Are you planning out your investments for companies to invest in the year 2021? Are you looking for the best stocks to invest in 2021? If so, then read further because this post will provide some useful tips on how you can find some promising potential stock market investments that are expected to be profitable during the next economic boom.
Call it a comeback. Many of the best stocks to buy for the rest of this year remain heavily tied to economic recovery prospects.
by: Charles Lewis Sizemore, CFAAugust 6, 2021
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2021 might have been the most anticipated year in history, or at least in recent memory. After the hard slog of 2020 and the COVID-19 pandemic, 2021 would have to be better by default. That’s why, as analysts went about picking their best stocks to buy for 2021, they focused on recovery stories.
A small wrinkle in that, as we consider the best stocks for the rest of this year: COVID is, alas, still with us, and the delta variant is driving a third wave. And alas, we’re having to dust off our masks to enter a lot of public places.
But with more than 70% of American adults having received at least one dose of a vaccine, the damage is expected to be at least less severe this time around, for what that’s worth.
“We see the virus trends, and it’s something we take seriously,” says Sonia Joao, senior partner at Robertson Wealth Management, a Houston-based registered investment adviser (RIA). “But at this stage, we’re not expecting a major market reaction, as investors appear to be looking past virus concerns and focusing on accelerating earnings. We may see a little market volatility if cases continue to spike, but we’re not expecting major disruption.”
There will be surprises. There always are. But several trends are emerging as potential winners in the second half of 2021 and beyond. Commodities are doing well, due in part to expectations of higher spending on infrastructure. Technology should continue to be a major driver, as trends that accelerated during the pandemic still have plenty of gas in the tank.
More than anything, though, the theme should be normalization as the economy continues to battle its way back to normalcy.
Amazon.com
- Industry: Internet retail
- Market value: $1.7 trillion
- Dividend yield: N/A
Apart from a few companies, such as Zoom Video (ZM), which went from relative obscurity to becoming an integral part of the daily routine for most of corporate America, few companies benefitted more from the lockdown economy than Amazon.com (AMZN, $3,354.72). Nearly anything you could imagine buying could be fulfilled by Amazon and could be on your doorstep in generally less than 24 hours.
But here’s the thing. While Americans are indeed returning to the malls, they’re likely to continue buying a much larger percentage of their purchases online than they did before the pandemic. That trend was already firmly in place, and the pandemic simply sped it up.
Wedbush, who rates AMZN at Outperform (equivalent of Buy), writes that “Revenue growth should decelerate in 2021 but remain above 2019 levels” – in other words, growth might slow slightly from last year’s windfall levels but still eclipse pre-pandemic levels. Meanwhile, “Amazon’s profitability should expand as it grows operating expenses more slowly than revenues. Amazon Web Services, Fulfillment by Amazon, and ads should drive steady margin expansion, with Prime memberships driving overall retail revenue growth.”
AMZN is one of the best stocks to buy for the remainder of 2021 … and likely for years to come.
Kinder Morgan
- Industry: Midstream oil and gas
- Market value: $38.8 billion
- Dividend yield: 6.2%
If you like the bullish thesis for Enterprise Products Partners, then you should be equally enthusiastic about Kinder Morgan’s (KMI, $17.14) prospects for the rest of 2021 and beyond.
Kinder Morgan is one of the largest energy infrastructure companies in the world with approximately 83,000 miles of pipelines and 144 terminals spread across North America. Approximately 40% of all natural gas consumed in the United States passes through Kinder Morgan pipelines.
Pipeline stocks have been a no-man’s land for years, and Kinder Morgan is no exception. Shares have been trending higher since November 2020 but remain below their pre-pandemic levels and are still more than 60% below their 2015 highs. In Kinder Morgan, you get the opportunity to buy a cheap stock in a cheap sector that, after years of declines, is finally trending higher. And you’re getting paid a 6%-plus dividend while you wait!
Simply returning to pre-pandemic levels would mean upside of nearly 30% from current prices, not including the dividend. That’s not too shabby in a market in which value is getting increasingly difficult to find.
Ryder System
- Industry: Rental and leasing services
- Market value: $4.1 billion
- Dividend yield: 3.0%
Ryder System (R, $75.40) is best known for its ubiquitous trucks crisscrossing America’s roads. Ryder owns and rents more than 235,000 trucks and other commercial vehicles of assorted shapes, sizes and functions.
It also does a lot more than that. Ryder offers a turnkey logistics and supply-chain operation, including e-commerce fulfillment. Building out a logistical operation takes time and capital that most companies simply don’t have, and Ryder offers this, ready to go, as a service.
There is no company on earth that is truly “Amazon-proof,” but Ryder seems as close as you can get. It might be an economy stock, but its services are critical to the functioning of the new economy.
Ryder sports a current dividend yield of 3%, which is more than double the S&P 500’s historically modest yield. Better still: Ryder is a dividend growth stock that has more than doubled its payout since 2011.
R shares have enjoyed a fantastic run over the past year, though the price remains at 2013 levels. Still, that means this pick could have further to run if value stocks remain in favor.
Vale
- Industry: Industrial metals and mining
- Market value: $109.3 billion
- Dividend yield: 4.0%
Commodities have enjoyed a great first half in 2021 as rising demand from a reopening economy combined with curtailed supply due to pandemic-related bottlenecks to create some of the best pricing conditions in decades. These conditions likely will take time to correct, which is good news for Vale (VALE, $21.69), the Brazilian miner. Vale happens to be one of the world’s largest producers of iron ore and is also a major producer of other industrial metals and precious metals.
Like most miners, Vale had a rough run in the years leading up to 2020. The shares were in free fall off and on for most of the past decade.
It’s not that Vale did anything particularly wrong. It simply had the classic problem of having a nice house in a bad neighborhood. Neither commodity stocks nor emerging market stocks never really recovered after the 2008 crisis. Well, Vale is both a resource stock and an emerging market stock. It never stood a chance.
But then, conditions finally improved in 2020. Emerging markets and commodities both finally bottomed out. Vale stock has more than tripled since hitting lows in March 2020, and more gains could be on the way.
“The major iron ore miners should be the standout performers due to extraordinarily high iron ore prices, free cash flow and dividends in the period,” says Jefferies analyst Christopher LaFemina (Buy). “This should not be a surprise as these companies have pristine balance sheets and a track record of large capital returns, but we do believe that the market still under-appreciates the magnitude of the upcoming capital returns.”
He adds that he thinks Vale – as well as BHP (BHP), Rio Tinto (RIO) and Fortescue (FSUGY) – are “likely to announce strong results and very large dividends.” LaFemina forecasts annualized capital return yields of 18.5% for Vale, including its ongoing buyback program.
Mining stocks can be wildly volatile, of course. But with industry conditions positive for the first time in years, Vale could be one of the best stocks to buy for the rest of 2021 and even farther out.
Conclusions
Stocks To Invest In 2021 – When the market is rising, every stock looks like a winner. But will they continue to perform when the economy turns south? That’s what you need to know for sure before you invest your hard-earned money in stocks.