Where does one find the best investments to start 2021? After all, choosing the right stocks can bring a sizeable windfall in just a single year.
For instance, at the beginning last year, a single share of Tesla (NASDAQ:TSLA), Shopify (NYSE:SHOP) and Zoom Video (NASDAQ:ZM), would have cost a total of $560. By the end of the year, that investment was worth $2,240.
Of course, these discussions always look rosy on the hindsight. However, there are investors who minted money in through smart stock picking. The good news is that investors can always find value creators, irrespective of broad market valuations.
Before discussing the investment ideas, let’s discuss the market outlook. I believe that a 10% correction is likely before another surge. Goldman Sachs opines that the S&P 500 index can end the year at 4,300. Wharton professor Jeremy Siegel also believes that 2021 will be strong for the markets. It’s also important to add that the global economy has been recovering “faster than expected.”
If economic recovery accelerates in the coming quarters, the market sentiment is likely to remain positive.
When considering the best investments to start 2021, you may want to start with these stocks:
- XPeng (NYSE:XPEV)
- BioXcel Therapeutics (NASDAQ:BTAI)
- Teladoc Health (NYSE:TDOC)
- Rada Electronic Industries (NASDAQ:RADA)
Best Investments to Start 2021: XPeng (XPEV)
XPEV stock currently trades at $51 and I expect the stock to double during the course of the year. Electric vehicle stocks have been in limelight last year and I believe that EVs will remain a key investment theme.
Specific to XPeng, the company is on a high growth trajectory. For December, the company reported delivery of 5,700 vehicles, which has higher by 326% on a year-on-year basis. Further, for the fourth quarter, vehicle deliveries increased by 303% on a year-over-year basis. Given this growth, I am bullish on XPEV stock.
It’s expected that EV sales will be 1.8 million units for the current year. This will be higher by 40% as compared to 2020. Therefore, XPeng is likely to report robust vehicle deliveries through the year. In addition, the company has also delivered its first batch of smart electric cars in Norway. Further expansion in Europe is another catalyst for vehicle delivery growth.
In terms of financial development, the company’s vehicle level margin has already turned positive in the third quarter. With robust delivery numbers, vehicle level margin will continue to improve. If the company achieves operating level profitability during the year, the XPEV stock will have another upside trigger.
Given these factors, investors can expect XPEV stock to double in the next 12 months.
BioXcel Therapeutics (BTAI)
I would include BTAI stock among the best investments to start 2021. In the last year, the stock has surged by 185%. However, there is more juice in the rally. BTAI stock touched a high of $64.60 in July.
The stock has been in consolidation range. A breakout on the upside seems imminent.
To back my view, the median estimate of seven analysts offering a 12-month price target for BTAI stock is $110. This implies a 130% upside from current levels. Therefore, BTAI stock is another name that can double in 2021.
BioXcel Therapeutics is developing innovative medicines using artificial intelligence. The company’s BXCL501 drug is being developed for acute treatment of agitation in dementia, including Alzheimer’s disease. The company believes that agitation associated with dementia affects an estimated 4 million patients in the U.S.
BioXcel Therapeutics expects to complete NDA submission for BXCL501 this quarter. With the drug already having a fast-track designation with the Food and Drug Administration, the current year is likely to be exciting in terms of advancement to commercialization.
Overall, BTAI stock is likely to have another big year in terms of returns. Fresh exposure can be considered at current levels.
Teladoc Health (TDOC)
Health care was another key investment theme last year and that trend will continue in 2021 with attractive investment opportunities. TDOC stock is a solid name to consider with the company providing virtual health care services.
TDOC stock has also been in a range of consolidation since July. As top-line and earnings growth sustains, the stock is likely to trend higher in the coming quarters. For the current year, analyst estimates point to 80% top-line growth and 56% earnings growth.
As of the third quarter, Teladoc reported 51.5 million paid members, which was higher by 47% on a year-on-year basis. As paid members continue to grow at a robust pace, the company’s cash flow is likely to swell.
Teladoc recently acquired Livongo. The latter helps in managing chronic conditions that includes diabetes, hypertension, among others. The merger can potentially accelerate growth in the coming years.
Overall, the novel coronavirus pandemic has shifted focus to the health care system, which needs revamped. Teladoc is well positioned to benefit in the coming years with an efficient health care model and a big addressable market.
I am of the view that TDOC stock can deliver at least 50% returns over the next 12 months. And the stock is worth holding beyond this investment horizon.
Rada Electronic Industries (RADA)
RADA stock, which trades at $10 and at a market capitalization of $435 million, is a hidden gem with potential for multi-fold returns in the coming years. I would therefore include RADA stock in my list of best investments to start 2021.
Rada Electronic is a manufacturer of defense electronics. The company is focused on tactical radars and believes that the total addressable market is $5 billion. Last year was exceptional for the company with new orders worth $102 million. The company is expecting continued order inflow from the U.S. Army in the current year.
Rada Electronic has also provided revenue guidance for the year at $120 million. On a year-over-year basis, revenue growth is likely at 60%. Given this robust outlook, I expect RADA stock to trend higher in the coming quarters.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored more than 1,500 stock specific articles with focus on the technology, energy and commodities sector.