Best Stocks

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Best Stocks

To Own In 2021

WRITTEN BY THOMAS HUGHES

This Is Where To Find Good Stocks For 2021

When asked the question "what is a good stock to own in 2021" our response is to say "what makes a stock good to own any other time?" The times have changed, that is for sure, but the same fundamental qualities that made a stock good to own in 2019 hold true in 2021. Those include earnings, growth, dividends, and value just to name a few. Putting that in practice for 2021 investing is simple; look for stocks that offer value among the sectors which have performed well during and since the pandemic began. The first group, probably the most obvious, is the stay-at-home consumer staples winners. Those stocks have seen a sustained uptick in demand that is going to linger on into the next year. Even if the comps in 2021 are weak, so long as the consumer staples giants post steady results on a YOY basis the dividends are safe and distribution growth is expected. The consumer staples may not be the "best sector" for 2021 regarding growth but there are some high-yield, deep-value plays that we consider must-have's for income and dividend-growth investors. The home-living and outdoor lifestyle stocks are two other groups that spring to mind. Sure, the economy is reopening and will continue to reopen but things will never return to "normal". Not any time soon. Social distancing and life-at-home trends will persist. Besides, a fair portion of America has had time to slow down and realize what life can be like when living at home, out of the mainstream, in comfort. I don't think they're going to rush back to the rat race if they don't have to. And companies from Home Depot to Target, Wayfair, and Tractor Supply Company have all experienced sustained increases in demand that have altered their long-term fundamental outlook. No matter how you look at it, social distancing is going to keep people at home. That means continued health if not strength in Consumer Staples and Home Improvement stocks but those aren't the only good stocks to own in 2021.

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The Dawn Of Another "New Age" In Technology

The pandemic sparked and/or accelerated a number of trends in America that have had a profound impact on earnings. Among them is the shift to digital. World citizens had been adopting tech at a double-digit pace going into the pandemic and that trend only accelerated. The need to distance made us use a tool that was already at our fingertips and the tool performed better than expected. What this means for investors is a need for tech at all levels from infrastructure to connectivity to hardware and software.

And there's another catalyst to drive tech growth already in the works. 5G. The 5G wave is here and going to drive the adoption of tech to new levels. Why? Because our phones and wireless devices are going to work faster. Not just faster but fast. Fast enough to handle the real-time activity and open a new era of applications.

The best place to see the proof is in retail sales data. Every business with an eCommerce presence saw high-double to high-triple-digit increases in digital revenues and the best part is those gains are expected to stick. The retail environment has been permanently altered and tech is the savior. Businesses without eCommerce are doomed. All it will take is one more shut down, the next pandemic, or some other catastrophe to wipe existing brick & mortar retailers out of business.

And the change isn't limited to retail. All businesses need tech. They need technology to communicate and interact with employees; they need technology to communicate and interact with their clients and customers. It's the dawn of a new age in digital, and the Cloud will power most of what we do.

And Then There's The Rebound...

If there was one thing apparent in the 2nd quarter 2020 earnings reporting and the economic data it's that the slowdown wasn't as bad as the analysts feared. Since then, the rebound has also been better than expected. There are areas of weakness, labor turnover remains high, but those are offset by high-levels of job creation, strong numbers out of the manufacturing sector, rising demand in the housing sector, and an elevated Leading Indicators Index. All of which point not just to growth but to robust growth in the second half of 2020 that will drive momentum going into 2021.

Something we noticed in all the 2Q earnings reports is that inventories are down. In some cases, inventories are down as much as 30% but 10% is a fair benchmark. That means shelves are empty, shelves that need to be refilled and that means manufacturing and production. Manufacturing on all levels means economic activity, jobs, wages, GDP, and corporate profits.

There really is nothing not to like about the investment prospects in 2021. We think all 11 S&P sectors are going to experience an historic boom. Well, maybe not the Energy Sector but even oil demand will rise if what we see building in the economy begins to bear fruit.

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Apple (NASDAQ: AAPL)

Of Course You Should Own The World's Leading Manufacturer Of Consumer Tech

Apple Inc., love it or hate, is the world's largest and leading manufacturer of consumer tech. If there is a gadget, gizmo, or device that fits mass consumerism Apple is sure to make one. Which is why you need to own it in 2021. The company is among the best positioned in tech as a must-have item for its millions of loyal followers and billions in annual sales. When it comes to the pandemic and its impact on revenue Apple is the poster-child for today's market. The company was among the very first to issue a profit warning when China closed down its economy and now the outlook for growth is stronger than ever. Not only did Apple weather the storm it came out in better shape than it was before. 5G will be a major catalyst for this stock in 2021. Mass production of the 5G iPhone was delayed due to the pandemic but expected to ramp up in early fall and hit full speed by the end of the year. The lowest-priced 5G iPhone will have priority but that doesn't matter. The low-end phone is expected to be 40% or more of total sales and this is a generational upgrade cycle we're talking about. There are going to be a lot of sales of 5G equipment over the next couple of years. Apple doesn't have a robust outlook for growth but there is growth in the forecast. What investors need to remember is Apple's annual sales topped $260 BILLION in 2019 and will grow mid to highsingle digits over the next three to five years. Growth may have slowed but it's not small, 5% of $260 billion is $13 billion extra revenue and there are other reasons to own this stock. Apple pays a dividend, not a big one by yield but one of the safest on Wall Street. The yield tends to run below 1.0% but the distribution is growing and there is no fear it will be cut. Apple has increased the payout for the last ten years and there is plenty of room on the balance sheet and cash flow statement to keep raising it for many years into the future. Regarding the cash, Apple is sitting on more than $93 billion in cash and the figure grows each quarter. That's more than $5.40 per share and gives the company ample liquidity to do ... well to do whatever it wants.

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Verizon (NYSE: VZ)

A HIGH-YIELD VALUE FOR THE 5G REVOLUTION

Verizon is a surprisingly good value for its high-yield despite the outlook for 5G. 5G has been described as a $50 billion dollar growth opportunity and Verizon, the nation's largest cell-phone service provider, is well-positioned to take a bite out of that pie. Trading at 13X times earnings it is a steal compared to the broader market and pays a much higher dividend. The real value in Verizon is its 5G strategy. Instead of rushing to launch the first 5G network or covering the most cities fastest, Verizon has been investing in the millimeter wavebands required for the fastest services. T-Mobile and AT&T may have beaten Verizon but we're only in the early stages of this game. The slower "light" versions of 5G peddled by the other two won't keep their users satisfied forever. Verizon is looking toward the long-term and its ability to deliver the most attractive services for businesses and consumers. AT&T pays a higher dividend yield then Verizon but there is a catch. AT&T is bogged down with its media and entertainment arms while Verizon is a pure-play on mobile. Regardless, the 4.15% yield is double the broad-market average and a significant return for income and dividend-growth investors.

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(NYSE: CRM)

CONNECTS BUSINESSES WITH CLIENTS VIA THE CLOUD

is one of those situations where its hard to overstate how well-positioned the company was for the pandemic. , if you are not aware, is the world's leading provider of customer-facing cloud-based software solutions for businesses. When it comes to webbased customer relationship management solutions is the first name you go to. 's revenue was growing at a high double-digit pace before the pandemic set in and nothing has changed since. The peak of growth was in the 4th quarter of 2019 when revenue accelerated 35% on a YOY basis but has steadied near 30%. The consensus outlook is forecasting that trend to continue but we think the estimates are too low. doesn't pay a dividend but this is a case that can be overlooked. a well-capitalized company about to experience an acceleration of already vigorous organic growth. And don't forget, was recently added to the Dow 30. That makes it one of the 30 most closely watched and owned stocks on the planet. That's a lot of buying power to support this stock as it dominates the CRM industry.

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