Let’s admit it. It’s hard to think about anything other than the coronavirus and its impact on our lives these days.
But as traders, it’s important to dial into the market sentiment across the world as investors gear up to take positions in the markets during what is expected to be a sustained period of optimism.
Astute traders need to consider which stocks show potential for 2021 as the world positions itself for a year of recovery that will be defining for businesses and investors across the world.
Here’s a look at what we can expect for these large-cap stocks this year.
Home Depot (.HD) – Defining The Pandemic
The home improvement retail giant Home Depot is one of the stocks that defined the pandemic in 2020.
As the virus rapidly spread during the early part of the year, consumers flocked to Home Depot’s 2,200 stores across the US to satisfy their “nesting instinct” and prepare for extended periods in their homes.
In-store sales rose by 24.6% as people invested in their houses to make them better suit their new lives, converting spare rooms into home offices, garages into gyms, and bedrooms into home classrooms, not to mention sprucing up their garden areas to make them a more relaxing escape during this challenging year. Online sales also soared a whopping 80% year on year.
As an added strength, Home Depot enjoys a reputation as one of the main purveyors of protective equipment (PPE), which will continue to enjoy high sales next year.
Home Depot’s strong performance during “normal” times, paired with its even stronger performance during crises like pandemics and natural disasters, is encouraging as the company seeks to build on its stellar performance of late.
Analysts see sustained interest in Home Depot during the year of recovery in 2021 as the psychological impact and practices developed during the pandemic sustain.
The awareness generated by the pandemic, convenient locations across swaths of the United States, and the continued uptick in demand for home improvement and PPE look set to make Home Depot a continued star stock heading into the new year.
Microsoft (.MSFT) – Business & Gaming Sectors Soar
Consumer electronic companies have been performing well during this pandemic. And while Apple and Amazon have enjoyed record stock prices, it’s Microsoft that’s perhaps flown a little under the radar and deserves a closer look heading into the new year.
The business world runs primarily on Microsoft. Alternative platforms don’t even come close to challenging Microsoft Office, which is now offered as a SaaS subscription that anyone can buy and use from the comfort of their home. With so many regions across the world still very much in work-from-home mode, this consistent revenue stream has become even more relevant.
To add its utter dominance in the business space, Microsoft is also releasing the newest version of the Xbox console to compete with the Sony Playstation 5. Purchases of consoles and games have skyrocketed during the lockdown, with Microsoft itself seeing a 30% growth in revenue from Xbox content and services last quarter. This trend is expected to carry over into 2021 as millions of gamers around the world hold out with bated breath and heavy pockets for the release of the Xbox challenger.
Furthermore, the company continues to hold its own in the gadgets and electronics market.
The company’s serious attempt at a purchase of TikTok’s operations also showed investors the scale of its ambition as it looked to strategically acquire into a dominant position in the social media space. Though the acquisition fell through, traders may be encouraged by the statement of intent from Microsoft given how legitimate its interest was.
Microsoft will certainly be looking to carry that vision into 2021 as it seeks to take on the likes of Facebook, Instagram and ByteDance.
Given its very consistent earnings growth trajectory and strong visibility, backed by strong free cash flow generation, many analysts are taking the view that the stock is undervalued and worth considering.
JPMorgan Chase (.JPM) – A Sleeping Giant
Shares in JPMorgan Chase (JPM), the financial services giant, have fallen 13% in 2020.
The stock trades on par with typical big banks, and the fall in its stock price may be the perfect setup for a slew of major buy positions next year. America’s biggest bank looks well-positioned for an economic rebound, and could be one of the best stocks to keep an eye on for 2021.
Vaccine distribution is widely expected to be the linchpin event to define the overall performance of stocks that have taken a hit this year. And even with widespread vaccine availability still months away, optimism over the release of several effective vaccines has already sparked a rally among many stocks that suffered in 2020 but now seem to be at bargain prices.
In addition, analysts are expecting that recovery for these stocks is likely to come during the early part of the year, as any lingering pessimism begins to dissipate amidst vaccine rollouts. We’re expecting many investors to pile in to take advantage of the currently undervalued megabank.
Amazon (.AMZN) – Set To Build On 2020 Dominance
Amazon comes as the most obvious pick on our list. Yet with so many unknowns heading into the new year, you’ll want to add at least a couple of known winners to your trading portfolio.
A few lots of Amazon stock sprinkled in with your robust-gains picks will help you sleep easier at night.
Today, Amazon stock comes at a premium, having enjoyed a stellar year throughout the pandemic. But this doesn’t necessarily mean that the price is overbought.
Amazon has plenty of significant revenue streams to rely on. Its strong showing, due to increased demand for home-delivery, looks set to continue at least throughout the first half of 2021. Indeed, the crisis has only strengthened the case for Amazon stocks.
Continued work-from-home policies across hundreds of thousands of companies around the world also benefit the company’s AWS cloud platform (Amazon Web Services), which has played a critical role in hosting work-from-home applications.
As if that wasn’t enough, Amazon’s retail grocery chains, where customers can pick up and purchase goods without ever interacting with store employees or touching self-service screens, look set to increasingly challenge the likes of Aldi as consumers opt for safer, contact-free experiences while shopping for consumables.
Analysts have predicted that a price per share for AMZN at $4,000 is a realistic target price in 2021.
There you have it. Four important stocks you’ll want to monitor as we head into 2021.
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