When I first started making this list of top stocks for 2021, I tried to pick companies that would benefit from the accelerating trends this year. On top of that — in line with my usual contrarian style — I tried to choose stocks that do not get nearly enough love from pundits and analysts. That approach is often one of the best ways to outperform the market.
The stocks on this list all check those boxes.
When it comes to today’s trends, three of these names will be boosted a great deal by the push toward renewable energy. Moreover, some of the companies should get meaningful lifts from the electric vehicle (EV) and autonomous vehicle (AV) revolutions. And the explosion of e-commerce should help one of these stocks, too.
What’s more, three of these names have miniscule market capitalizations compared to their potential. Meanwhile, the other two trade at fairly reasonable valuations.
So, without further ado, here are my 5 top stocks for 2021:
- JinkoSolar (NYSE:JKS)
- American Superconductor (NASDAQ:AMSC)
- General Electric (NYSE:GE)
- Velodyne (NASDSQ:VLDR)
- PayPal (NASDAQ:PYPL)
First on my list of top stocks for 2021 is JinkoSolar, one of the world’s leading producers of solar modules. That’s in terms of both sales volumes and efficiency.
The company sells a large number of panels in every major market, including China, Europe, India, Japan and the United States. More specifically, JKS made a huge deal in the U.S. with NextEra Energy’s (NYSE:NEE) Florida Power & Light, a leading utility when it comes to solar.
What’s more, both China and the EU meaningfully increased their carbon-reduction goals in 2020. Additionally, the U.S. has elected a new president who’s pledged to support renewable energy. With these gigantic tailwinds, the forward price-earnings ratio and trailing price-sales ratio of JKS stock are way too low, standing at 14 and 0.52, respectively.
JKS is up well over 500% from its 2020 lows, but it clearly has a great deal of room to surge much higher in the new year.
Finally, despite the pandemic, the company’s third-quarter EBITDA jumped 44% year-over-year (YOY). Its top line rose 17% YOY. Right now, the market capitalization of the solar-industry giant is $3.28 billion.
American Superconductor (AMSC)
American Superconductor is incredibly well-positioned to benefit from today’s renewable energy trend, making it an easy qualifier for this list of top stocks for 2021. More specifically, wind power will be a particularly strong catalyst for AMSC.
For one, he company’s D-VAR VVO system enables utilities to more efficiently and effectively utilize solar energy and provide fast charges for EVs. It also allows utilities to receive solar power from their residential customers and feed it back into the grid at one-eighth of the typical cost. Plus, VVO makes it easier to handle power from wind turbines and D-VAR helps facilities ensure their electrical voltage is stable.
As a result, the company has made meaningful deals with wind-power providers in India and South Korea, both of which are looking to expand their wind production of electricity. American Superconductor also expects to get a big lift from the proliferation of offshore wind turbines.
In Q2 of 2020, the company’s revenue jumped over 50% YOY to $21.1 million. AMSC also expects to generate positive cash flow of up to $1 million in Q3 of the fiscal year. Although the shares have soared over 500% from their 52-week low, the firm’s market cap of $740 million is tiny compared to its vast potential. The forward price-sales ratio of AMSC stock is also a reasonable 6.95.
General Electric (GE)
GE has several things going for it. For one, the company has already agreed to supply 190 offshore wind turbines to Britain’s Dogger Project, as well as 187 turbines to Invenergy. As I noted in a previous column, “Wind energy is expected to account for 44% of America’s new power generation in 2020.” Now, General Electric has clearly become a leader of the sector. GE stock is poised to become a favorite name among ESG investors.
Meanwhile, both Goldman Sachs and I expect the company’s Aviation unit to rebound in a big way this year as vaccines are rolled out around the world. Plus, as the EV market share surges, I continue to believe that GE will benefit meaningfully from the incoming demand for more power stations and equipment. That trend should become meaningful by Q3 of this year.
For Q4 of last year, GE projects its industrial free cash flow (FCF) to amount to an impressive $2.5 billion. Additionally, InvestorPlace contributor Mark Hake estimated that “GE stock is worth between $18.24 per share to $21.72.” So, there’s plenty of room to grow from the current $11 price. That easily lands this name on my list of top stocks for 2021.
Next on my list of top stocks for 2021 is Velodyne. According to expert analyst and InvestorPlace contributor Matt McCall, “most [AV professionals] agree that lidar is the future of the industry.” As a leading maker of lidar systems, then, VLDR should do well as the demand for autonomous vehicles surges.
Analysts, on average, expect the company’s sales to jump about 50% this year to $150 million. In fact, research firm Needham recently reported that the company “has established a clear first mover advantage in the LiDAR category […] which is a critical technology for advanced driver assistance systems (ADAS), autonomous vehicles (AVs) and non-automotive applications.” Needham expects the technology to be utilized in 60% of vehicles with ADAS capabilities by 2024.
Plus, in October, Ford (NYSE:F) bought over 13 million shares of VLDR stock. Inspiring more confidence, Chinese tech giant Baidu (NASDAQ:BIDU) also made a three-year deal with the lidar maker.
Finally, Velodyne reportedly has an impressive backlog of 175 projects in its pipeline. So, the company’s market cap of nearly $4 billion is very small relative to potential.
As InvestorPlace contributor David Moadel recently pointed out, Deutsche Bank increased its price target on PYPL stock to $275 from $234. Why? The firm stated that PayPal should get a lift from the accelerated “adoption of e-commerce and mobile-payment services.”
I agree with that sentiment. More and more, companies are selling their products online and accepting PayPal as a viable payment method. Additionally, PYPL should also benefit from the rapidly increasing online sales of larger companies like Walmart (NYSE:WMT) and Overstock (NASDAQ:OSTK). Finally, the company’s Venmo money-transfer app is also growing very quickly.
But it’s not stopping there. PayPal is also looking to compete with Square (NYSE:SQ) in the physical-payments space. That would open up a potentially huge new market for the company.
Right now, PYPL stock is trading at a relatively affordable 52 times forward price-earnings. That makes it a solid pick for my list of top stocks for 2021.
On the date of publication, Larry Ramer held long positions in JKS, AMSC, GE, VLDR and PYPL.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015.Among his highlysuccessful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.