5 unstoppable trends to invest $1,000 in for 2021
The finish line is finally in sight. In 17 days the curtains will (hopefully) close on 2020, and we look forward to a brighter year in 2021.
The same goes for the investment community. Although the S&P500 is on track for a double-digit gain this year, it’s been anything but smooth sailing. The year ahead is expected to see the rollout of coronavirus disease 2019 (COVID-19) vaccines, the drawdown of federal stimulus funds, and the perpetuation of historically low interest rates. It’s a perfect scenario for stocks to thrive under a new president.
However, throwing a dart at the financial section of the newspaper is not a good strategy for stock picking. If you want to make serious bank in 2021, you should seriously consider taking $1,000 and putting it to work in these five unstoppable trends.
1. American Cannabis
In case you haven’t been paying attention, North American marijuana stocks have been hot for much of the year. But when given the choice, US pot stocks have a much larger market at their disposal, with far fewer barriers.
There’s virtually no chance of federal cannabis legalization in the United States before 2023 (unless the Democrats win both Georgia Senate elections in January), and state-level legalizations are piling up. While the federal government signals that it will take a hands-off approach to state-level regulation, there’s not much standing in the way of U.S. cannabis stocks.
For instance, Green Thumb Industries (GTBIF -3.19%) is expected to be highly profitable on a full-year basis in 2021. Green Thumb has 50 operational dispensaries, but holds licenses to open up to 96 in a dozen states. In particular, Green Thumb has chosen to focus on Nevada, which is expected to lead the nation in per capita cannabis spending by mid-decade, and Illinois, a potential $1 billion market. dollars that waved the green flag on adult-use sales on January 1. , 2020.
One of the many things we learned in 2020 is that cybersecurity is not an option. Rather, it’s a basic service that businesses of all sizes will need to get ahead. As the world becomes more digital, the responsibility to protect business and consumer data is going to fall on cybersecurity companies.
According to Grand View Research, the global cybersecurity market is expected to grow 10% annually, reaching $326.4 billion in sales by 2027. It may not be the fastest growing industry in 2021, nor in the next two years; but it has the safest floor of any high-growth industry.
One name that really excites me here is CrowdStrike Holdings (CRWD -3.11%). CrowdStrike’s cloud-native Falcon platform is less expensive than on-premises security solutions and is responsible for monitoring over 3 trillion events per week. Recently, the company announced that 61% of its customers now have at least four cloud module subscriptions, which has more than doubled from 27% three years ago. Treat any significant pullback as a buying opportunity.
3. Personalized/precision medicine
Even if a slew of successful vaccines bring the pandemic to an end in 2021, it’s pretty clear that healthcare services designed to personalize the treatment process and improve convenience are going to stay hot for a long time.
While estimates vary on Wall Street, most analysts expect global precision medicine growth of 10-12% per year over the next five to seven years. Again, not the fastest growing industry, but one with exceptionally secure ground.
A look at the operational performance of the telemedicine company Teladoc Health (TDOC -2.70%) shows how powerful and enduring the precision medicine trend can be. Teladoc has seen virtual visits more than triple compared to the prior year period during the COVID-19 crisis. Yet sales grew at a compound annual rate of 74% between 2013 and 2019. With Teladoc’s acquisition of applied health signals company Livongo Health in a cash and stock deal, it will now be able to remotely monitor patients with chronic conditions, connect patients virtually with physicians and easily cross-promote its products.
4. Cloud infrastructure
Another smart way to put $1,000 to work in 2021 is to invest in cloud infrastructure stocks. I have no doubt that we will see all facets of the cloud continue to see inflows next year. But in the wake of the pandemic, companies have realized how important it is to have an online presence and how crucial data sharing and remote working can be. That’s why the building blocks of the cloud are going to be such a hot commodity next year.
Last year, IDC released a five-year forecast for the growth of public cloud services and infrastructure, calling for a compound annual growth rate (CAGR) of 22.3% between 2019 and 2023. Specifically, Infrastructure-as-a-service stocks are expected to be the fastest growing trend in the cloud (a CAGR of 32%).
However Amazon is the undisputed market share leader in cloud infrastructure services, it is Alphabet (GOOG 0.08%) (GOOGL 0.09%) that could offer the best growth potential. Alphabet’s Google Cloud is growing at a much faster rate than Amazon Web Services. Google Cloud also generates much better margins for Alphabet than its ad revenue. Eventually, these strengthened margins should seriously inflate its operating cash flow.
5. Gold diggers
You may not think gold stocks are unstoppable, but in 2021 they could seriously shock Wall Street. With nearly $17 trillion of high quality global debt bearing negative yield and the Fed launching an unlimited quantitative easing program to support the US financial market, this has created the perfect scenario for physical gold to shine.
At the same time, we have seen gold miners spend the last five to seven years reducing their net debt by selling off non-core assets and focusing on mines that offer high-yielding ore. As the price of physical gold soars, gold stocks are in their best financial shape in a long time.
Gold Yamana (AUY 5.51%) is a name that stands to be the main beneficiary of rising gold prices. Yamana has reduced its net debt over the past five years, while binging Cerro Moro online and increasing production at its Canadian Malartic mine, where it has a 50% stake. Yamana’s operating cash flow is expected to soar in 2021 as its production of gold equivalent ounces increases in double digits and exceeds one million.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Sean Williams owns shares of Amazon and Teladoc Health. The Motley Fool owns shares and recommends Alphabet (A shares), Alphabet (C shares), Amazon, CrowdStrike Holdings, Inc., Green Thumb Industries and Teladoc Health and recommends the following options: $1,940 short calls on Amazon in January 2022 and Long January 2022 Calls for $1920 on Amazon. The Motley Fool has a disclosure policy.