Best stocks to invest in 2021: where to put your money as Covid-19 vaccines raise recovery hopes
12:23, 24 March 2021
The stock market has seen a volatile start to 2021, with stocks in the technology and clean energy sectors that led the rally in 2020 losing momentum in recent weeks. The prospect of a return to regular economic activity over the summer thanks to the rollout of Covid-19 vaccines could see a rotation into travel and entertainment stocks after they were hit hard last year.
Are you looking for good stocks to invest in right now? In this article, we consider some of the most promising stocks this year as the basis for further research for your portfolio.
Best stocks to invest in 2021: 10 companies to add to your portfolio
From retail to gaming, entertainment and technology, there are opportunities for investors to pick up stocks that have the potential for strong growth this year. Here is our list of 10 companies whose shares you may want to keep on your radar in 2021.
Disney (DIS)
Disney stock recently hit an all-time high of $203.02 per share on March 8, as its Disney+ video streaming service has strengthened during the Covid-19 pandemic and has offset delays to cinematic releases and the closure of theme parks. There is further upside for the stock this year when parks reopen, with pent-up demand likely to drive visitor numbers.
US investment bank JP Morgan has a $220 price target on the stock as it expects operating margins from Disney's parks to rebound faster than previous economic downturns. Disney has managed revenue losses from the parks better than expected and optimised the closures by making advancements in operations and consumer experiences that will put them in a stronger position on reopening than pre-pandemic, JP Morgan said, making it one of the best stocks for 2021.
On March 10, Disney announced a new rights deal with the NHL that creates advertising opportunities for its TV and streaming services including Hulu.
DraftKings (DKNG)
The share price for online sports entertainment and gaming company DraftKings has climbed by 55 per cent year-to-date and shows potential for further growth.
US investment firm Goldman Sachs expects US online sports betting to rise at a compound annual growth rate (CAGR) of 40 per cent from $900m today to $39bn by 2033, with internet gambling rising by a CAGR of 27 per cent to $14 billion, in response to favourable legislation and consumer adoption. Analysts at Goldman boosted their DraftKings price target to $87 per share from $79 per share on March 22.
The US state of New York is including provisions to legalise mobile sports betting in its budget due on April 1. Goldman notes this is “a strategic positive” for sports betting companies and puts them among the best stocks to invest in now.
Five Below (FIVE)
Specialty discount store chain Five Below, which sells products aimed at children and teens, reported a 6.2 per cent increase in net sales in 2020 to $1.96bn, despite the impact of the Covid-19 pandemic on retail.
With the vaccine rollout expected to enable shoppers to return to stores, analysts are bullish on the outlook for the stock, which has gained 15 per cent year-to-date and reached an all-time high of $205.28 earlier this month.
After the company announced earnings on March 17, at least eight analysts upgraded their share price targets, to range between $205-252, from $180-220 previously, according to MarketBeat.
Ford (F)
The legacy carmaker is seeing a new lease of life as it joins the electric vehicle (EV) revolution, with its share price recently trading at a four-year high. UK bank Barclays raised its price target on March 19 from $9 per share to $16 per share, as its plans will see it “shift much more aggressively than consensus believes” towards EVs in 2025-2030.
Ford is expected to announce its EV strategy at its spring investor day, leveraging Volkswagen’s modular electric platform in the European market.
Goldman has also raised its global EV sales estimates as uptake is accelerating, forecasting a global EV sales ratio of 11 per cent in 2025, from 9 per cent previously, and 25 per cent in 2030, from 18 per cent per cent previously.
Johnson & Johnson (JNJ)
US pharmaceutical giant Johnson and Johnson offers investors the opportunity to make a play on the rollout of Covid-19 vaccines while also spreading the risk by benefiting from the company’s diversified sales across the pharmaceuticals, medical device and consumer health product segments.
JNJ is a dividend king, having paid a rising dividend for 58 consecutive years. The share price is up by 2 per cent year-to-date and the average price target from analysts of $178.93 indicates there is another 11 per cent further upside.
Mastercard (MA)
Payment processing firms Mastercard and Visa (V) are well-placed as the best shares to invest in to benefit over the long term from the transition away from cash to card and online payments, and more immediately, from the rebound in retail expected in the aftermath of the Covid-19 pandemic.
Data shows strong US consumer spending prompted by the latest round of US government stimulus and pent-up demand. Trends around dining out, air travel and hotel occupancy are improving, and while increased social distancing measures in Europe have pressured international spending, vaccinations will allow them to ease eventually. Morgan Stanley sees any near-term volatility as a buying opportunity and rates Mastercard stock overweight with a price target of $412 per share, up from the $355 level.
Netflix (NFLX)
Streaming platform Netflix saw its share price climb by 64 per cent in 2020 as at-home entertainment benefited from Covid-19 lockdowns.
The stock is among Bank of Montreal (BMO)’s top stock picks for 2021 ahead of the resumption of its share buyback programme in the second half of the year and a crackdown on subscribers sharing their account passwords, which should yield separate subscriptions.
BMO recommends selling ViacomCBS, which has gained around 150 per cent year-to-date to buy more Netflix, for which it has a price target of $700 per share from the current $535 level.
Nvidia (NVDA)
Computer processor manufacturer Nvidia has been a favourite stock of technology investors in recent years, and reached an all-time high above $600 per share in February.
There is potential for further upside in the share price despite the recent gains, as the growth of online gaming drives demand for its new graphics processing units (GPUs).
At least seven analysts boosted their price targets on the stock on March 3, after an investor presentation on March 2, ranging from $625-800 per share from $575-700 previously, according to MarketBeat.
Roblox (RBLX)
Video game developer Roblox has been touted as one of the top stocks to watch in 2021 after debuting on the New York Stock Exchange via direct listing on March 10.
The company’s social gaming platform, with its own digital currency, Robux, reported strong user growth among children and teens in 2020. It expects its daily active users (DAUs) to reach 34.6 million to 36.4 million in 2021, representing year-over-year growth of 6-12 per cent, and forecasts higher growth in 2022 as it targets older age demographics and regions like western Europe and east Asia.
Analysts at Stifel initiated coverage of the stock on March 22 with a buy recommendation and a price target of $85 per share, indicating upside from the $60.50-79.10 range in which it has traded so far.
Walmart (WMT)
Retail giant Walmart gained 12 per cent in 2020 as the pandemic accelerated the growth of online sales, but the stock has slipped by 7 per cent so far in 2021 as investors have rotated into recovery plays.
However, analysts at Telsey Advisory Group view the pullback as a buying opportunity for the essential retailers, as consumers have become accustomed to “one-stop shopping” and the likes of Walmart, Amazon (AMZN), Costco (COST) and Target (TGT) are set to continue gaining market share over the long term.
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Stock market outlook points to new highs
The fastest bear market decline of 34 per cent in 23 days at the start of the Covid-19 pandemic a year ago unexpectedly gave way to the largest 12-month rally in the post-Second World War era, with all the major indices reaching record highs. And there is still scope for stocks to rise further, analysts at Raymond James noted in a recent commentary.
The analysts said: “While the Info Tech, Health Care, and Consumer Discretionary sectors were among the first to recover their Covid-induced losses, eight of the 11 S&P 500 sectors have now fully recovered.”
Read more: Amazon stock forecast: all the pieces in place for more upside in 2021
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