With so much of the news centered on the novel coronavirus, it’s hard to think about anything else. But as difficult as it is to conceptualize at the moment, there is life after corona. Thus, astute investors should consider potential top stocks to buy for 2021 and the years beyond that.
Given this long-term framework, I’m going to mostly avoid speculative companies that have a one-track mind, so to speak. Of course, the pandemic has given life to several no-name organizations and those that were on the brink of collapse. But just how viable will they be once we enter a new normal without the pernicious threat of Covid-19? It’s this question that drives our discussion of the top stocks to buy for next year.
For the purpose of this discussion, I’m running on the assumption that the coronavirus and the ensuing governmental response will leave a lasting, if not permanent impact to those who are alive and cognizant today. We saw a similar dynamic play out during the Great Depression, with survivors taking a much more draconian approach to personal finance.
In the new normal, Americans will likely be more mindful of their cash flow. However, we also received a harsh lesson in health and protective measures that we may never forget. Thus, top stocks to buy over the long run should incorporate industries that cater to this demand.
But it’s not all about protecting against microbes. The pandemic has brought disruptions and forced changes to how we work, live and consume. Therefore, the list of top stocks to buy for 2021 is an eclectic one:
- 3M (NYSE:MMM)
- Home Depot (NYSE:HD)
- Costco (NASDAQ:COST)
- Amazon (NASDAQ:AMZN)
- Microsoft (NASDAQ:MSFT)
- Johnson & Johnson (NYSE:JNJ)
- GrubHub (NYSE:GRUB)
- K12 Inc. (NYSE:LRN)
- IBM (NYSE:IBM)
- Toyota (NYSE:TM)
Best of all, most of these companies have viable businesses and strong consumer demand that extend outside the corona catalyst. Therefore, you may consider these 10 top stocks to buy with a measure of confidence.
Top Stocks to Buy and Hold Into 2021: 3M (MMM)
One of the first names to pop up as top stocks to buy during this pandemic was industrial and applied science firm 3M. In recent years, MMM stock struggled for relevancy. Simply, the business world had changed. Giant conglomerates like 3M were confusing and unwieldy. But that suddenly changed when the new virus came knocking.
Since the Sep. 11 attacks, Americans have been used to fighting a visible, tangible enemy. Now, we’re facing a microscopic threat that has taken more lives than any conflict in the post-World War II era. Instinctively, and despite initial urges to the contrary, people rushed to hardware stores to stock up on N95 respirators.
What makes me believe that MMM stock will be a long-term buy going into 2021, though, is the lingering psychological impact. Research has demonstrated that economic crises can impose permanent behavior changes on young people who suffer through such periods. By deduction, I believe we all will carry at least some mental scars from this crisis. Cynically, this is a net positive for 3M.
Home Depot (HD)
Going along the same lines of psychological impact, I see sustained interest in Home Depot. During the initial wave of the coronavirus, consumers naturally shifted their spending from discretionary purchases to necessary goods. Basically, this translated to food, water, beer and toilet paper — you know, the essentials.
But most of the retail personal protective equipment (PPE) are sold at hardware stores like Home Depot. Thus, HD stock benefited from the panicked frenzy. As well, shares are continuing to enjoy positive momentum and I believe this will carry into next year.
Although the pandemic is a catalyst, it’s not the only one. For example, Home Depot received a free, organic opportunity to market its alternative delivery services. Let me tell you — I’ve used HD’s ship-from-store service several times during this crisis and I’m very impressed with the speed and convenience. I’ll definitely take advantage of it next time, pandemic or not.
This thought process being repeated a million times over is what drives the case for Home Depot being one of the top stocks to buy.
Also, crises happen all the time. This year, we’re encountering a record-breaking hurricane season. Next year, who knows what could happen? Likely, though, Home Depot will be around to help you, which is a good reason to trust HD stock.
During this outbreak, which has led to on-again, off-again shutdown orders, putting Costco on a list of top stocks to buy is so obvious, it’s almost criminal. However, the point of this article is to consider names that have a long pathway to success. In that context, I don’t want to go crazy. Instead, I’ll load up with reliable plays like COST stock.
Of course, Costco is incredibly relevant right now because of lingering fears of the coronavirus. Mainly, if the Covid-19 pandemic is so infectious during the summer season, what will it look like in the winter? Also, White House health advisor Dr. Anthony Fauci poured some cold water on people’s high expectations for a vaccine. Although one could come about, it may not be overwhelmingly effective, Fauci warned.
But the beauty of COST stock is that it’s a great name to have in your portfolio under other circumstances. Since the average Costco member’s annual salary is close to $100,000, you can reasonably assume that its core customers are financially stable and working from home.
Plus, you might even see pent-up demand following the pandemic. In good times, Costco is a shopaholic’s fantasy come true.
Often listed in multiple stories featuring top stocks to buy, Amazon is another obvious pick. It also arouses controversy for its disruptive ways and dominance of any market it enters. Yet with so many unknowns, you want to go with known winners. Even if they may not deliver the robust gains you’ll get from a high-flying biotechnology firm, AMZN stock will at least make you sleep easier at night.
Today, that confidence comes at a premium. And I’ll bet that this security will become more important as we head toward 2021. While we desperately want this virus to fade away, it’s not like the clean up process is something to look forward to. At least with a position in AMZN stock, you’ll have many pertinent revenue streams to depend on.
Clearly, Amazon’s core, contactless e-commerce business isn’t going away anytime soon. Indeed, the crisis has only bolstered the case for AMZN stock. In addition, Amazon has its AWS cloud platform, which has become critical as the nation quickly turned to work-from-home applications.
If that wasn’t enough, Amazon is probably going to take over the world someday. So, put it on your list of top stocks to buy and sleep easy.
Consumer electronic companies have been hot stuff throughout this pandemic. For instance, Apple (NASDAQ:AAPL) has soared on strong demand, as well as its possible physical electric vehicle project. Even my old stomping grounds Sony (NYSE:SNE) has been one of the surprising hot stocks to buy this year. However, it’s Microsoft that deserves some looks too, especially as a holding to carry into next year.
Primarily, the business world runs on Microsoft. Say what you want about alternative platforms; when it comes to office work, nothing beats Microsoft Office. Now offered as a Service as a Subscription platform, MSFT stock should be backed by consistent revenue streams. Also, with the U.S. still very much in work-from-home mode, this consumer tech giant has become even more relevant.
Next, Microsoft can more than hold its own with the trinkets and gadgets that keep us mindlessly glued to the screen. Furthermore, the company is releasing its next iteration of the Xbox at the end of this year to compete with the Sony PlayStation 5. As you know, video games have been hot stuff during the lockdowns. And that sentiment will surely carry over into 2021 and well beyond.
Johnson & Johnson (JNJ)
Not surprisingly, the biotech space produced several hot stocks to buy because of the race to develop a coronavirus vaccine. But the risk in chasing these names is that you don’t know how they’ll fare post-pandemic. In fact, you don’t know which biotech will produce a viable product. For these and other reasons, I believe investors are better served with healthcare stalwart Johnson & Johnson.
Don’t get me wrong – JNJ stock is a boring play. Not only that, some incentivize exists to take a bet on speculative biotechs. One concern investors may have about mass-scale vaccine production is the issue of liability. However, according to an email sent to me by Marc Gottlieb, a partner at Ortoli Rosenstadt LLP, the core issue stems from “whether what went wrong was foreseeable and preventable and the cost benefit analysis in making it a safer product.”
So long as vaccine companies enacted proper protocols and acted competently and ethically, there shouldn’t be a problem. Still, it’s fair to wonder about longer-term viability for several of the vaccine players.
With Johnson & Johnson, you don’t have that problem thanks to its myriad healthcare applications. Plus, JNJ stock has its own Covid-19 tailwind.
I’ll freely admit that out of this list of top stocks to buy for the long haul, GrubHub carries many unknowns. And unknowns are not what you want, especially after shares have already soared in the year thus far.
As you know, the restaurant industry has arguably been the worst-hit sector. With the coronavirus infections still elevated in many parts of the U.S., going to restaurants for most folks was just out of the cards. However, this boosted the case for delivery services, invariably lifting GRUB stock.
What makes shares so tricky at current prices is the longer-term impact that the pandemic will have. According to a BusinessInsiderreport, 85% of independent restaurants may permanently close by the end of 2020. Some segments, such as the all-you-can-eat buffet, are probably busted for years to come.
On one end, that doesn’t help support the bullish thesis of GRUB stock due to revenue channel evaporation. But on the other end, deliveries could become a much more important component of the eatery business. As I mentioned earlier, this pandemic may scar Americans on a permanent or semi-permanent basis.
If so, GRUB could cynically be a good deal.
K12 Inc. (LRN)
With the coronavirus threatening the reopening of schools, K12 Inc. has become one of the top stocks to buy this year and it shows. Personally, I’d like to see LRN stock tick down a little bit before engaging it. Technically, shares are overbought. But if that discount comes around, LRN is likely a name you can trust going into 2021.
I say this because parents face a brutal choice. In my opinion, there’s no substitute for in-person schooling. This is an opportunity for children and teenagers to learn valuable social skills that will serve them well for life. At the same time, you want to protect your offspring. With still so little known about Covid-19, I think it’s ridiculous to state with confidence that schools can reopen without problems.
Nevertheless, that choice may be taken away from parents if the coronavirus worsens this fall and winter seasons. Don’t misread this — I’m not saying one way or the other that it will. However, the optimistic approach hasn’t served us well. Thus, if schools do shut down broadly, that’s your signal to buy LRN stock.
For years, IBM has been a slow and boring investment. But because of the new normal, this tech icon may turn out to be one of the top stocks to buy for next year and possibly beyond that. Gradually ditching its legacy businesses, “Big Blue” is focusing on relevant matters, such as cloud computing and cybersecurity. Obviously, with the work-from-home movement, these two should be great catalysts for IBM stock.
But I’m including the tech firm on this list for another reason: artificial intelligence. Specifically, I believe that IBM’s question answering platform Watson could become a huge factor post-pandemic. Following the initial devastation of Covid-19, millions of the suddenly jobless found themselves getting locked out of their state benefits offices. Further, many people called into other institutions for answers and found nothing but busy dial tones.
To be fair, AI is not yet a perfect solution but here’s an anecdote. During this crisis, I called AAA for car battery service. Rather than speaking with a human operator, I placed my service request through an AI platform. The order went through without a hitch. This is the kind of opportunity that IBM can market, which bodes well for IBM stock.
To the surprise of many InvestorPlace readers, I finally saw the light with American cars, specifically Ford (NYSE:F). The iconic automaker’s push toward electric vehicles should make things very interesting for the relatively young market. But if you’re looking for an interesting alternative, you may want to consider Toyota.
At what was supposed to be the 2020 Summer Olympics, Toyota was scheduled to preview its solid-state battery-powered EV. Now, solid-state batteries represent the holy grail of EV batteries, primarily because they’re fast charging. However, solid states do have one critical disadvantage: a short life span. Thus, you may not want to prematurely declare Toyota as one of the top stocks to buy.
In addition, the current manufacturing process for solid states is cumbersome and doesn’t lend itself to mass manufacturing. Still, Toyota has an extra year (hopefully) to fine tune its innovation. If it does, that could see TM stock go berserk.
That said, I’m not going to hold my breath. What I do find interesting is that Toyota is unwilling to play second fiddle in the EV race. Plus, the brand evokes quality, reliability and value, something that will appeal to consumers, especially if we suffer a prolonged recession. Therefore, TM stock is appealing against a longer-term framework.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long SNE and F.