3 Top Stocks to Buy for the Third Coronavirus Wave

On Wednesday, 100,000 new cases of COVID-19 were reported in the U.S. — an unfortunate record, and significantly worse than the nation’s prior peak, when it topped 77,000 new cases on a single day in mid-July. As those numbers continue climbing, state and local governments may once again have to impose restrictions or even complete lockdowns, which won’t be good for the economy. However, there are companies that you can invest in that are likely to do well even if that happens.

American Well (NYSE:AMWL), Amazon (NASDAQ:AMZN), and K12 (NYSE:LRN) are web-based businesses that could easily attract more revenue if the U.S. returns to stay-at-home mode. Here’s a look at how they have performed so far in 2020 and why they’ll continue to earn investor attention.

Man using tablet to make a video call.

Image source: Getty Images.

1. Amwell

Telehealth services provider American Well, better known as Amwell, IPO’d in September, and will release its first earnings report as a public company later this month. And there’s every reason to believe its third-quarter results will be strong, as many people are still avoiding doctors’ offices when possible and opting for virtual visits instead.

In the Massachusetts-based company’s prospectus, it reported that its daily visits in April topped 40,000 — compared to less than 3,000 visits a day in April 2019. And while the number of visits started to taper off in the months that followed, the company is still experiencing incredible growth. Sales through the first half of 2020 were $122.3 million, up 77% year over year, and the company’s net loss of $41.6 million during that timeframe was 63% smaller than its $113.4 million loss from the 2019 period.

Although Amwell and the broader telehealth industry are doing well due to the pandemic, that doesn’t mean the stock is only a good investment to hang onto while COVID-19 continues to be a major threat. According to a survey the company recently conducted, 91% of patients who responded said they were at least “somewhat satisfied” with their telehealth visits. That’s an important metric, because for 59% of patients, this year was the first time they had a virtual visit with a physician.

Telehealth offers greater flexibility to patients, and if the majority of users are happy with the experience, investors might expect companies like Amwell to maintain their popularity long after the pandemic is over. That makes Amwell a great investment not just for this period of steeply rising COVID-19 cases, but for the long term as well.

2. Amazon

One thing that consumers are doing much more of this year is online shopping. It’s an easy alternative to stressing about trips to crowded stores, and given how wide an array of products the e-commerce leader offers, it can fill a large share of a household’s needs.

On Oct. 29, Amazon released its third-quarter results, reporting that net sales grew 37% year over year to $96.1 billion. Notably, its gains have been fairly consistent in 2020. For the first nine months of the year, its sales rose by 35% year over year to $260.5 billion. And the company’s expecting even stronger numbers ahead. “We’re seeing more customers than ever shopping early for their holiday gifts,” said CEO Jeff Bezos, “which is just one of the signs that this is going to be an unprecedented holiday season.”

Amazon’s stock is trading at more than 96 times earnings, compared to P/E of around 70 just one year ago. In other words, it’s not a cheap stock. But as long as the e-commerce and online shopping trends continue amid and past the pandemic, the stock could continue to climb. Year to date, shares of Amazon are up by 78%. 

3. K12

Education company K12 offers students the opportunity to learn from home through online public schools. It employs state-certified teachers who teach grades from kindergarten through high school, and tries to offer students an educational experience comparable to that provided by a traditional school.

Given the health risks of returning to the classroom and the fact that many districts are already operating under all-remote or hybrid learning plans, demand for educational alternatives of all kinds is on the rise. K12 has certainly seen a rise in enrollments this year. For its first quarter of fiscal year 2021, which ended Sept. 30, it reported that enrollment grew by 57% year over year to 195,000, and revenue grew by 44% to $371 million. The company’s general education segment, which includes classes in the core subjects for primary and secondary school students, accounted for 85% of its top line.

K12 also offers career-related classes that are meant for older students and adults, offering them opportunities to learn the skills necessary for careers in technology, healthcare, and business.

If this next phase of the pandemic leads more parents to decide their children need a different school option than the one their district is providing, K12 will have ample opportunities for growth. And its website indicates that enrollment remains open.

Which stock should you buy today?

Amwell, Amazon, and K12 have all seen demand for their products rise during the pandemic, and the trends driving their revenues upward are likely to continue for the foreseeable future. Shares of Amwell are up 30% since the stock went public; here’s how the other two stocks are doing this year compared to the S&P 500:

AMZN Chart

AMZN data by YCharts

Each of these stocks is outperforming the market, and all are likely to keep doing well while COVID-19 cases are on the rise. However, in my view, the most interesting buy-and-hold pick of the three today is Amwell.

Amazon’s mammoth valuation alone creates some risk and limits stock price growth for investors. K12 is an intriguing option, but it’s unclear just how much demand will persist for its services once the pandemic is eventually put in the rear-view mirror. For working parents, it’s often more convenient to send kids to a physical school rather than keep them learning at home. Telehealth, on the other hand, gives people more flexibility in their lives, which will remain a selling point with or without a global public health crisis. That’s why I see healthcare company Amwell as the most optimistic long-term option for investors.

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