And peaking of the dynamic duo, Bezos’ reign as the world’s richest person has ended. Bloomberg reported on January 7 that Elon Musk, the genius behind the electric vehicle maker, has passed the founder of the e-commerce giant, moving into the top spot with a net worth of $188.5 billion.
Imagine what you could do with that kind of money? Between them, they have a combined net worth of slightly more than $375 billion, $45 billion more than Nvidia’s (NASDAQ:NVDA) market capitalization (Nvidia would be the third company to put on my list). But these big names weren’t the biggest Nasdaq winners in 2020.
Over the past year, the Nasdaq stock with the best performance was Covid-19 vaccine candidate Novavax (NASDAQ:NVAX), up 2705% through January 7. The second and third-best performers? Celsius Holdings (NASDAQ:CELH) in the second spot, up 1224%, while third place goes to GrowGeneration (NASDAQ:GRWG), up 1061%.
Those are excellent returns, no question. But I’m not picking these stocks either.
Here are my 10 best stocks to buy on the Nasdaq right now:
- Apple (NASDAQ:AAPL)
- Adobe (NASDAQ:ADBE)
- Netflix (NASDAQ:NFLX)
- SVB Financial (NASDAQ:SIVB)
- Etsy ((NASDAQ:ETSY)
- Tractor Supply (NASDAQ:TSCO)
- Freshpet (NASDAQ:FRPT)
- Helen of Troy ((NASDAQ:HELE)
- Johnson Outdoors (NASDAQ:JOUT)
- Fluent (NASDAQ:FLNT)
I’m confident these Nasdaq stocks will deliver solid returns in 2021.
Best Stocks on the Nasdaq to Buy: Apple (AAPL)
Market Cap: $2.21 trillion
Apple chief executive officer Tim Cook got a 28% increase in his pay in fiscal year 2020, earning $14.8 million, which includes $10.7 million of a non-equity bonus. He hasn’t received any stock awards in the past three fiscal years.
But don’t feel sorry for Cook. When he became CEO in 2011, he got a ton of stock grants. In 2020, $282 million worth vested. He also got $114 million in new stock grants that he’ll be able to cash in if he stays with Apple through 2025.
Not to worry though, if you’re a shareholder.
In fiscal 2020, Apple earned $57.4 billion on $274.5 million in sales. Not bad for a year in which many of its retail stores were closed for lengthy periods. Cook’s $396 million stock grants accounted for 0.7% of its net income the past year.
I’d say he’s been worth it.
Market Cap: $229.1 billion
I’d say that Adobe is arguably one of the most underrated tech companies in America. Known for developing the PDF, it is so much more. And it continues to innovate and change with the times.
InvestorPlace’s Thomas Niel recently wrote that Adobe’s new share repurchase program should light a fire under ADBE stock, which is already on fire, having generated a one-year total return of 43.3% through January 7.
“This plan calls for $15 billion in repurchases through 2024. This comes as the company’s prior $8 billion repurchasing plan starts to wrap-up. With more than $5 billion per year in operating cash flow, and around $6 billion in cash, Adobe has more than enough to finance this aggressive buyback program,” Niel wrote on December 18.
“At today’s prices, $15 billion in buybacks represents about 6.6% of the company’s outstanding shares. While it’s no game-changer, it could help bolster returns for ADBE stock in the coming years. Especially if the company continues to deliver double-digit earnings growth.”
In the company’s first nine months of the 2020 fiscal year through Aug. 28, 2020, it repurchased 6.5 million of its shares at an average price of $350.72. Currently trading over $477, it’s already seen an excellent return on those 2020 buybacks.
As I said in the beginning, Adobe is a well-run company and that should translate to more gains in 2021.
Market Cap: $224.7 billion
Benchmark analyst Matthew Harrigan recently reiterated his sell rating on Netflix. The analyst’s target price for its stock is $412, 19% below current prices.
“Netflix’s trading correlation with other prominent Nasdaq 100 and FAAMG names has now clearly broken down as 1) confidence in its streaming exceptionalism is fading somewhat even as 2) the stay-at-home trade may be ‘very 2020’ even with some concern over how U.K. and South African virus mutations could affect COVID-19 vaccine efficacy,” Harrigan wrote on January 5.
At present, 21 analysts rate NFLX a buy, five have it overweight, 12 give it a hold, one says it’s underweight, and three, including Harrigan, have it as a sell with an average price target of $563.75.
The last time I wrote about Netflix was in October 2020, just before it announced its Q3 2020 earnings. I suggested that if you were holding for 2-3 years, paying $540 wouldn’t be a bad move. It’s been on a rollercoaster ride ever since.
The thing that jumped out at me in its earnings report was that its free cash flow (FCF) through the first nine months of its fiscal year was $2.2 billion, $3.8 billion more than in the same period in 2019.
For all of 2020, it expects FCF of $2 billion, much higher than its expectation of break-even to slightly positive. In 2021, it expects FCF of -$1 billion to break-even. I expect that they will meet this projection and then some.
It continues to underpromise and overdeliver. I like that in a stock.
SVB Financial (SIVB)
Market Cap: $22.3 billion
If you go to InvestorPlace’s homepage and search for SVB Financial’s stock symbol, you’ll see that except for a couple of stories from Louis Navellier in 2018, I’m the only one writing about this California-based innovation bank.
And that’s okay. I prefer being the exception, rather than the rule.
Flat out, Silicon Valley Bank puts most banks of any size to shame. Off to a quick start in 2021 and up 11.2%, it’s managed to deliver an annualized total return of 23.5% over the past decade, more than double Bank of America’s (NYSE:BAC) total return over the same period.
Warren Buffett might want to consider adding SIVB to his portfolio. His shareholders would appreciate the bump in returns.
On January 4, SVB Financial announced that it would pay $900 million for Boston Private Financial Holdings (NASDAQ:BPFH), a Boston-based private bank that provides banking and wealth management services for high-net-worth customers in New England and California.
Boston Private shareholders will get 0.0228 shares of SIVB for each share held along with $2.10 cash per share. Once completed, SVB Financial will have $17.7 billion in assets under management.
The deal strengthens the bank’s hold on the innovation economy. I continue to love its strategic vision and focus. It’s truly unique.
Market Cap: $21.5 billion
For the longest time, I didn’t take this one-of-a-kind arts and crafts platform seriously. It didn’t make money. Its sellers were granola-crunching hippies. Its buyers had too much time on their hands.
Big mistake on my part.
Since going public in April 2015 at $16, it’s delivered ten-fold returns for its early investors. I’m not sure how Etsy caught my attention, but it did, and now I’m solidly on the bandwagon.
Toward the end of December 2019, I discussed whether ETSY was a $40 stock or a $70 stock. I concluded it was the latter, but I still wasn’t convinced about its staying power.
“I must admit I haven’t followed Etsy as closely as I probably should have given it does have a great business model. However, you can’t follow them all,” I wrote on Dec. 23, 2019.
“At this point, I would say that Etsy stock has lost plenty in 2019, making a purchase at current prices a reasonably strong idea.”
At the time, it was trading at $44. I’m glad I was willing to give it a chance. It’s performed like a rockstar ever since.
In mid-December, my InvestorPlace colleague, Thomas Yeung, recommended ETSY stock as one of eight stocks with long-term potential. I couldn’t agree more.
However, as Yeung suggests, it isn’t cheap, at 16 times sales. You’ll want this to be one of your stocks to put in a drawer for the next decade. You’ll like what you find in 10 years.
Tractor Supply (TSCO)
Market Cap: $17.1 billion
I’ve liked the specialty retailer that caters to rural communities for a long time. I probably first wrote about it in 2011. It’s grown quite a bit since then. In December 2018, it was one of seven S&P 500 stocks I thought would continue moving higher despite trading within 10% of an all-time high.
TSCO stock didn’t let me down: it’s up 65% over 24 months, a respectable return in my books.
Like most retailers, Tractor Supply has to make the best of a bad retail situation by leaning on its digital business. In the third quarter ended Sep. 26, 2020, it had same-store sales growth of 26.8%, driven by healthy increases in average transaction count and ticket growth during the quarter.
While it doesn’t break out its e-commerce revenues, the company did say that they experienced triple-digit growth in Q3 2020. Regardless of what happens with Covid-19 in 2021, TSCO is ideally positioned to benefit.
For all of 2020, it expects to generate net income of at least $163 million on revenues of at least $2.6 billion. Its long-term targets over the next 3-5 years include net sales growth of 6-7%, same-store sales growth of 4-5%, and operating margins of at least 9.0%.
Based on trailing 12-month free cash flow of $1.11 billion and an enterprise value of $19.29 billion, it has a FCF yield of 6.0%, which puts it squarely in the growth-at-a-reasonable price camp.
As retail stocks go, you can’t go wrong over the long haul with TSCO.
Market Cap: $6.0 billion
I will always be a fan of Freshpet (NASDAQ:FRPT) because it gave me a few extra months with our cat Boo, who we adopted from a close friend who died of cancer a few years ago. Boo wasn’t eating, and skinny to begin with; my wife and I were beside ourselves trying to figure out what to do.
Then I saw something online that talked about Freshpet and how people found it helped their dogs and cats appetite. Remembering that I passed the Freshpet freezer in our local grocery store, I went and bought a couple of tubes of Freshpet Select Chicken & Beef Recipe. Boo devoured the cat food and immediately was a different cat.
As an opinion writer, I’m often writing about stocks whose products I don’t use and will never use, forming opinions based on financials, third-party analysis and the like. In this instance, I know the product works. And, as it scales its business, the finances will only get better, making FRPT an excellent long-term hold.
In August 2020, I recommended Freshpet amongst a list of 10 Nasdaq stocks to buy. It is one of two stocks returning for my January selections — SIVB is the other — and it’s performed as expected, up 46% over the second half of 2020 and into 2021.
“In 2020, I’ve recommended its stock on two occasions, both in June: First as part of a seven-pack of pet care stocks and again a few days later as one of 10 consumer stocks to buy to ride the post-Covid-19 wave,” I wrote on Aug. 14.
Nothing’s changed to stop recommending FRPT stock.
Helen of Troy (HELE)
Market Cap: $5.7 billion
Helen of Troy is one of those consumer stocks that likely flies under the radar of most investors. However, since it began a five-year strategic transformation in May 2015, its stock’s been on fire, delivering an annualized total return of 20.8%.
Its laundry list of brands are household names: OXO kitchen utensils, Braun thermometers, Vicks humidifiers, Pert Shampoo and Drybar hair products and styling tools.
As I said, it’s got something for virtually every household need. And its financials are pretty compelling as well.
In fiscal 2021, it expects to grow its sales to at least $2.08 billion, a 21.5% growth rate over fiscal 2020. On the bottom line, it expects non-GAAP earnings per share of at least $11.50 a share, 23.7% higher than a year earlier.
With trailing 12-month free cash flow of $400 million and an enterprise value of $5.86 billion, Helen of Troy has an FCF yield of 6.8%, a mere 120 basis points from 8%, which I consider to be value territory.
I haven’t written a whole lot about the company. This is one stock you should take a closer look at on your own. I think you’ll like what you see.
Johnson Outdoors (JOUT)
Market Cap: $1.2 billion
Johnson Outdoors sells fishing, diving, camping and non-motorized watercraft.
From a historical perspective, JOUT is not cheap at the moment. It’s trading at 2.0 times sales; its five-year average price-to-sales ratio is 1.2, or 40% lower. By every metric, it’s expensive.
So why buy? Because its products will always be in demand, especially after what we’ve all been through during Covid-19. The great outdoors never looked so good.
JOUT was founded by former SC Johnson CEO Sam Johnson, in 1970, as a way to diversify the family-owned consumer products company into other industries. His daughter, Helen Johnson-Leipold, runs the company today and has since 1999. The Johnson family controls a majority of both its Class A and Class B shares.
If you don’t like stocks with low liquidity, JOUT isn’t for you. It only has 10.1 million shares outstanding, and the Johnson family holds most.
However, if you’re interested in something off the beaten track that’s consistently profitable, you’ll want to consider it.
On Dec. 11, 2020, it announced its Q4 2020 results. Sales grew by 6% (4.5% excluding the extra week) in fiscal 2020 to $594.2 million, while operating profits were up 11.4% over 2019 to $71.1 million.
Due to Covid-19, its sales in the final quarter of fiscal 2020, normally a slower period, grew 58% while operating profits rose a whopping 926%.
Now, I’m not saying that will happen again in Q1 2021, but there’s money to be made in this industry. If you’re patient, an investment in JOUT will pay serious dividends.
Market Cap: $401.9 million
Of all the stocks on this list, Fluent is the only one I’m not familiar with. And that’s okay. Sometimes you’ve got to broaden your horizons to win in the markets.
Fluent operates digital marketing campaigns for more than 500 clients across multiple industries. Founded in 2010, it’s grown to become an industry leader in data-driven digital marketing services with more than 150 employees in four offices in the U.S. and Canada.
Operating a performance-based pricing model means this company will benefit from strong growth in digital ad spending, which is expected to grow almost 14% annually over the next four years through 2024.
The company itself has grown significantly.
In 2016, it had annual sales of $182.6 million. In the latest 12 months through Sep. 30, 2020, it had annual sales of $308.2 million. That’s compound annual growth of 15%. On the bottom line, it’s been a bumpier road with annual adjusted EBITDA varying from a high of $44.1 million (2018) to a low of $32.5 million (2017).
Fluent’s got excellent potential as digital continues to grow. That said, it traded below $2 in the March 2020 correction, making it a much riskier proposition than the rest of the stocks on this list.
If you have some money to play with, I’d pick FLNT between $3 and $4.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.