By Jeff Reeves, MarketWatch
It's hard to fight momentum on Wall Street. Whether the market is surging higher or dropping like a stone, taking the other side of the trade can often end up costing you.
That doesn't mean your only choice is to stampede with the herd and settle for a vanilla S&P 500 /zigman2/quotes/210599714/realtime SPX +0.74% index fund. A number of stocks are outpacing the market so far in 2020, avoiding deep losses in March and rallying more strongly than their peers in April.
Investors can come out significantly ahead simply by reallocating a bit of your portfolio from the laggards and into the top performers. Here are five trades that offer high-potential alternatives to stocks you may have already heard about.
1. Buy Alibaba, not Amazon
Global growth in e-commerce was already well underway before coronavirus pandemic created an even bigger tailwind for this megatrend. But if you think Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -0.45% is the only online game in town, think again.
Alibaba Group Holding /zigman2/quotes/201948298/composite BABA -0.49% is plotting 30% revenue growth this fiscal year and another 25% growth next year — figures that top the admittedly impressive growth of Amazon. Furthermore, while Western nations continue to wring their hands over the influence of Big Tech, with President Trump and the European Union finding a rare issue of agreement as they take aim at Amazon, Alibaba remains quite cozy with the Chinese government and carries much lower political risk.
Even if investors want to believe Amazon can keep growing market share and avoid any regulatory pain, the more than 30% surge of Amazon stock since Jan. 1 seems to indicate that the shares have already priced in much of the stock's current and expected success.
Alibaba is the go-to choice in Asia, a high-growth market with nowhere near the maturity of Europe or North America, which Amazon dominates. So if you want to ride true e-commerce growth, you should consider Alibaba over Amazon.
2. Buy Regeneron, not Big Pharma
In times of uncertainty, megacap healthcare stocks get a lot of attention as recession-proof investments. After all, people will cut back on just about any other expense before they stop buying the medicine that keeps them healthy.
Yet Big Pharma names including Merck & Co. /zigman2/quotes/209956077/composite MRK +0.81% , GlaxoSmithKline /zigman2/quotes/209463850/composite GSK +1.16% and Pfizer Inc. /zigman2/quotes/202877789/composite PFE +1.00% have all performed worse than the S&P 500 since Jan. 1 — proving bigger isn't always better and even supposedly stable healthcare companies can suffer when they are reliant on an aging drug pipeline and a growth-by-acquisition strategy.
That's where Regeneron Pharmaceuticals /zigman2/quotes/203149337/composite REGN -0.39% stands out. The company has received a lot of attention since news in February that it entered an agreement with the U.S. Department of Health and Human Services to develop vaccines to fight coronavirus. But beyond that short-term potential should Regeneron succeed, the firm has an aggressive research strategy as it develops treatments for other pathogens including influenza virus strains, and embarks on clinical trials for antibody-based treatments to fight conditions ranging from cancer to arthritis.
This high-growth and research-driven firm is uniquely positioned for the future of healthcare — not tying its success to an old generation of drugs. If you need proof beyond its research plans, consider that Regeneron stock has gained an impressive 60% year-to-date.
3. Buy Cheniere, not Haliburton
After oil tumbled into the low $20s this spring — and briefly even saw prices go negative thanks to storage issues — it looked like energy stocks were done. But now oil is back in the high $30s and bargain hunters are rummaging through the oil patch on hopes of a rebound. The logic (if it can be called that) is that oil servicers such as Haliburton Company /zigman2/quotes/210488727/composite HAL +3.52% and Schlumberger /zigman2/quotes/201012972/composite SLB +3.77% are natural beneficiaries as energy companies start spending again and resume production in earnest.