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Investors who are trying to time the potential rebound in cruise ships, airlines, hotels, and restaurant stocks that have been hammered by the pandemic have the right idea…
But we can do even better.
Sure, some of those stocks may bounce, but the earnings rebound in these companies will not really start until the second half of the year.
The vaccine is here, but it is going to take time to get widely distributed.
Some people will be hesitant to take the shots. We will still have new cases and deaths being reported for at least the first six months of the year.
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Rallies in the COVID-19 impacted stocks may not be supported by earnings until well into 2021…
So, I decided to look for stocks to buy that fell in 2020 but are not relying on the vaccine to restore earnings growth. I also found companies in solid shape fundamentally with outstanding financial statements.
They may have struggled somewhat in 2020, but these top comeback stocks have the potential to be market leaders in 2021…
Here's My First Comeback Stock to Buy
Perdoceo Education Corp. (NASDAQ: PRDO) is a for-profit university that has both online and in-person classes. Most of the classes have been moved online thanks to COVID-19 this year, and the transition was pretty much seamless.
Perdoceo has reported no significant loss of business due to the pandemic, according to recent conference calls with management.
Perdoceo, formerly known as Career Education Corp., offers doctoral, masters, bachelors, associate degrees, and certificate programs in a wide range of subjects.
This company, and its stock price, will be beneficiaries of two significant trends in society today.
The first is the requirement for postgraduate degrees to advance in many fields like education, medicine, and government.
The second is the growing awareness that the current on-campus education system is not the best option for many students. Online degrees can often be completed much faster and almost always much cheaper than the on-campus programs.
The shift to online offerings will drive strong earnings growth for this company for the next five years. In spite of this, the shares trade at less than eight times free cash flow.
If the stock traded at the same free cash flow multiples as many of its competitors, it would sell for more than twice the current stock price.
That is a likely price target in 2021 if the company exceeds analyst estimates as it has all year in 2020.
The Top Healthcare Comeback Stock to Buy
National Research Corp. (NASDAQ: NRC) is a healthcare analytics provider that helps measure and improve patient and employee experiences in medical institutions.
National Research conducts survey-based research to collect what it considers to be mission-critical data for healthcare providers.
The company has been doing this since 1981. Its 39 years of operation have allowed National Research to build a network that will be difficult for potential competitors to breach.
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The stock is down more than 30% this year, but that's unlikely to happen again in 2021.
Based on the high returns on assets and equity this company is earning, I expect to see the stock to rebound back to the highs of early 2020 and beyond next year.
National Research has a Piotroski F-score of 8 and an Altman Z score of over 11. This tells us that this company is in fantastic financial shape and that prospects for a turnaround in the stock price in 2021 are excellent.
The Best Comeback Stock to Buy Now
Our final selection for a comeback stock in 2021 is going to be a surprise…
It is one of the most unloved stocks on Wall Street right now. Of the 30 analysts following the stock, 22 are neutral or bearish, and only seven rate it as a strong buy.
The stock is down more than 25% and has recovered very little of the ground lost in the march sell-off.
This is in spite of the fact that shares of AT&T Inc. (NYSE: T) are paying a 7.25% dividend yield and trade for less than 10 times what the analysts expect it to make next year.
The dividend has been raised for 36 years in a row, making AT&T one of the best dividend growth stocks on the market today.
AT&T may be seen as a stodgy old blue-chip, but if we look deeper, we find out some surprising facts.
AT&T is a 5G story.
AT&T is a big player in fiber optics and will be a bandwidth and infrastructure story.
Thanks to HBO Max, it's one of the fastest-growing streaming stocks as well. Between the dividend and the likely renewal of stock buybacks in 2021, AT&T is also a solid shareholder yield story.
Cash flows and dividends will be important again in 2021, and AT&T has a lot of both. I think the stock could recover all the ground lost in 2021 and go on to new highs next year.
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