Most of us called in the new year in a socially distant way – often from our sofas. We toast with friends – glass of eggnog that touched virtually – through video calls. And we are happy to leave 2020 behind. But when planning where to invest in 2021, it is important to keep that window open for the past year. To succeed now and beyond, we must not forget everything that happened in the difficult year of 2020.
In 2020, investors faced an entirely new and unexpected situation: the coronavirus pandemic. Its effect on the stock market was temporary – the market plummeted and then recovered. But its effect on how companies do business and how consumers operate continues. And the crisis itself continues. So, understanding that, let’s talk about the best way to invest $ 100,000 now. (And if you don’t have that amount, you can reduce this plan to suit your budget.)
Image source: Getty Images.
The ongoing crisis
First, I would invest $ 50,000 in a basket of companies that will not be harmed by the ongoing health crisis. Despite the launch of a vaccination program, cases of COVID-19 are increasing in the USA. Even if you are investing in the long term, this element is important. Because? Because we don’t know how long the situation will last – and we don’t know the total effect it will have on the companies that suffer the most.
Considering that, I would invest $ 10,000 each in Abbott Laboratories (NYSE: ABT), Teladoc Health (NYSE: TDOC), Vertex Pharmaceuticals (NASDAQ: VRTX), Amazon (NASDAQ: AMZN)and Target (NYSE: TGT). The U.S. Food and Drug Administration (FDA) has granted Emergency Use Authorization (USA) for eight of Abbott’s coronavirus tests – including a new fast and inexpensive home test. With President-elect Joe Biden’s support of testing, we should expect an increase in revenue. Teladoc, a leader in virtual medical consultations, saw quarterly revenue soar to three digits last year. Most importantly, the trend continued even when doctors’ offices were reopened and coronavirus cases declined.
Vertex specializes in cystic fibrosis treatments. In fact, the company predicts that it will continue to be the leader in this market until at least the late 2030s. Even during the coronavirus, Vertex managed to initiate new patients in its treatments and, in the most recent quarter, increased its revenue forecast from product for the entire year. Market leadership and strength in difficult times make me confident about Vertex for the long term.
Rewarding investors
Amazon and Target won last year for their ability to serve customers online with essential items like groceries and cleaning products, as well as general merchandise. Amazon’s delivery system and Target’s same day pickup and delivery sealed the deal. The shift from consumer to online shopping was not temporary, however. Analysts expect online retail sales to rise steadily over the next few years – with or without coronavirus. Therefore, these companies – and their shares – will continue to win.
Now, let’s add some dividend stocks to the mix. Here, I look for Dividend Aristocrats, or those companies that have increased their dividends annually, at least for the past 25 years. This record indicates that they have continued financial strength and a willingness to reward investors – important factors when looking for a steady return on a stock. Abbott and Target, which we have already chosen, are Dividend aristocrats. I would also add Chlorox (NYSE: CLX) and McDonalds (NYSE: MCD), with an investment of $ 10,000 each.
CLX dividend data by YCharts
Clorox sales soared in 2020, led by demand for its cleaning products. This level of demand may not last beyond the health crisis. But I hope that revenue and profit will continue to rise gradually. Both metrics have increased in most years over the past decade. As for McDonald’s, the company’s drive-thru strength should help you, as consumers continue to prefer contactless experiences.
Two bets
Next, I would place two bets – on the manufacturer of a coronavirus treatment and on a car manufacturer. While manufacturers of vaccines against coronavirus soared last year, companies that develop treatments have been left behind. Regeneron (NASDAQ: REGN), for example, rose 29%. (In comparison, the vaccine developer Novavax (NASDAQ: NVAX) rose by more than 2,000%.) In November, the FDA granted Regeneron’s antibody cocktail a USA for the treatment of certain coronavirus patients. Regeneron can win as its cocktail increases revenue in the short term, and in the long run, its seven marketed products can increase revenue and, eventually, share prices. I would invest $ 10,000 in Regeneron.
Teslain (NASDAQ: TSLA) the stock price continues to rise. But also the demand for their cars. Revenue has been increasing for about six years and the annual loss is gradually decreasing.
TSLA revenue data (annual) by YCharts
And even in 2020 pressured by the coronavirus outbreak, Tesla managed to deliver around 500,000 vehicles, fulfilling its guidance. As the health crisis subsides, demand and production are likely to increase. So, I would invest $ 10,000 in this stock now.
And finally, we are left with $ 10,000. I would keep this cash available for purchase opportunities that arise in the coming months. As we know, the investment world is full of surprises – so it is a good idea to have funds ready for action at any time.