The Best Stocks To Buy Right Now (March 2021)
What a year!?! The stock market has increased over 75% in the past 12 months and left many investors scratching their heads, asking the question “What do we do now?” Since the market is near all-time highs, should you sell? Will it continue its atmospheric rise and we should buy? While I don’t know if I have those answers, I can offer some investing frameworks for this market and share some stock picks that I’m actively adding to my portfolio.
Risk & Reward
The principles of investing revolve around this idea of risk and reward. If you want to take on very low risk, then you will get a very low reward (~1%); but if you want to take on high risk, you could gain major reward (+20%) or suffer major loss (-20%). The key to successful investing is minimizing your risk while maximizing your reward- easier said than done! In this market, a lot of the sure-fire stocks have been taken and so my approach right now is to take on a low risk, moderate reward mindset. What are low risk companies that you can invest in that will give you a moderate reward? These are companies where I see the upside being 15–40% and the downside being 10–20% depending on market conditions.
Lasting Covid Impact
I don’t have to convince anyone that Covid has dramatically affected our world over the past year, but the question remains: what will the lasting impact be? What aspects of societal behavior have changed permanently? Or will at least be around for the next 3–5 years? Your answer to these questions will determine how you invest and if you can beat the market by understanding and forecasting consumer behavior.
I’m no guru, but here are three trends that I see likely to continue for the next few years:
1. A concern for health and sanitation
2. The ability to work remotely
3. Eating and cooking in the home
Health and Sanitation (Buy CLX)
I don’t think there has ever been a time when there’s been such a global awareness of personal health, germs and sanitation. The habits and thoughts built over the past year are not going away anytime soon. Regarding investing, the healthcare sector has been a fantastic place to invest over the past year and I would conclude that it will continue to be a strong sector. My stock pick however is more focused on the sanitation and cleaning side of the market, and that would be Clorox — maker of Clorox wipes and cleaning supplies.
After Covid, Clorox’s revenues went up 8% and their net income up 14% and I don’t see those numbers dropping dramatically anytime soon. Just think about all the restaurants and schools opening up and buying Clorox products. Cleaning and sanitation will be a necessarily high value for businesses in the coming years. Everyone knew this last summer and the stock shot up to $240 last August but has since dropped to $180 as investors took profits and assumed that maybe Clorox was just a temporary covid trade. I really like Clorox at this price, the P/E ratio is under 20 and the dividend is above 2% — looks like a low risk, moderate reward choice to me.
Other stocks to consider: PG, KMB, CL, CVS
Working Remotely (Buy MSFT )
One of the largest learnings from Covid has been the realization that millions of people can do their jobs effectively from home. Facebook, Twitter, Square, Ford and several other large companies have already declared that their employees can work from home indefinitely if they so choose. There’s a running debate on how effective this will be, but regardless, it is happening. When people work from home, they rely solely on technology to connect them to their work. They might use a laptop made by Apple, a wifi router made by Netgear, and services provided by Amazon, Microsoft, Salesforce and Zoom. All of these technology stocks have been on fire!
Even with a return or partial return to work in the office, I believe these technology services will still be in demand. If you are a company or school, are you going to cancel your Zoom subscription anytime soon? Probably not. There are so many quality tech stocks to choose from in this market, but I would suggest these: MSFT, AMZN, ZM. All of these stocks are trading at a discount from their highs and have experienced double-digit sales growth over the past year and I expect their products and services to continue to be in high demand in the coming years.
Other stocks to consider: GOOG, CRM, NVDA
Cooking at Home (Buy CAG and GIS)
If millions of people are working from home rather than the office, what does that mean for their consumer behavior? For me, rather than picking up coffee and a pastry from Starbucks, I’m drinking Keurig and eating cereal at home… rather than having lunch at a downtown deli, I’m making a sandwich or heating up a frozen meal… rather than munching at the vending machines, I’m buying my own snacks and consuming them at home. Time will tell how much of an impact this will have on the market, but I do believe it will be lasting.
There are a variety of ways to play this trend, but two of my favorites are Conagra (CAG) and General Mills (GIS). Conagra is a packaged foods company with brands such as Healthy Choice, Marie Callendars, Hunt’s Ketchup and Jiffy Pop. In the past year, their revenue is up 15% and net income is up 24%, which is incredible for a consumer staples company! General Mills is the beloved cereal maker of Cheerios and Cinnamon Toast Crunch, but they also make Haagen-Dazs, Nature Valley, Yoplait and other well-known consumer food products. In the past year, their revenue is up 4.5% and net income is up 24% with a P/E of 15 which is comparatively cheap in this market. Both Conagra and General Mills have a dividend over 3% which further insulates the risk associated with these investments.
Other stocks to consider: KHC, SJM, MDLZ
Whether or not you agree with these particular stock picks, hopefully this article provides a framework to think about investing and how you can put your money to work in this crazy market.
