Ever since the novel coronavirus pandemic began, there has been a shift in investor mentality. There is a new breed of traders who are are completely wild. They care little about facts, and completely focus on their mission at hand. The extreme example of this manifested itself with the GameStop (NYSE:GME) debacle. Sure, not all of them are as wild as the r/WallStreetBets group, but it’s pretty close. Consequently, there are a few themes that have completely failed to gather any momentum in months. And these stocks to buy will make a comeback this year.
That said, this recovery could happen at any point, even late in the year. However, it could even happen in the next few weeks. Often investors get too comfortable in their trades and lose perspective. And even though the company fundamentals are not en vogue, they are not dead. Like the fact that every rally has a dip and every crash has a bounce, these wild investors are bending them but they can’t break. There will be a snap back to reality, and it will cause sharp pain.
But, with all of that in mind, we’re going to take a look at three of these stocks to buy that will comeback in 2021. The fundamentals behind two of the tickers are absolute facts and rock solid. You wouldn’t guess it from looking at their charts, because it’s been a death spiral. Euphoria and financial regulators are messing with the nature of risk and disrupting the price action. They have broken the true assessment of risk, and created the perception of a low value for it.
As they say, the best laid plans often go sideways. There are signs that this state of the economy is fast approaching forks in the road. The true exit from the pandemic is not the suppression of the virus. It’s the divestiture from the social programs that will make that mark. The politicians will not have an easy time weaning the people off the government dime.
Once the officials opened the “trillion” dollar bag they committed to it for eons. Like it or not, inflation is coming like a runaway bus. And the Federal Reserve is going to need incredible skills and lots of luck.
Now, though, let’s take a closer look at these three names. They are:
- SPDR Gold Shares (NYSEARCA:GLD)
- VanEck Vectors Gold Miners ETF (NYSEARCA:GDX)
- iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT)
Stocks To Buy Making a Comeback: SPDR Gold Shares (GLD)
Normally I would’ve also included Bitcoin (CCC:BTC-USD) as one of the stocks to buy today. But in good conscience, I can’t do it this late. I am glad I did that months ago when it was still single digits. However, the idea behind the logic for today’s write up is to find alternate value repositories.
Overall, the aggressiveness of central banks makes it a impossible for the currencies to hold value. The more help and stimulus that they offer, the weaker they make the money. It is not a coincidence that last year gold finally made a new high after the 2011 collapse. That was the biggest year of government assistance on record and by a mile.
That said, I suspect that they won’t be able to do this again. They are trying now with an additional $1.9 trillion. It is depressing to me to see us buried in a $5 trillion hole. The dirt is still not on top of it, but there won’t be a ladder to use. The way out will be an extreme struggle for decades. We could start seeing signs that the wheels are coming off this wagon later this year.
So far, this sounds like I am proposing a doom scenario. No, I am merely saying that it’s much more possible now than a few months ago. Owning gold and other assets like it could guard against the lurking risk. The best way to invest in gold is to actually hold it in the physical form. That’s not always practical so the GLD stock is a viable alternative. It is liquid, so it is easy to get in and out if it on a dime.
VanEck Vectors Gold Miners ETF (GDX)
A close proxy to GLD stock is the GDX stock. This makes for good trading sense but is not a like-for-like to the shiny metal. First of all it’s a collection of company stocks. If the stock market falls it could put downside pressure on the GDX too. But since the bulls are in complete charge of the action, that risk is low.
Even in this rising market, holding GDX stock to bet on a gold comeback makes sense. Gold and stock prices compete for investor bids. That’s why often they move in inverse relationship. The GDX is not as vulnerable to that antagonistic relationship. I won’t use the term correlation because statisticians could call me a liar.
It is comforting to know that the companies that make up the GDX ETF are solid. Newmont Mining (NYSE:NEM) and Barrick Gold (NYSE:GOLD) have learned great lessons from the swoon that started in 2011. Managements have streamlined the operations to be very efficient. A rise in the price of gold will help the cause of these stocks. This opportunity is a good blend of solid fundamentals and favorable technicals.
Stocks To Buy Making a Comeback: iShares 20+ Year Treasury Bond ETF (TLT)
So, where the heck is TINA? This is the acronym for There Is No Alternative that used to prop bond prices up.
Well, TINA is working very hard for stocks these days. Money managers across the globe are seeing insane returns in a market that refuses to fall. And I bet they are taking their chances on this ride continuing.
Consequently, money is pouring into risky assets instead of bonds. At some point, there will be an incident to scare them straight. Money will come back to bonds when they are reminded of the risks. I bet that the smart money will come back to TLT stock early, and I want to be there too. So far that has been a losing trade. But there is mounting evidence now than that this could be close.
Overall, owning TLT stock should work well if the equities stumble. Case in point is what happened in March when Wall Street risk spiked. The TLT also made new all-time-highs and extremely fast. Again here statisticians could argue that point but in times of trouble money seeks safety in bonds.
I love America and I hope I am wrong about everything in here. But until proven otherwise, the laws of physics and finances do still exist. We can stretch and bend them for a while, but eventually they snap. It happened in 2008 and resulted in the worst financial crisis ever. Pause from reading for a second and try to guess how much money it took to fix that… Less than $500 billion (with a “b”). The current sums of money spent on this are already 10 times bigger and counting.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.