Fortune - USA (2020-12)

PICKS

FORTUNE DECEMBER 2020 /JANUARY 2021 49

navigated the pandemic well; its profits even

rose early on owing to the decline in elective

procedures, leading it to pay some rebates to

customers. But Saira Malik of Nuveen calls the

absence of post-election risks the “biggest posi-

tive” for the insurer: With the next Congress

expected to be evenly and sharply divided,

Medicare for All is not to be. Malik expects

UnitedHealth to expand its footprint in Medi-

care Advantage plans “at the fastest rate in

five years” and to increase memberships in its

Optum business (which includes health savings

accounts and payment processing). The stock’s

forward P/E, at 22 times estimated earnings,

trails the S&P 500 average, and Malik believes

UnitedHealth could close that gap “as the com-

pany’s business model returns to normal” and

its shares climb.

CONSUMER STOCKS

There’s life after lockdown for some

retailers and for live events.

R

ETAIL’S LONG SHIFT to e-com-

merce accelerated even faster

as the pandemic shuttered

stores nationwide. But if the

eventual arrival of a vaccine

coaxes still more people back

into in-person shopping, companies that rely

on physical stores could reward investors

nicely. That’s particularly true of discount

retailers, which have been able to please cus-

tomers with a “treasure-hunting” experience

along with lower prices that are welcome in a

shaky economy. Parnassus’s Keith is a fan of

Burlington Stores, the third-largest off-price

retailer in the country after Ross Stores and

TJX. Burlington was hit less hard than some

brick-and-mortar retailers because many of its

stores are in stand-alone locations, not malls,

and were able to reopen early. And new CEO

Michael O’Sullivan, who came to the company

in 2019 from Ross, is making investments in

tech for supply-chain management and analyt-

ics that should help Burlington continue to

improve its operating margins.

An era in which people prefer outside to

inside could be a boon for apparel titan VF,

whose portfolio includes outdoorsy brands

like Vans, The North Face, and Timberland.

Investments in e-commerce have paid off with

that will benefit from a return to normal.

Eric Schoenstein, a managing director

and portfolio manager at Jensen Investment

Management, likes Stryker, a top producer of

orthopedic implants, joint replacements, and

other technology that caters to the needs of an

aging population. Stryker has what Schoen-

stein calls a “first-mover advantage” with its

robotics-assisted surgical platform, which is

used in hip and knee replacements. Roughly

half of Stryker’s business can be categorized

as “elective procedures,” but as those proce-

dures continue to come back, analyst estimates

project its revenues growing more than 13% in

2021. The stock, meanwhile, trades at valua-
      tions slightly below the sector average.
      The full-fledged return of elective surger-
      ies will also benefit Teleflex, whose products
      include many used in vascular and urology
      procedures and the treatment of prostate
      disease. Lori Keith, who manages the Parnas-
      sus Mid Cap Fund, sees long-term demand for
      Teleflex’s equipment as baby boomers age. The
      stock isn’t cheap, at nearly 30 times estimated
      forward earnings, but analysts think Teleflex
      could grow revenues by 13.5% in 2021.
      Giant insurer UnitedHealth Group has

2020 STOCK PERFORMANCE

–40%

JAN.

–20

0

20

40

60%

MARCH MAY JULY SEPT. NOV.

TOTAL RETURN OF S&P 500

EXCLUDING FAAMG

TOTAL RETURN OF FAAMG STOCKS

SOURCE: S&P GLOBAL; AS OF 11/13/20;

MARKET-CAP WEIGHTED INDEXES

11/13/20

52.5%

6.3%

Cellnex

(MC: CLNX, $61)

Stryker

(SYK, $236)

Teleflex

(TFX, $375)

UnitedHealth

Group

(UNH, $357)

Burlington

Stores

( BURL, $231)

VF

(VFC, $82)

PRICES AS OF 11/16/2 0

MADE BIGGER BY A BOOM YEAR

As the pandemic increased our dependence on

telework, e-commerce, and home entertainment,

the FAAMG stocks soared.