Broader markets have been celebrating new record highs regularly over the summer. Year-to-date (YTD), the Dow Jones Industrial Average (DJIA), the S&P 500 index, and the Nasdaq 100 index are up about 15.6%, 20.5%, and 18.2% respectively. Meanwhile, analysts debate whether valuation levels for many stocks are overextended at this point. Nonetheless, there are several catalysts that could push a number of shares and sectors even higher in the final stretch of 2021. Today I’ll be discussing seven stocks to watch that could benefit from such trends.
First of all, we can expect technology and growth stocks to continue their bull ride in the near future. Understandably, there will be occasional declines as investors ring the cash register to take some money off the table. Within technology names, semiconductors, which are found in countless products, should keep shining and will be a key component in many stocks to watch.
Secondly, cryptocurrencies and blockchain, the technology behind digital assets, will likely make headlines. Meanwhile, financial technology (fintech) businesses should continue to grow in prominence. Globally, fintech is expected to be a $382 million market by 2027, which represents a CAGR (compound annual growth rate) of 7.05%.
Third, inflation levels will be watched closely and investors will put money on stocks that could do well if inflation were to go up. They include shares that could create an inflow of cash as a source of reliable income. The Federal Reserve targets a 2% inflation rate and thus could change the current monetary policy if inflation does not stay within that range.
On Aug. 11, the U.S. Bureau of Labor Statistics announced, “The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in July on a seasonally adjusted basis after rising 0.9 percent in June … Over the last 12 months, the all items index increased 5.4 percent before seasonal adjustment.” In fact, economists warn that high inflation is here to stay for the next few years.
The next catalyst will be the continued emphasis on the potential benefits of switching to renewable energy sources. Reduced global dependency on fossil fuels (such as oil and gas) should result in alternative energy businesses stateside and worldwide creating significant shareholder value.
Finally, value stocks will likely gain traction. Warren Buffett once said in a letter to his shareholders, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Investors use several ratios including price-to-earnings (P/E), price-to-book value (P/B), dividend yield, price-to-sales (P/S) and others as they research shares that might be selling at good value.
With that information, here are seven stocks to watch that could benefit from various catalysts. Market participants should ideally aim for lower entry points into such robust shares to build or top-up long-term portfolios.
- Advanced Micro Devices (NASDAQ:AMD)
- Invesco Zacks Multi-Asset Income ETF (NYSEARCA:CVY)
- iShares Global Utilities ETF (NYSEARCA:JXI)
- Mastercard (NYSE:MA)
- NextEra Energy (NYSE:NEE)
- Siren Nasdaq NexGen Economy ETF (NASDAQ:BLCN)
- Vanguard Value Index Fund ETF Shares (NYSEARCA:VTV)
Stocks to Watch: Advanced Micro Devices (AMD)
52-week range: $72.50 – $122.49
Dividend Yield: N/A
Innovation fuels performance, especially when it comes to technology. The first of our stocks, Advanced Micro Devices, was once the underdog in the semiconductor sector. But it now it is regarded as one of the leading names, as it has been taking market share from other semiconductor names.
AMD announced Q2 metrics in late July. Revenue came at $3.85 billion, almost doubling year-over-year (YOY). Non-GAAP net income hit $778 million, or 63 cents per diluted share (EPS). Investors were delighted with the growth of 260% over the year. Free cash flow stood at $888 million, a record for the chip name.
After the announcement, CEO Lisa Su said, “We now expect our 2021 annual revenue to grow by approximately 60 percent year-over-year driven by strong execution and increased customer preference for our leadership products.”
Wall Street was highly impressed with AMD’s results. Management highlighted the increase in processor sales as well as higher average selling prices as the main reasons for these better-than-expected metrics. In Q3, the chip darling is forecasting revenue of about $4.1 billion, an increase of 46% YOY.
After the results, AMD stock hit a record high on Aug. 4. Since then, though, it has come under pressure. Nonetheless, it is up 21% year-to-date (YTD). AMD shares currently trade at 46 times forward earnings and 9.3 times current sales. Interested readers could buy the dips in the stock.
Invesco Zacks Multi-Asset Income ETF (CVY)
52-week range: $15.73 – $25.24
Dividend yield: 2.7%
Expense ratio: 0.94% per year
Our next choice on this list of stocks to watch is an exchange-traded fund (ETF) that could appeal to those readers who are readying their portfolios against inflation. The Invesco Zacks Multi-Asset Income ETF gives access to a wide range of U.S. stocks, American depositary receipts (ADRs) that pay dividends, real estate investment trusts (REITs), preferred stocks, master limited partnerships (MLPs) and closed-end funds.
CVY, which has 151 holdings, follows the Zacks Multi-Asset Income Index. In terms of country allocations, the U.S. tops the list with almost 89%. Next in line are China, Mexico and South Korea, each with slightly more than 2%.
The 10 largest holdings constitute about 11% of net assets of $129 million. Among the leading names in the roster are steel producer Ternium (NYSE:TX), financial services groups T Rowe Price (NASDAQ:TROW) and Wells Fargo (NYSE:WFC), Dominion Energy (NYSE:DCUE) and JP Morgan Chase (NYSE:JPM).
So far in 2021, CVY is up close to 22%. The current price supports a dividend yield of almost 2.7%. Interested readers could regard the $23.50 level as a better entry point.
Stocks to Watch: iShares Global Utilities ETF (JXI)
52-week range: $53.95 – $64.68
Dividend yield: 3%
Expense ratio: 0.43% per year
Our next choice for inflationary times is another fund. The iShares Global Utilities ETF invests in global utility companies. The fund currently has 67 holdings and assets under management stand at $146 million. JXI began trading in September 2006.
The top 10 holdings constitute about 45% of the fund, and include names like Nextera Energy, Duke Energy (NYSE:DUK), Southern (NYSE:SO) and Dominion Energy (NYSE:D) among others.
Year-to-date, JXI is up nearly 6%. Moreover, the ETF has increased 13% over the past 52 weeks. Interested readers could regard any decline toward $62 or below as opportunity to invest.
52-Week Range: $281.20 – $401.50
Dividend Yield: 0.5%
Our next stock, Mastercard, offers exposure to the fintech space. As one of the most important payment processors, it helps consumers and institutions with transaction-related needs. Most InvestorPlace readers likely know its brands, including Mastercard, Maestro and Cirrus.
Mastercard issued Q2 financial results on July 29. Net revenue came in at $4.5 billion, up 36% from the prior-year period. Adjusted net income of $1.9 billion translated into an adjusted diluted EPS $1.95. A year ago, the adjusted net income and diluted EPS were $1.4 billion and $1.36 respectively.
Following the announcement, CEO Michael Miebach said, “We delivered solid revenue and earnings growth this quarter, fueled by the execution of our strategy and the continued recovery in domestic and cross-border spending. International travel is still in the early stages of recovery and represents additional upside potential.”
Mastercard is providing the infrastructure for e-payments as societies increasingly go cashless. MA stock is down by 2.5% this year and by 5% in the past 12 months. Forward price-to-earnings (P/E), price-to-sales (P/S) and price-to-book (P/B) ratios stand at 45, 21 and 54, respectively. As Mastercard has dropped below the $350 level, the shares attractive for long-term investors.
Stocks to Watch: NextEra Energy (NEE)
52-Week Range: $66.79 – $87.69
Dividend Yield: 1.85%
As many nations continue to adopt clean energy, a large number of companies stateside, such as NextEra Energy, have been gaining traction in the past year. Its regulated utility, Florida Power & Light (FPL), distributes power to millions of homes in Florida. Furthermore, the alternative energy segment primarily generates and sells power throughout the U.S. and Canada.
NextEra issued Q2 2021 metrics in July. Revenue came at $3.9 billion. Adjusted earnings of $1.4 billion translated into 71 cents per share. A year ago, these metrics had been $1.29 billion, or 65 cents.
On the results, CEO Jim Robo said, “NextEra Energy Resources continued to capitalize on the terrific market opportunity for low-cost renewables and storage and added approximately 1,840 megawatts to its backlog since the release of our first-quarter financial results in April. We remain as enthusiastic as ever about our long-term growth prospects.”
The energy group leads among U.S. utility companies in terms of solar or wind power generation capacity. It is investing about $50 billion in alternative energy infrastructure projects.
NEE stock currently hovers slightly over $83, up 8% YTD. Forward P/E and current P/S ratios stand at 33 and 10 respectively.
Siren Nasdaq NexGen Economy ETF (BLCN)
52-Week Range: $32.88 – $53.31
Dividend Yield: 0.7%
Expense Ratio: 0.68% per year
From alternative energy, we move to the blockchain space. The Siren NASDAQ NexGen Economy ETF invests in businesses developing or using blockchain technologies. BLCN, which currently has 69 holdings, started trading in January 2018.
Close to 53% of firms in the BLCN are based stateside. Others include companies from China (13.32%), Japan (12.64%), Germany (4.48%), Canada (3.75%) and South Korea (1.53%).
The leading sectors include technology (44.95%) and financials (32.55%). Holdings of the top ten names comprise close to 20% of BLCN’s net assets, which currently stand around $312 million.
Coinbase Global (NASDAQ:COIN), Square (NYSE:SQ), Accenture (NYSE:ACN), Advanced Micro Devices, MicroStrategy (NASDAQ:MSTR) and SAP (NYSE:SAP) are among the leading blockchain stocks on the roster.
Since the start of the year, BLCN is up 17.5% and saw a record high in mid-March. Since then, a number of the shares in the fund have come under pressure. Interested readers could regard this dip as opportunity to buy into the fund.
Stocks to Watch: Vanguard Value Index Fund ETF Shares (VTV)
52-Week Range: $100.68 – $142.54
Dividend Yield: 2.2%
Expense Ratio: 0.04% per year
We conclude our discussion with another fund that could be appeal to readers looking to invest in value shares. The Vanguard Value ETF invests mostly in large-capitalization (cap) U.S. value stocks.
VTV began trading in January 2004 and has total net assets of $127.6 billion. In terms of fund composition, financials make up 21.3%, followed by healthcare (19.1%), industrials (13.9%), consumer staples (10.2%), and Consumer Discretionary (6.4%).
The ETF has 351 stocks and the top ten holdings make up 20.3% of the total net assets. Top holdings include Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B), JPMorgan Chase, Johnson & Johnson (NYSE:JNJ), and UnitedHealth (NYSE:UNH).
YTD, VTV is up about 19.5% and saw a record high in August. Long-term investors could consider investing between $140.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.