With 2020 fast drawing to a close, it’s time for investors to recalibrate their portfolios and fine-tune them for the coming year. The stock market has seldom failed to spring new surprises, but even the most pessimistic navel gazers could not have foreseen the devastation wrought by Covid-19 especially on the travel and energy sectors.
The sectors that outperformed in 2020 benefited from new and accelerated trends resulting from COVID-related lockdowns. However, this trend is expected to reverse somewhat with top stocks in 2021 largely expected to benefit from a healing economy and a return to normalcy.
As retail advisory firm LPL Financial has noted in its 2021 outlook, continued progress in the response to COVID-19 as well as another stimulus package will be key to sustaining the recovery. LPL Financial expects the earnings rebound in 2020 and to continue in the coming year with strong earnings growth in 2021 allowing stocks to grow into somewhat elevated valuations.
That said, the analyst says that COVID-19-impacted service industries are likely to be the last to bounce back. In other words, travel, hotels, oil and gas industries are likely to remain in the doldrums longer than most.
Here, then, are the 5 best stocks to buy from 5 different sectors for 2021.
- Healthcare: LHC Group
Covid-19 has been, without a doubt, the most important healthcare story of 2020. The pandemic has been an event with few peers, challenging some parts of the healthcare sector while elevating others.
As of mid-December 2020, the globe had suffered 72 million coronavirus cases resulting in more than 1.6 million deaths. That includes 16.5 million cases here in the United States that have so far claimed the lives of 303,000 Americans not to mention the additional adverse health effects on the survivors.
Naturally, then, companies that have successfully developed Covid-19 vaccines including Pfizer Inc.(NYSE:PFE), BioNTech SE (NASDAQ:BNTX), Moderna (NASDAQ:MRNA), AstraZeneca (NASDAQ:AZN), CureVac (NASDAQ:CVAC) and Johnson & Johnson (NYSE:JNJ) have been in the limelight a lot with their stocks flying.
However, resilient healthcare firms that have demonstrated the ability to thrive in both rich and poor economic cycles have emerged as investor favorites, too.
LHC Group, Inc. (NASDAQ:LHCG) belongs to the latter category.
LHC is a provider of in-home healthcare services mostly to seniors living in their own homes. LHC Group has partnered with more than 400 U.S. hospitals and health systems in 35 states and the District of Columbia to provide high-quality care to more than 525,000 patients annually. The company has 770 locations that allow it to reach 60% of the U.S. population 65 or older, with its network gradually expanding.
The demand for the company's services is likely to grow as a result of COVID-19 with more Americans determining that long-term care facilities are not necessarily the safe havens they were thought to be.
LHCG's latest results included a 0.4% year-over-year uptick in net services revenues, to $530.7 million while net income of $51.3 million was almost 30% better than the year-ago figure. More importantly, the firm slightly raised its fiscal 2020 guidance from $2.025 billion at the midpoint to $2.065 billion while adjusted EBITDA is expected to clock in at $234.5 million at the midpoint, $10 million higher than its August guidance for the year. Further, LHC expects another strong performance in 2021.
LHCG stock has gained 45% in the year-to-date, matching its three-year average annual total return of 44% and handily outperforming the Health Care Select Sector SPDR Fund (XLV).
- Credit Services/eCommerce:PayPal Holdings
Back in 2015, online marketplace eBay Inc. (NYSE:EBAY) spun off PayPal Holdings (NASDAQ:PYPL) into an independent company. eBay investors who sold their PayPal shares must now be suffering from seller’s remorse considering that PYPL has climbed 550% since the split compared to 75% gain by the parent company over the timeframe.
PYPL is up 104% YTD.
The ecommerce sector has been thriving during the pandemic as people prefer to buy online and work remotely. Luckily, PayPal has established itself as the world's most widely used online payment acquirer, processing nearly a quarter of a trillion dollars in payments last term alone.
PayPal reported Q3 revenue of $5.46B (+24.7% Y/Y) and TPV (Total Payments Volume) of $247B vs. $232.26B consensus. Meanwhile, the company remains on track to add 70 million new users on its platform in the current fiscal year, and expects FY’20 GAAP EPS growth now expected in the range of 37%–38%.
PayPal president Daniel Schulman is optimistic that these trends will not go away after the pandemic is brought under control, saying the remote work model is likely to be around for another six to nine months before changing to a hybrid model for the long haul.
- Social Media: Pinterest
Like their eCommerce peers, stocks of social media companies have generally been thriving during the pandemic. However, none has done better than Pinterest (NYSE:PINS), boasting an YTD gain of 274%.
Pinterest is a social-networking app that allows users to share images grouped by keywords. The user experience is all about finding and providing inspiration.
Like most social apps, Pinterest makes money mainly from advertising. The company has partnered with Shopify Inc. (NYSE:SHOP) to create a new ad technology platform that allows advertisers to upload catalogs to Pinterest. App users can use the platform to buy items with just a few clicks--a development that could potentially transform Pinterest's business.
For the third quarter, Pinterest reported that monthly active users jumped 37% overall to 442M while revenues rose 58% to $443M. However, just like Facebook Inc. (NASDAQ:FB) during its early days, Pinterest still operates in the red: Q3 GAAP net loss clocked in at $94.2M, which nevertheless was an improvement from the year-ago loss of $124.7M.
That said, social media stocks have lately come under pressure after news that FB is facing a huge antitrust suit by the Federal Trade Commission and a coalition of 48 states with serious breakup implications.The antitrust actions explicitly seek to reverse Facebook’s mergers with WhatsApp and Instagram.
- EVs: Vision Marine
The global electrification drive is in full swing, and EV stocks are on fire.
The mass electrification wave is rapidly proliferating across all things transportation. If you haven’t thought about E-Boats, then now is the time, because this stock is the furthest advanced, with legend oozing out of its hull.
Not only is the overall boat market on track to hit $27 billion a year… but sales of electric boats and motors are set to triple in just three years… and there’s a huge effort underway to electrify the waterways entirely.
There is no company better positioned to ride this wave than the already-producing VMAR, which makes this a far less speculative stock than Nikola, or even Fisker.
Vision Marine (NASDAQ:VMAR) isn’t just about boats - it’s about the incredibly lucrative moment where boats meet high-end energy technology and all the massively valuable IP that comes along with that.
Vision Marine, formerly the Canadian Electric Boat Company, is a leading provider of electric technology in the design and manufacture of the world’s first fully-electric powertrain outboard motor (E-Motion) and electric powerboats …
And they’ve got a huge line-up.
So, when Vision IPO’ed on November 27, where it offered 2,760,000 common shares at a price of US$10 per share, it was one of the most exciting prospects on this rapidly growing EV scene.
With a current market cap of $95M, early Vision Marine investors have seen their investment return nearly 250%.
Vision intends to use the proceeds from the IPO for sales and marketing, the build-up of inventory for order fulfillment, research and development, development of rental operations, and general working capital.
And the company certainly looks well covered with multiple industry firsts…
First off, Vision Marine is the world’s only company to produce a fully electric powertrain with groundbreaking destructive tech and intellectual property.
Designed by boating legend Ian Bruce, the father of the Laser, the world’s most popular sailing boat, Vision’s first motorboat Volt 180 set a record for the electric boat competition in the famed Lake of the Ozarks Shootout races in August last year after hitting a speed of 30mph (48kmh/26 kts).
The Volt was closely followed by the Phoenix, a 19-foot, ten-passenger open boat that was introduced at the Miami Boat Show back in February at the 2020 Miami Boat Show.
Both of the high-speed boats have been powered by Torqeedo Deep Blue outboards, but are now about to get a major upgrade.
Vision Marine has announced plans to use its proprietary E-Motion outboard motor--the world’s first 180hp electric propulsion motor--to power its boats in the future.
E-Motion combines an advanced battery pack, inverter, and high-efficiency motor with proprietary union assembly between the transmission and the electric motor design and extensive control software. E-Motion technology used in this powertrain system is designed to improve the efficiency of the outboard powertrain and, as a result, increase both range and performance.
The Torqeedo motors generate 80 horsepower but can only run it for 20 seconds before dropping to 50 horsepower. In contrast, the first of the E-motion electric outboard systems will have a peak power of 135kW/180 HP and continuous power of 9kW/120 HP. The motor itself will weigh in at 188 kg/ 413 lbs and will be powered by lithium batteries.
Vision Marine’s business plan is to market the powertrains to Original Equipment Manufacturers (OEMs) rather than the public, and they have already received hundreds of advance orders--just in the first year of production.
That’s a great start that affirms robust demand for the E-Motion powertrain.
With the outboard engine market alone expected to grow from $2.9B in 2018 to $25B in 2025, Vision Marine certainly seems to have ample growth runways.
With a share price of $12.50 and a market cap of $95M, this appears like a great investment since it’s not an entirely speculative EV play like Fisker or Nikola.
Vision’s boats are already coming off the production line, so it’s that much closer to becoming the Tesla of the EV boating world, and the competition in this segment is Tesla-like--with Vision being Tesla.
- Energy:TAN ETF
Whereas the EV sector has been trouncing the market, the solar sector has simply been shooting the lights out.
The solar sector’s sole pure-play ETF Invesco Solar ETF (TAN) has gained 179% YTD, a no mean feat for a fund with $2.8B in assets under management (AUM).
Whereas TAN ETF might take a breather after the torrid rally, solar stocks can still make good profits for long-term investors. After all, the entire renewable energy sector is licking its chops at the prospects of better days under a much more supportive federal government.
At this juncture, a Biden green deal still hangs in the balance with two outstanding senate runoff races in Georgia. But that doesn’t automatically mean that Biden’s green ambitions are dead in the water. Even under a Republican-dominated Senate, Biden’s government can still undertake several executive actions and changes in personnel that will have a significant impact on the renewable energy sector, particularly the solar sector.
The solar sector has emerged as the best-performing corner of the clean energy universe during the pandemic and has continued to shine after Biden was declared president-elect.
It could do even better because Biden’s first pieces of business is likely to be ordering the International Trade Commission to evaluate Trump’s Section 201 solar tariffs and possibly repeal them considering the damage they have wrought to the downstream solar industry in this country. Even partly eliminating those punitive tariffs on solar modules and inverters is expected to have tremendous positive effects on solar development.
Further, Biden has already pledged to lower or completely eliminate those unfair fossil fuel subsidies and channel the funds to renewables like solar and wind energy.
Lastly, another massive stimulus package could offer a shot in the arm of the renewable energy sector by helping create well-paying jobs in industries like solar and wind and also encourage these companies to invest in their employees.
By Alex Kimani For Safehaven.com
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