.85%.
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American Tower Corp. (AMT)
- Stock price as of March 24: $227.00
American Tower is a company that might not be as familiar as some of the other names on this list, but it’s a Fortune 500 company whose products are an important part of daily life. American Tower is a real estate investment trust that owns and operates wireless and broadcast infrastructure, such as cell towers. By leasing space on its various infrastructure properties, the company benefits from the expansion of communications technology. With the coming wave of 5G technology likely to fuel further infrastructure development, American Tower is poised to benefit. The company will also benefit from increased usage as the economy returns to normal.
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