“If 2020 has proved anything, it’s that the market is impossible to predict, so that’s why I don’t try.“ This comment by Desmond Henry, a Kansas-based financial planner, to Forbes Magazine expresses the view of many investors.
This was after noting how earlier in the year, the S&P 500 had dropped over 33% during the presidential elections and the ongoing pandemic. In December of the same year, however, the S&P 500 was reaching its highest level.
This growth trend has continued, and by May of this year, the stock index had reached record highs 26 times.
In addition, more than 85% of S&P 500 listed companies exceeded their profit expectations.
With this in mind, Henry noted that it would be extremely difficult to predict what 2021 would bring.
If an expert finds it difficult to determine how to find a good investment, what chance do we normal folk stand?
The unexpected highs and lows of 2020 have brought to light the necessity of being aware of some basic investment principles. For example:
- investing in a widely diversified low cost – long-term portfolio
- performing due diligence when buying individual stocks
- only checking your investment balances occasionally.
Henry advises his clients to avoid following trends and ‘hot’ investments.
“Keep a well-diversified portfolio that can withstand the highs and lows of the market,” he says, “rather than trying to predict what’s going to happen next.”
But with 2021 well underway – there are some indications of the best stocks for investors to buy as the year crosses the halfway mark.
We’ve compiled a list of the best investments to make during a pandemic and we have found these particular investments to be highly lucrative. They give investors a chance to take advantage of a winning opportunity and make money.
Your Guide To the Latest Stock Investment Trends
Many investors are moving away from traditional stocks in large successful companies. Instead many new industries are entering the fray and may prove to be highly successful.
As seen above, the S&P 500 index has logged an annual yield well above the average of 10% per annum.
There are however some other types of stocks that have the potential to provide large returns, especially in light of the Covid-19 pandemic.
Here are just a few options if you are wondering what to invest in now.
Pharmaceutical Industry Stocks
If the vaccine rollout is successful it will be a big win for vaccine makers such as Pfizer, Moderna, and Novavax.
While many other industries saw their share prices drop amid fears of the full economic impact of Covid-19, pharmaceutical and other health care stocks did not decrease, and in some cases showed growth.
These investments may be speculative, as it depends on the effectiveness of vaccines in the long term.
The travel and tourism industry has been one of the worst-hit since the start of the pandemic.
With the enforcement of travel restrictions, airlines, hotels, and cruise lines have been severely affected by reduced revenues, long-term business uncertainty, and declining share prices.
Along with the rollout of vaccines in 2021, travel companies will begin to recover and this presents an opportunity for investors.
These do tend to be high-risk investments because of the uncertainty about the spread of coronavirus variants and vaccination rates. But regardless of the risk – some stocks do show great potential.
According to Nasdaq, some of the largest hotel chains–Marriott International, Hilton, and Wyndham Hotels and Resorts–have all shown improved market performance.
They have share price gains of 59%, 61%, and 80% respectively, beating the S&P 500 that stood at a 45% gain in March 2021.
Travel companies Airbnb, and e-Commerce based Expedia that owns Vrbo – a growing vacation rental business – could be the best stocks to consider investing in as restrictions on travel lift.
Airbnb’s revenue is projected to grow by over 40% in 2021, and 35% in 2022. Expedia is expected to show even greater growth with a 45% increase in 2021, and 40% in 2022.
Chain Restaurant Stocks
The potential for massive earnings in the chain restaurant industry was clear when share prices increased after Pfizer announced the 90% efficacy of its vaccine.
According to James Rutherford from Stephens, a financial services firm, Wendy’s Co is the one to watch in the restaurant industry in 2021.
Up to date, their shares are up 7% this year but they are flying under the radar. This presents investors with a great buying opportunity.
Their breakfast menu launch was a huge success, but their stocks are still trading at a pre-breakfast menu valuation which leaves room for expanded earnings.
For investors with a low-risk tolerance, large-cap stocks are generally able to withstand reductions in monetary and fiscal stimuli. The government has been a large driver for growth in many companies, and they face share price drops if these funds are reduced.
Large-scale caps on the other hand are able to withstand market shocks because they often have a greater financial capacity than small-value stock investments that are growth orientated.
These companies are the top 5 large-cap stocks. They are all expected to appreciate by over 20% per share between May 2020 and May 2021. Here are just two of the most popular companies to include in your portfolio.
Dubbed the king of large-cap stocks in the US, Apple tops the American exchanges and is worth more than $2 trillion.
A major factor that contributes to the brand’s top status is its impeccable balance sheet, with $69.8 billion in cash, compared to $13 billion in short-term debt.
The company generated $4.03 per share in 2020 and expects that to increase to $5.75 in 2021.
The rise in work-from-home mandates has boosted its Mac sales, the rise of 5G has increased iPhone sales, and it currently dominates the wearables. Apple’s predicted share growth stands at 28% up to May 2021.
Vertex is the leader in cystic fibrosis drugs that treat over 80,000 people worldwide. They also have treatments for diabetes type 1, inflammatory diseases, and other rare diseases.
Their predicted share growth is 33% over the next year and their drugs continue to dominate the market due to little competition, highly effective treatments, and consistent use by patients.
Their cost of debt is 3% meaning they are liquid enough to aptly handle their short-term debts.
Investing in Real Estate in 2021
Brick and mortar investments are probably the oldest and historically risk-averse investment options. Residential real estate is easily accessible and if managed well, can offer consistent earnings.
Residential real estate however can be quite risky when dealing with individual rent and mortgage payments.
Another option for people looking for high yield real estate investments is to diversify their holdings with commercial real estate (CRE).
Some types of CRE include:
- Multifamily properties
- Industrial properties
- Retail properties
Investing in commercial property offers more opportunities than residential properties and has proven to be a profitable way to diversify your investments.
Here are a few reasons why you should invest in commercial property now!
- Increased income: Compared to single-family residences, commercial properties rent for higher prices, offering investors higher earning potential.
- Less risk: Although the investment is usually higher than with a residential property, CRE is less volatile.
You can sign long-term contracts, often for three to five years that will protect your income even in the event of an economic downturn.
- Solid returns over a long period of time: Most investors have a long-term view and look to lower their risk by holding assets over time.
CRE provides predictable returns with a steady cash flow. Over 20 years, the average annual rate of return of CRE is around 9.5% that is higher than the S&P 500’s 8.6%.
- Leverage: Many CRE owners have a mortgage on their properties and as they are likely to appreciate, the investor can leverage their investment dollar, and at the same time build equity.
As per Forbes’ calculations, if a property is bought with 20% equity, and 80% debt, the value only has to go up 20% to have a return of 100%.
There is however a risk of foreclosure so investors must ensure enough rental cash flow to service the mortgage payments.
- Tax benefits: A reason many people invest in CRE is the potential tax benefits. Depreciating the value of a property helps reduce the annual taxable income.
In reality, well-located properties should appreciate, but for tax purposes, depreciating the value over time offers a unique opportunity compared to other investments.
- Offset effects of inflation: Because property rents can be adjusted upwards with a rise in inflation, owning real estate is a lucrative investment.
This is in comparison to stocks or bonds that could have diminished returns with increased inflation.
When deciding on what to invest in now, it is helpful to understand the risks associated with each type of investment.
Property syndication is an ideal way for investors to enter the 2021 commercial real estate market
Let’s take a closer look at this form of investment.
Property Syndication in 2021
Property syndication is a type of property investment where money from a pool of investors is used to buy an income-producing property.
As a passive investor, all you need to do is invest funds in a piece of real estate for a specified return.
Syndication is a way for you to invest in larger commercial properties that many individuals would not be able to afford by themselves.
It saves you the trouble of raising capital as well as having to deal with property management and rent collection.
One of the most important factors to consider is the person or group you choose to invest with, and how they manage the project.
With a trusted, well-qualified organization, property syndication could become a cash cow for you this year.
Bolster your portfolio or start your career as a passive investor today!