The stock market had a good 2020, with the S&P 500 up 16.3%. Cryptocurrency bitcoin, on the other hand, was up more than 300% for the year. In the last month alone, Bitcoin’s price has more than doubled.
But bitcoin’s incredible rise may mean that a fall is imminent. With that in mind, we asked three Motley Fool contributors for their top stock picks that didn’t have big rises in 2020 and look undervalued right now. They came back with Corteva (NYSE:CTVA), General Electric (NYSE:GE), and Dow (NYSE:DOW). Here’s why they think these stocks have better prospects than bitcoin.
Harvester of joy
Lee Samaha (Corteva): The world is always going to need more food, and farmers are always going to need to improve crop yields and protect their harvest. That’s where Corteva comes in. Created out of the breakup of DowDuPont, it’s a play on long-term demand for food crops and also a value stock in the making.
The agriscience company generates around 59% of its revenue from seeds (of which 68% is from corn and 21% from soybean) and 41% from crop protection (51% from herbicides and 27% from insecticides). Long-term demand for higher-yielding seeds is assured given the need to feed a growing population and to increase profitability for farmers. For example, U.S. corn yields have gone up from around 108 bushels per acre in 1990 to around 176 bushels per acre in 2020. It’s a remarkable achievement which shows how valuable higher-yielding seeds, such as Corteva’s, are to farmers around the world. In addition, if a crop is going to be harvested then it will need protection.
Corteva has attracted the interest of an activist hedge fund, Starboard Value, whose case for buying the stock is based on the potential for Corteva to improve profit margins to the level of its peers. In fact, Corteva is making progress on that front with its earnings before interest, depreciation, and amortization margin rising to 16.8% in the first nine months compared to 16.2% in the same period last year.
Trading at 24 times next year’s estimated earnings, Corteva’s end markets are relatively stable and the potential for margin expansion is substantial. It’s not a glamorous stock, but Corteva’s earnings growth potential is significant, and it’s the sort of overlooked stock that investors should be considering right now.
A general idea to get charged up about
Scott Levine (General Electric): Bitcoin’s recent performance probably has long-term holders feeling vindicated — and a lot richer. Those who have hesitated to buy the cryptocurrency, however, are likely reluctant to begin investing now, dubious that there’s more growth on the horizon. Fortunately for them, there are plenty of investing opportunities that offer much more reasonable valuations, such as General…