Back in early 2020, I picked six stocks that I thought would perform well in 2020. The six names were Aurinia Pharmaceuticals (AUPH) , Personalis (PSNL) , Tempur Sealy (TPX) , Recro Pharmaceuticals (REPH) , Datadog (DDOG) , and InMode (INMD) .
If I had foreseen a pandemic I probably would have changed some of my picks but overall they did quite well with an average gain of 75%. I still like AUPH, PSNL, and INMD in the year ahead. Here is how they have performed:
PSNL up 273%. This was a name that had a great story in the cancer genomic testing area but went unrecognized for a long time. It was finally discovered and jumped in the last few months due in part to aggressive buying by the ARK Genomic Revolution Multi-Sector ETF (ARKG) . It is still a great story and probably a potential acquisition play but it's no longer cheap and will need to perform well to keep running
DDOG up 166%. DDOG is a cloud play that benefited from the 'work at home' theme this year. The company assists in monitoring the operation of software and provides analytics. It has had tremendous revenue growth but it is very expensive and will need to continue to put up big numbers. I would buy this only after a deeper pullback.
TPX up 27%. TPX took a big hit as retail sales of bedding products dropped sharply when the Covid crisis hit but it recovered very well. Sales grew 38% in the third quarter and it still looks relatively cheap. This is not a momentum name but should be solid stock in the year ahead.
INMD up 21%. INMD provides devices for minimally-invasive aesthetic procedures. Its business dropped sharply but is roaring back with strong eps and revenue in the third quarter and predicted eps growth of 25% in 2021. I believe this business still has substantial upside and should see some good gains in 2021.
AUPH down 30%. AUPH is a classic example of a stock with good news but not yet appreciated by the market. It made substantial progress in the development of its drug for the treatment of lupus nephritis but the market is waiting for FDA approval which is expected in late January. I believe this stock will see increased interest as the FDA decision approaches.
REPH down 84%. The big loser was REPH which is a contract manufacturer of pharmaceuticals. My view was that there was an increased focus on shifting drug manufacturing to the U.S. but management simply failed to perform. The stock has recently recovered but still has much to prove before I'd be interested again.
The most important lesson from these picks is that it is good to have some diversification. The winners more than offset the two losers.
I'll have some new picks for 2021 coming soon.
