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It’s probably safe to say that no one had a “global pandemic” on their 2020 bingo card. But as the dust settles on a year filled with unprecedented medical, economic and political developments, it’s time to turn to 2021 and the equity investment opportunities it offers.
What are the best stocks to buy in 2021?
Given the strong possibility of an economic recovery in 2021, it might be tempting to fill your portfolio with every lagging stock that was squashed during the pandemic in 2020. But the new year promises no less uncertainty than it does. its predecessor, so investors should remain cautious as always.
“The unknown question is how people will react to taking the vaccine and how quickly people will feel comfortable returning to some semblance of normalcy,” says Judith Lu, founder of Blue Zone Wealth Advisors.
This suggests caution when selecting stocks that will be ready for a big rebound in 2021. Major brokers, such as Wells Fargo, UBS, and JP Morgan, and the experts we interviewed for this article, offered a nuanced look. on the outlook for 2021.
Keep in mind that the 2021 actions listed below are only suggestions based on expected macroeconomic trends. Think of them as thoughtful advice for the year ahead, as they are by no means recommendations for buying any particular stock.
Use these lists to generate ideas and help you identify opportunities in different industries. Always research and understand a company before buying its shares.
Consumer discretionary stocks for 2021
Why? Consumer discretionary stocks suffered from economic shutdowns in 2020, and they stand to gain after the Covid-19 vaccine made social events safer and more accessible.
Entertainment and parks
Overall, entertainment companies that own venues and theme parks have suffered badly in 2021. With an economic reopening on the horizon, foot traffic could return when a vaccine will allow people to enjoy activities. social in public in a safer way. These three stocks have the potential to be bought at a discount now for a rise later as the economy reopens.
If one industry has suffered this year, it is restaurants. In 2020, this sector rebounded between closing, opening for deliveries only, outdoor catering, closing again. This meant that rituals like the daily chai latte were relegated to drive-thru. The companies banded together and replicated a restaurant experience via delivery and alfresco dining, which came at a cost.
Shares of large restaurant and cafe chains can therefore be bought at a discount now, with the prospect of returning customers as the economy opens again.
Retail, especially brands less well equipped to switch to e-commerce, have been hit hard by the pandemic. Not only did people not visit malls or buy work clothes, but overall fashion was reduced to sweatpants and casual wear, plunging many fashion retailers into a prolonged decline.
With retail, investors should be looking for brands that continue to support trends that started during the pandemic, such as home improvement names as people continue to work from home – some permanently – as well as retailers who offer discounted or flexible retail experiences.
Energy stocks for 2021
Why? Because the world runs on electricity, and green energy in particular is ready to be rewarded.
The world is changing the way energy is produced, and changes in consumption patterns linked to the pandemic have only accelerated the changes. Low-carbon, zero-carbon production is on the rise, so look for companies that could benefit from their contribution to California’s New Electric Vehicle Mandate. Also, check out energy stocks that are offering above-average dividends to help bolster other areas of your portfolio that might be good buys at today’s discount, but need a longer trail. to show returns at more normal levels.
- Diamondback Energy Inc. (CROC)
- Pioneer of natural resources (PXD)
- Connect the power supply (PLUG)
- Williams Enterprises (WMB)
Healthcare stocks for 2021
Why? If 2020 has shown anything clear, it’s the value of rapid innovation in healthcare. Experts and analysts believe that industry leaders are currently undervalued.
While the pioneers in this sector could be companies ready to deploy vaccines, beyond pharma, other names could be ready to rebound higher in 2021. Look for companies that will benefit from the return of elective surgeries in the Surgery centers nationwide and other major medical device vendors who have used their products have stagnated due to the necessary shift to Covid-centric care.
Technology stocks for 2021
Why? Experts expect habits formed during the pandemic, such as delivery services and online shopping, to persist during the recovery. That’s why they favor technology names that provide e-commerce infrastructure and information technology companies that support these behavioral changes.
Large-scale retail markets and e-commerce technology companies that empower small businesses are likely to continue to grow. Any retail business that hasn’t made the major shift to online sales should be lagging behind in the industry as consumer demand for smart online shopping experiences grows stronger.
Industrial stocks for 2021
Why? Because people could finally be, in the words of Southwest Airlines, “free to roam the country,” which means more travel (note that airlines are considered part of the industrial sector). If e-commerce remains strong, as many predict, industry related to shipping could also benefit.
In this sector, investors could keep an eye out for companies that move goods from point A to point B and those that make shipping-related products, such as dry ice for vaccine shipments and supplies. bulk shipping. Airline stocks have been particularly hard hit and an acquisition now that flights are still limited could see you making gains as people once again feel safe and comfortable sitting in coach class seats too close together. .
Sectors to avoid in 2021
A large-scale economic reopening in 2021 means some sectors could experience a slowdown.
“There will be a recall of stocks that have benefited from Covid-19 as they may be considered overvalued, such as work-from-home businesses and home-gym businesses,” said Daniel J. Laginess, investment advisor , certified public. accountant and managing partner at Creative Financial Solutions.
Yet this recall does not mean that all stocks in the Covid boom will fall back to their pre-pandemic valuations. “We will most likely see continued use of [some of these] technologies because we are now used to our new way of working from home, ”he says.
As you examine your portfolio and assess where you might be underweight or overweight, think about stocks you own that could have benefited from the demand related to Covid. Then think about the “normal use levels” of those stocks. For example, have grocery stores benefited from panic buying? Or have subscription meal services been oversubscribed due to pandemic restrictions?
Also, keep in mind that even in areas that could be successful in the long run, we might expect turmoil as America and the world consider the implications of vaccine rollouts and a new presidential administration.
However, Patrick Healey, certified financial planner (CFP) and President of Caliber Financial Partners, takes any potential upheaval with a grain of salt. “There will be some short-term volatility for stay at home companies, but I suspect that some will continue to do well after this initial volatility depending on the reset of the way we do our business and the way we live our lives in the future, ”he said. .
What is your strategy for 2021
No matter how anxious you are to leave 2020 out, your wallet has likely benefited this year from the Covid bump: in mid-December 2020, the S&P 500 is up more than 13% for the year and almost 64% from its March lows. It’s a good reminder to keep for the New Year: even when the market looks bleak, you never know what’s to come.
When considering your investment opportunities for 2021, also consider your investment horizon, goals and risk tolerance when evaluating new holdings for your portfolio. While stocks and individual sectors can be positioned for a particularly good year, a broad base, at low cost index funds Give you exposure to many of the same sectors and stocks that could become important in 2021. They also save you from picking individual winners.
If you go for individual stocks, “overall, look for companies with strong earnings, continued growth as well as strong dividends and dividend appreciation,” says Laginess, which is good advice for selecting companies. ‘actions, in the event of a pandemic or not. If in doubt, you can always contact a Financial Advisor for advice tailored to your needs.