There will very likely be another stimulus check signed into law. The House will soon bring a bill to vote and it will then move to the Senate. This third round of stimulus will be signed by President Joe Biden before March 14. Theoretically, the IRS could then begin to send out the $1,400 checks by the third week of March.
There is also the matter of delayed stimulus checks as well. Some people are still awaiting their first and second checks, in addition to the third.
The overall thrust though is that liquidity will soon flood the market. There were record numbers of first-time trading accounts being opened during this pandemic. Robinhood noted that it had an influx of first-time traders. We can safely assume that lower-priced, speculative stocks will get a real bump from this next round of stimulus.
I’m hoping that this time around more Americans invest in fundamentally sound stocks than in previous rounds.
This article will include fundamentally strong stocks I think (hope) Americans will invest in. Lastly will be a speculative stock which I believe could soon garner lots of attention and skyrocket for more dubious reasons. They are:
- Taiwan Semiconductor Manufacturing Co. (NYSE:TSM)
- Apple (NASDAQ:AAPL)
- Applied Materials (NASDAQ:AMAT)
- Home Depot (NYSE:HD)
- Floor & Decor Holdings (NYSE:FND)
- United Microelectronics (NYSE:UMC)
- Gogo Inc (NASDAQ:GOGO)
Stocks to Buy: Taiwan Semiconductor Manufacturing Co. (TSM)
Investors have a good reason to get behind TSM stock. Actually, there are several good reasons to get behind TSM stock. The most important may be that Taiwan Semiconductor is arguably the most important company in the world right now.
Frankly, that’s an argument that would’ve held water prior to the current semiconductor shortage. However, with the shortage rippling through tech and automotive sectors the argument has perhaps more weight than ever.
TSMC is the foundry to the majority of the world. As such, it is incredibly important. The company is a dedicated foundry that handles the manufacturing of chips which fabless semiconductor companies design. It holds a 57% market share of the foundry sector.
The company is going to increase its manufacturing capacity to satisfy the demand created by the shortage. One way to look at this situation is simply that the world is beholden to TSMC and that the company should be able to capitalize from the situation.
The company is an excellent business with or without a semiconductor shortage. My hope is that some stimulus check investment flows toward the company.
Apple is another solid business with a lot worth investing in. The company is coming off one of its most successful quarters ever.
Apple released its earnings report at the end of January. And it was a very strong one, indeed. It reported record quarterly revenue of $111.4 billion in Q1 2021. This was an increase of 21% over the same period in the previous year. The pandemic fueled some of this growth undoubtedly as people are forced to remain inside and thus end up spending time online.
Apple CFO Luca Maestri noted,
“Our December quarter business performance was fueled by double-digit growth in each product category, which drove all-time revenue records in each of our geographic segments and an all-time high for our installed base of active devices.”
As the pandemic wears on, there’s fair reason to believe that the trend could continue into the second and third quarters of 2021. My contention is that it wouldn’t be bad at all if Americans bolstered one of America’s best companies with some of their stimulus checks this time around.
Although AAPL stock remains well-regarded with its “overweight” status on Wall Street, I believe it to be an outright “buy.” My thinking is that analysts who regard it as a “hold” tend to do so based on the idea that gravity will bring it down as the pandemic wanes. I believe Apple’s moves toward bolstering its vertical integration by beginning to make its own chips shows it is much more than it sometimes receives credit for.
Applied Materials (AMAT)
Applied Materials is a company that your average investor may never have heard of. But to many others, especially those who follow the semiconductor industry, it is a strong name worth noting.
This is because it makes the tools used in semiconductor manufacturing. And if TSMC makes sense now due to its position as the main foundry to the semiconductor industry, then AMAT is doubly attractive.
The reason is this: Applied Materials is in position not only to capitalize on the current semiconductor shortage, but also for years to come.
Firstly, Applied Materials is going to be the beneficiary of business as foundries scramble to ramp up manufacturing during this current shortage. That’s in addition to its strong position within the industry prior to any shortage.
Secondly, there’s good reason to believe that Applied Materials has tailwinds pushing it well beyond its current catalysts.
“We have strong momentum across the company, as our broad portfolio and exposure to technology inflections, combined with the traction of our new products, put us in a great position to substantially outgrow our markets again in 2021 and beyond.”
AMAT stock was bolstered by net sales that increased by 24% in Q1. This is great. But perhaps more importantly, the future could be brighter. Companies of all stripes are going to be investing massive amounts of money to increase semiconductor chip manufacturing capacity for years to come. Their increasing complexity and necessity obviates the argument for buying into AMAT stock now.
Stocks to Buy: Home Depot (HD)
Home Depot has an excellent case to rocket upward with government stimulus. What do you do if you have time, money, but are stuck inside due to the pandemic? One answer to that question is to invest some time and money in a home improvement project.
In fact, more than three-quarters of homeowners did a home improvement project since the start of the pandemic according to a survey reported in July. So, investors can safely assume that number has risen in the intervening eight months.
Of course, that has been a boon to companies like Home Depot. So, when Americans receive their third stimulus check it’s a safe bet that a new round of home improvement projects is sure to follow.
When Home Depot last announced earnings back in November, the news was good. It reported revenues of $33.5 billion, jumping 23.2% over the same period in 2019. Those revenues resulted in earnings of $3.4 billion.
According to CEO Craig Menear, “The third quarter was another exceptional quarter for The Home Depot as we saw the continuation of outsized demand for home improvement projects, which has led to sales growth of more than $15 billion through the first nine months of the year,”
Floor & Decor Holdings (FND)
The same catalysts that stand to prop up Home Depot also apply to Floor & Decor Holdings. Analysts currently covering FND recently pushed it from “overweight” into “buy” territory. I have to assume that the company’s previous four EPS beats in each of those quarters have something to do with it. Stimulus check announcements likely played a big role as well. FND jumped up by 4.29% overnight on Feb. 19 ostensibly on stimulus check news.
The Georgia company won’t release earnings until Feb. 25, but they are expected to be strong in any case. Revenues are anticipated to hit 691.2 million, an increase of 31.2% YoY.
So, even absent the newest round of stimulus check news, FND stock makes sense as an investment. There’s good reason to now believe that it could pop again as consumers could spend heavily at the company for remodeling projects.
Readers will note that home sales have been extremely strong during the pandemic, which benefits both FND and HD stock.
United Microelectronics (UMC)
You may be noticing a pattern by now: semiconductors are prevalent on this list. I’ve already discussed why major players in the sector including TSMC and Applied Materials should skyrocket and are both strong buys in my mind.
The same logic applies for United Microelectronics. Further, the company’s shares are much cheaper than the other two.
United Microelectronics is also based in Taiwan and operates as a foundry, similar to TSMC. Of course, it is much smaller. The company is undergoing a sales increase and has already seen a 10.21% increase in January compared with last year. It reported revenue of $1.59 billion in Q4 of 2020 and is a strong company in one of the semiconductor foundry hotspots of the world.
Shares are around $10, Wall Street appreciates them, and they’ve risen over 300% in the past year. The company is increasing capacity to meet shortage demand. It simply makes a lot of sense right now.
Stocks to Buy: Gogo Inc. (GOGO)
The last stock on this list is Gogo Inc. and its GOGO stock. Although this is indeed a list of stocks to buy, I’ll forewarn readers here: this is more of a pick as a stick I believe might skyrocket for dubious reasons rather than fundamental strength. I say that because I’ve listed GOGO simply because it has a high percentage of its float which is sold short. In fact, it recently had 43.49% short interest.
If you’re familiar with the Gamestop (NYSE:GME) story, then you know where I’m going with this. I believe GOGO stock could be seized upon by r/WallStreetBets types as a gamification of stocks target. They may band together and attempt to put a short squeeze on it.
Full disclosure: I am not particularly a fan of GOGO stock. I’m simply mentioning it because it may be something to keep an eye on for fun. For investors who are so inclined, perhaps put a small amount of stimulus money toward it. Nothing more.
The company itself provides in-flight broadband services and is pretty ho-hum from an investment perspective. However, if Robinhood factions seize upon something they like and can convince their peers is attractive in the stock, it could skyrocket.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.