The S&P 500 finished 2020 with a gain of 16.16% and more than 300 of its components posted positive annual returns. Statistics like that could imply upside for this year is limited, but there are still plenty of hot stocks to buy now that offer considerable potential.
Supporting the case for being constructive on stocks in 2021 is the sheer depth of where hot stocks hail from. Last year, the technology and consumer discretionary sectors were the two largest contributors to S&P 500 upside – themes that could remain in place this year as growth stocks remain in style and as the economy eventually reopens.
Likewise, there’s momentum for cyclical and value stocks based in part on the notion that the incoming Biden Administration will favor policies efficacious for sectors that scuffled a bit last year. There are other catalysts for hot stocks this year.
“Improving economic conditions likely will lead to greater business and consumer confidence, which should drive significant corporate earnings growth in 2021,” according to Wells Fargo. “This, coupled with the potential for increased fiscal spending and a moderation of tariffs, also may provide a tailwind to profits.”
With those factors in mind, here are some hot stocks to buy now in advance of 2021 gains.
- Caesars Entertainment (NASDAQ:CZR)
- Intel (NASDAQ:INTC)
- Caterpillar (NYSE:CAT)
- Nvitae (NYSE:NVTA)
- DraftKings (NASDAQ:DKNG)
- A10 Networks (NYSE:ATEN)
- Nano Dimension (NASDAQ:NNDM)
Hot Stocks: Caesars Entertainment (CZR)
Caesars finished 2020 higher by 24.53%, but the really impressive statistic regarding CZR stock is a run of 1,133.72% off the March 2020 lows. Neither of those figures mean investors should take a pass on the casino giant this year.
The gaming company is one of the hot stocks to buy now that has multiple tailwinds to justify that hot stock status. For example, some analysts believe that as more Americans take one of the novel coronavirus vaccines, the Las Vegas Strip’s recovery timeline will be sped along. That’s important for Caesars because it’s the second-largest operator on the Strip.
Even if the pace of recovery in Sin City remains sluggish, Caesars augments that by deriving a substantial portion of its revenue – 75% in the third quarter – from regional casinos. Regional gaming properties are recovering faster because gamblers can drive to those venues and don’t need to get on a plane as many would have to to get to Nevada.
Another factor in Caesars’ favor is the pending acquisition of William Hill (OTCMKTS:WIMHY).That deal, slated to close in the first quarter, will create a powerhouse in the iGaming and sports betting spaces, one with scale rarely seen in these still-nascent industries. Additionally, Caesars will defray some of the $3.69 billion purchase price by selling William Hill’s international businesses soon after the acquisition is finalized. That sale could command $2 billion or more.
Laggard alert. Intel slumped almost 17% last year while the PHLX Semiconductor Sector Index surged 51%. That’s a staggering chasm for what was once the largest domestic chipmaker.
As has been seen over the history of the technology sector, Intel became a lumbering company that lost its way, due in part to ill-fated acquisitions. Now, some high-level investors smell blood in the water and they want to want to ensure Intel gets its act together.
Late last year, Third Point, the giant hedge fund run by Dan Loeb, took an activist position in INTC, admonishing company leadership for allowing the chip behemoth to fall so mightily.
“We cannot fathom how the boards who presided over Intel’s decline could have permitted management to fritter away the company’s leading market position,” Loeb wrote to Intel Chairman Omar Ishrak.
It’s not yet clear what Loeb’s near-term ideas for Intel are, but those concepts could center around him gaining board seats and perhaps forcing Intel to shed some lagging businesses that came into the fold via old acquisitions.
The combination of ongoing geopolitical tensions between the U.S. and China and the Covid-19 pandemic could have been a toxic brew for Caterpillar last year, but CAT stock returned an admiral 23.25%.
If investors are going to nit pick with the construction and industrial machinery maker regarding 2020, it’s that Caterpillar didn’t raise its dividend. Good news: The payout, which has doubled since 2009 and been paid since 1933, wasn’t cut, either.
The stock offers upside potential in 2021 because the Biden Administration is likely to take a softer approach to China. Economic recovery historically results in upside for this name.
Some on Wall Street are enthusiastic on Caterpillar with Baird analyst Mircea (Mig) Dobre recently boosting his price target on the name to $220, implying upside of 21% from the Dec. 21 close.
One wildcard that could work in Caterpillar’s favor is Congress and the White House finally coming together on a massive U.S. infrastructure package. That could be a significant catalyst for CAT stock.
Investors looking for future disruption in the healthcare sector need not look much further than genomics equities, including Invitae. NVTA stock jumped 159.21% last year, but slid 18% in the final week of the year, indicating a dip may be afoot for risk-tolerant investors to embrace.
Invitae makes genetic tests and is pioneering concepts that turn those tests “into a single service with higher quality, faster turnaround time, and lower prices.” Investors shouldn’t underestimate the importance of declining genomics costs. As those costs come down, it makes genomics testing and applications more accessible to a broader swath of healthcare professionals and patients, explaining why many market observers are forecasting strong compound annual growth rates (CAGR) for the genomics industry over the next several years.
The intersections of DNA sequencing, gene therapies and artificial intelligence (AI) could, most importantly, improve patient outcomes while ushering in a new age of healthcare growth investing. How Invitae integrates recently acquired ArcherDX and its ability to diversify product offerings will go a long way toward determining equity performance this year.
DraftKings was one of the toasts of the publicly traded gaming universe last year as it surged 335.14%. Investors’ enthusiasm for the first pure play sports betting stock – DraftKings debuted last April – helped, as did an asset-lite model during the pandemic when sports returned.
I say this as a DraftKings shareholder: Don’t bet on DKNG stock quadrupling again this year, but there’s strong upside potential here on the back of more states embracing online casinos and sports wagering. Additionally, some of the newer sports betting states, such as Colorado, Illinois and Michigan, will get a full year under their belts, assuming the sports calendar remains somewhat normal.
Those are among the reasons some analysts see a $100 stock here. If nothing else, the aforementioned catalysts should drive top line growth in 2021.
An avenue for DraftKings to pleasantly surprise investors this year is to rein in customer acquisition costs, which could speed the timeline to profitability, which is expected to be 2023 or 2024.
A10 Networks (ATEN)
A10 Networks is a small-cap hardware and software provider. The real source of allure here being its software-as-a-service platform, which gives it strong cloud computing exposure. ATEN stock surged 43.52% last year.
Even with that impressive performance, it never closed above $11 and finished 2020 residing slightly below $10. Relative to the consensus price target of $14.25, A10 has potential upside of 44.5% in the eyes of Wall Street. Over the past five years, A10 lagged broader markets, but it turned the tide to profitable from losing money during the prior three years. Its return on equity (ROE) is decent at around 9%.
Demand for A10’s Thunder application delivery controller, which balances server data loads, is strong and the company’s Thunder threat protection system could be on a similar trajectory as more companies allocate financial resources to cybersecurity.
Nano Dimension (NNDM)
In the pantheon of disruptive technologies, 3D printing is one of the oldest and now one of the most overlooked. But Israel-based Nano Dimension gained almost 260% last year and there are reasons to believe more upside is available in 2021.
Last month, Nano Dimension said 10 customers upgraded to its 24/7 DragonFly LDM machines from the older DragonFly Pro machines. Remember, customers are embracing that upgrade during a global pandemic.
“By now, 66% of our customers world-wide already own DragonFly LDM 3D-Printing systems. The improvement of the Dragonfly LDM in comparison to the DragonFly Pro, among other things, is its ability to perform certain automatic maintenance functions during the additive manufacturing operation,” according to the company.
In November, Nano Dimension said it would sell $100 million in stock to raise cash, an offering that was later upsized to $250 million and those headlines weighed on the shares, but NNDM stock recouped those losses on DragonFly LDM sales. That’s the factor for investors to watch this year.
On the date of publication, Todd Shriber owned shares of DraftKings.
Todd Shriber has been an InvestorPlace contributor since 2014.