Each year, U.S. News & World Report scours the market and selects 10 of the best stocks to buy for the coming year. They tend to hail from a variety of industries and range from blue-chip dividend stocks to little-known small-cap names. Not all stocks will suit the needs of every investor and their personal risk tolerance, but in aggregate, the 10-stock portfolio aims to outperform the S&P 500 over the calendar year. U.S. News’ 10 best stocks to buy for 2019 collectively gained 28.4% for the year, outpacing the 26.4% return of the S&P 500 by 2%.For a better understanding of the results, here are the 10 2019 picks, accompanied by their performance and brief commentary on the factors at play:Starbucks Corp. (ticker: SBUX)Entering the year, news had recently broken that famed money manager Bill Ackman had staked nearly $1 billion on the coffee giant through his hedge fund, Pershing Square. Not only was the news bringing more Wall Street attention to SBUX, but the company was seeing impressive growth from its China/Asia Pacific market.As 2019 progressed, overall same-store sales growth accelerated, the company repurchased $12 billion in stock for the fiscal year, and Starbucks Rewards membership growth continued at a 15% year-over-year pace. Starbucks stock, which was a steal to begin the year at 20 times earnings, saw its price-earnings ratio expand to 30, fueling a rally.Year-to-date return: +40.3% NXP Semiconductors (NXPI)Dutch semiconductor giant NXP appeared criminally undervalued to start the new year. To begin with, the tech sector had just suffered a severe correction, and the sell-off was particularly unforgiving in the semiconductor industry. NXPI stock was even more unloved; investors had abandoned the stock after a long-planned acquisition by Qualcomm (QCOM) unexpectedly fell through earlier in 2018.Trading as high as $124 per share when the buyout was still expected, shares were trading in the low $70s to start 2019. Also, NXP had announced a massive, $30 billion stock buyback program to take advantage of the market’s irrationality. This common sense play yielded amazing returns as the stock rallied back to merger-era levels. YTD Return: +70.5%Facebook (FB)Facebook is another stock whose 2019 returns were aided by the oversold tech environment that characterized the beginning of the year. FB was trading almost 40% below its highs, set just five months prior, around $209. The fallout from the Cambridge Analytica scandal made FB stock even more unpopular, although the underlying business, then boasting 2.2 billion monthly active users, certainly wasn’t going anywhere. U.S. News recommended taking advantage of the opportunity: “The time to buy, after all, is when there’s proverbial blood in the streets.” YTD Return: +48.1%Stitch Fix (SFIX)One of the higher risk-reward investments on the 2019 list, e-commerce play Stitch Fix was the smallest of the 10 companies going into the year. SFIX offers personal, virtual stylists who send regular clothing installments according to user preferences. Like Zappos, whatever you don’t like you can send back. Although shares were volatile in 2019, the thesis that Wall Street would warm up to a subscription-based e-commerce company built around personalization proved correct. Revenue rose 21% last quarter. While shares remain volatile to this day, SFIX’s depressed price entering 2019 was too tempting to pass up.YTD Return: +51.4%Johnson & Johnson (JNJ)Very few names on Wall Street have been blue-chip stocks for generations on end. But health care and consumer mainstay Johnson & Johnson, founded in 1887, has managed to do just that. Since its founding, JNJ has weathered 27 panics or out-and-out recessions to become the nearly $400 billion diversified giant it is today. Although it underperformed the S&P 500 in 2019, U.S. News typically names a couple of “all weather” megacap stocks to its annual list – stocks like JNJ that tend to minimize portfolio volatility in favor of predictability and cash flow. Johnson & Johnson, which pays a 2.7% dividend, fulfilled its purpose on that front. YTD Return: +12.6%Berkshire Hathaway (BRK.B, BRK.A)Berkshire Hathaway CEO Warren Buffett, 89, and vice chairman Charlie Munger, 95, are no spring chickens. But these two financial legends have spent over half a century building up the single most impressive and consistent string of returns in stock market history. Like Johnson & Johnson, BRK was selected as a safe-haven stock that investors could fall back on if markets turned sour. A sweetheart $10 billion financing deal for Occidental Petroleum (OXY) preferred stock carrying an 8% perpetual coupon showed Berkshire could still throw its weight around in 2019. With over $100 billion in cash ready to be opportunistically invested at a moment’s notice, U.S. News recently named Berkshire Hathaway one of the best blue-chip stocks to buy for 2020. YTD Return: +10.4%Centene Corp. (CNC)Although health insurer Centene Corp.’s underlying business was and is sound, a few factors made CNC an ill-timed pick. Firstly, CNC was riding high in late 2018 after midterm elections swung the House to a Democratic majority, which meant Medicaid, Centene’s bread-and-butter, would keep expanding. CNC investors bid shares higher (perhaps too swiftly) as a result. Second, Centene announced a deal to acquire rival government-sponsored health care provider WellCare Health Plans (WCG) in March 2019 for $17.3 billion. Typically, stock in the acquiring company falls on such news. Still trading at attractive multiples (12 times forward earnings), CNC has been in rally mode since hitting a 52-week low in October.YTD Return: +0.1%Apple (AAPL)Apple was the best of the best stocks to buy for 2019, with shares soaring 77% year-to-date. This pick illustrates the power of identifying great companies trading for lower-than-deserved earnings multiples. Due to the relentless tech stock selloff in late 2018, AAPL stock was beaten down, and was slammed even further when its fall earnings report – despite beating top- and bottom-line expectations – aroused concern over soft guidance. Heading into 2019, U.S. News noted that AAPL was too good to pass up at just 13 times earnings. Over the next year, Apple bought back over $67 billion in stock, high-margin services revenue kept hitting records and Apple’s P/E ratio catapulted almost 80% higher to its present day value of 23. Apple’s incredible short-term upside potential is gone entering 2020, but 2019 was a great ride.YTD Return: +77%Sprouts Farmers Market (SFM)Although healthy grocery chain Sprouts Farmers Market appeared to be in tune with the zeitgeist entering 2019, shares of the mid-cap grocer stumbled in 2019. The business is doing fine, just not phenomenally. In the last year, Sprouts grew from 315 stores in 19 states to 335 stores in 21 states. And while same-store sales grew modestly and revenue advanced about 8% last quarter, higher selling, general and administrative (SG&A) expenses caused profits to fall. In 2019, the company named a new CEO and the CFO departed, which was too much uncertainty for Wall Street. U.S. News swung and missed on this pick.YTD Return: -16.5%DowDuPont (DWDP)The final stock among U.S. News’ 2019 picks was DowDuPont, the industrial chemicals company and one of 30 members in the prestigious Dow Jones Industrial Average. Shares hadn’t done well in 2018, and DWDP was chosen as an out-and-out contrarian pick – not sexy, no momentum, low growth, and about to undergo a complex three-way spin-off. The Wall Street maneuvering that followed is considered one of the most complicated corporate actions ever, and in retrospect, DWDP was too convoluted for the list. The thesis, that investors would value the three distinct businesses, Dow (DOW), DuPont de Nemours (DD) and Corteva (CTVA), more fully as independent entities, didn’t pan out in 2019. For each DWDP share investors held, they now own one-third of a share in each new stock. YTD Return: -9.9%
