The finish line is finally in sight. In 17 days, the curtains will (thankfully) close on 2020, and we’ll be looking forward to a brighter year in 2021.
The same is true for the investment community. Though the S&P 500 is on track to deliver a double-digit gain this year, it’s been anything but smooth sailing. The upcoming year should feature the rollout of coronavirus disease 2019 (COVID-19) vaccines, federal stimulus dollars being put to work, and the perpetuation of historically low interest rates. It’s a perfect scenario for equities to thrive under a new president.
Nevertheless, throwing a dart at the financial section of the newspaper isn’t an advisable strategy for stock-picking. If you want to make some serious bank in 2021, you should strongly consider taking $1,000 and putting it to work in these five unstoppable trends.
1. U.S. marijuana
In case you haven’t been paying attention, North American marijuana stocks have been blazing hot throughout much of the year. But when given a choice, U.S. pot stocks have a substantially larger market at their disposal, with far fewer hurdles.
There’s virtually no chance of federal cannabis legalization in the U.S. prior to 2023 (short of Democrats winning both Georgia Senate runoffs in January), and state-level legalizations are piling up. With the federal government signaling that it’ll take a hands-off approach to state-level regulation, there’s not much standing in the way of U.S. cannabis stocks.
For example, Green Thumb Industries (OTC:GTBIF) should be very profitable on a full-year basis in 2021. Green Thumb has 50 operational dispensaries, but holds licenses to open as many as 96 in a dozen states. In particular, Green Thumb has chosen to focus on Nevada, which should lead the country in cannabis spending per capita by mid-decade, and Illinois, a potential billion-dollar market that waved the green flag on adult-use sales on Jan, 1, 2020.
One of the many things we’ve learned in 2020 is that cybersecurity isn’t an option. Rather, it’s a basic-need service that businesses of all sizes will need moving forward. As the world becomes more digital, the onus of protecting enterprise and consumer data is going to fall on cybersecurity companies.
According to Grand View Research, the global cybersecurity market is forecast to grow by 10% annually, hitting $326.4 billion in sales by 2027. This may not be the fastest-growing industry in 2021, or over the next couple of years; but it has the safest floor of any high-growth industry.
A name that really excites me here is CrowdStrike Holdings (NASDAQ:CRWD). CrowdStrike’s cloud-native Falcon platform is cheaper 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 four or more cloud module subscriptions, which has more than doubled from 27% three years ago. Consider any significant pullback a buying opportunity.
3. Personalized/precision medicine
Even if a multitude of successful vaccines brings a halt to the pandemic in 2021, it’s pretty clear that healthcare services designed to personalize the treatment process and improve convenience are going to remain hot for a long time to come.
Though estimates vary on Wall Street, most analysts are calling for global precision medicine growth of 10% to 12% annually over the next five to seven years. Again, not the fastest growing industry, but one with an exceptionally safe floor.
A quick look at the operating performance of telemedicine company Teladoc Health (NYSE:TDOC) shows how powerful and sustainable the precision medicine trend can be. Teladoc has seen virtual visits more than triple from the prior-year period during the COVID-19 crisis. Yet, sales grew by a compound annual rate of 74% between 2013 and 2019. With Teladoc acquiring applied health signals company Livongo Health in a cash-and-stock deal, it’ll now be able to remotely monitor patients with chronic illnesses, connect patients virtually with physicians, and cross-promote its products with ease.
4. Cloud infrastructure
Another smart way to put $1,000 to work in 2021 is by investing in cloud infrastructure stocks. I don’t doubt we’re going to see all facets of the cloud continue to see money inflows next year. But in the wake of the pandemic, businesses have realized how important it is to have an online presence, and how crucial data-sharing and remote work can be. That’s why the building blocks of the cloud are going to be such a hot commodity in next year.
Last year, IDC released a five-year forecast on public cloud service and infrastructure growth, 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 fastest growing trend within the cloud (a CAGR of 32%.)
Though Amazon is the clear market share leader of cloud infrastructure services, it’s Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) that might offer the best growth potential. Alphabet’s Google Cloud is growing at a much faster pace than Amazon Web Services. Google Cloud also generates considerably better margins for Alphabet than its ad-based revenue. Over time, these juiced up margins should seriously expand its operating cash flow.
5. Gold miners
You might not think of gold stocks as being unstoppable, but in 2021 they could seriously shock Wall Street. With close to $17 trillion in global investment-grade debt bearing a negative yield and the Fed unleashing an unlimited quantitative easing program to support the U.S. financial market, it’s created the perfect scenario for physical gold to shine.
At the same time, we’ve watched gold miners spend the past five to seven years reducing their net debt by selling noncore assets and focusing on mines that offer high-yield ore. As the price of physical gold spikes, gold stocks are enjoying their best financial situation in a long time.
Yamana Gold (NYSE:AUY) is one name that should be a prime beneficiary of higher gold prices. Yamana has slashed its net debt over the past five years, all while binging Cerro Moro online and increasing output at its Canadian Malartic mine, where it owns a 50% stake. Yamana’s operating cash flow should rocket higher in 2021 as its gold equivalent ounce production grows by low double digits and tops 1 million.