2021 has been one of the wildest years on record in the history of investing. After 2020, a year that saw both a Presidential election and one of the hottest stock markets, investors weren’t sure what to expect from 2021. That uncertainty has meant choppiness for many shares.
Yet the volatility has also created several unique buying opportunities for savvy investors with long-term horizons. Now is the perfect time to deploy capital if you are in a position to invest in equities. Today we’ll examine the top stocks to buy if you have $10,000 to invest.
Over the past year, several trends have been emerging as potential winners. For starter, technology continues to be the most significant driver. Commodities are also doing well, mainly due to expectations of higher spending on infrastructure.
As new stimulus further boosts the U.S. economy and new retail investors rush to make their first trades, money continues to flow into growth companies. Clean renewable energy, as well as ecommerce stocks, are making headlines as well.
In other words, some stocks have managed to cope with the pandemic better than their counterparts. Here are the 7 best stocks to buy with $10,000 right now:
- Applied Materials (NASDAQ:AMAT)
- Caterpillar (NYSE:CAT)
- Ford Motor (NYSE:F)
- Freeport-McMoRan (NYSE:FCX)
- Oshkosh (NYSE:OSK)
- Silicon Motion Technology (NASDAQ:SIMO)
- SPDR Portfolio S&P 600 Small Cap ETF (NYSEARCA:SPSM)
While the delta variant currently seems to be heralding a new third wave of Covid-19, the economic and health damage is expected to be less severe this time, given that more than two-thirds of American adults have already received at least a dose of a vaccine. As a result, investors’ sentiment is still bullish.
7 Stocks to Buy with $10,000: Applied Materials (AMAT)
52 week range: $54.15 — $146.00
Dividend yield: 0.71%
Santa Clara, California-based Applied Materials is one of leading suppliers of semiconductor manufacturing equipment. The group provides materials and engineering solutions to help manufacture nearly every chip in the world.
Applied Materials announced Q3 2021 results in mid-August. The company grew its top line 41% year-over-year (YOY) to $6.20 billion. Net income increased 104% year over year (YOY) to $1.72 billion, or $1.87 diluted earnings per share. Adjusted EPS of $1.90 was a record, up 79% YOY. Cash and equivalents ended the quarter at $6.17 billion.
On the results, CEO Gary Dickerson commented, “Applied Materials delivered record performance as long-term trends fueled by the digital transformation of the economy drive strong, secular demand for semiconductors.”
Automotive, datacenter and smartphone applications are expected to further increase demand for chips in the coming years. Recent metrics highlight, “The global semiconductor market is projected to grow from $452.25 billion in 2021 to $803.15 billion in 2028 at a CAGR of 8.6% in forecast period, 2021-2028.”
In June, a bipartisan group of U.S. senators passed a bill to inject more than $50 billion into domestic chip manufacturing to improve the country’s competitiveness, especially vis à vis China.
Analysts expect the high-demand for chips to continue in the foreseeable future. As a result AMAT stock is one of the best pure plays for chip manufacturing. AMAT shares are up almost 100% over the past 12 months, making it one of the top-performing megacap companies.
The stock currently hovers around $135. AMAT is up 58% so far this year and hit a record high in April. Forward price-to-earnings (P/E) and price-to-sales (P/S) ratios stand at 17.39 and 5.82, respectively. Potential investors could consider investing around $125.
52 week range: $135.65 — $246.69
Deerfield, Illinois-based Caterpillar is the world’s largest heavy equipment manufacturer. It also provides power solutions and locomotives.
Caterpillar announced Q2 results in late July. Total revenue increased 29% YOY to $12.9 billion. Net income came at $1.4 billion, or $2.56 diluted earnings per share, compared to a net income of $458 million, or 84 cents per diluted share, a year ago. Cash and equivalents ended the quarter at $10.8 billion.
CEO Jim Umpleby cited, “We’re encouraged by higher sales and revenues across all regions and in our three primary segments, which reflect continued improvement in our end markets.”
Caterpillar is a cyclical stock. Dependence on the global energy and industrial economies has put Caterpillar in a tough spot. However, while CAT is vulnerable to economic declines, it’s also well-positioned to benefit from booms and gain back its momentum. With infrastructure spending and construction spending looking to accelerate in the coming years, investors are bullish on the leading equipment supplier to those sectors.
The company is also a Dividend Aristocrat, currently yielding 2.2%. CAT stock hovers at $210, up almost 18% YTD. Despite posting impressive earnings, the shares have fallen about 20% over the past three months. Therefore it now offers a better buying opportunity for long-term investors. Forward P/E and current P/S ratios stand at 21.83 and 2.54, respectively.
Ford Motor (F)
52 week range: $6.41 — $16.45
Ford manufactures automobiles under its Ford and Lincoln brands. The carmaker has about 14% market share in the U.S. and about 5% market share in Europe.
Management released Q2 results in late July. Total revenue soared by 38% YOY to $26.8 billion. While the adverse effects of the global chip shortage had Wall Street expecting a loss of 10 cents per share, the company reported a net income of $561 million, or 13 cents per diluted share. The company ended the quarter with a cash balance of $25.1 billion and liquidity of $41 billion.
During the earnings call, management expressed optimism for the second-half of the year. In the new era of clean energy, Ford is investing heavily in new technologies to compete in the markets for electric vehicles (EVs), autonomous driving and ride-sharing. For instance, the group recently reported that the “Mustang Mach-E has captured the #2 share position in the U.S. among all EV SUVs; [it was also] named “Electric Vehicle of the Year” by Car and Driver.”
Despite chip shortages that continue to weigh on the entire auto industry, Ford sales and profits are strong. The company has also forged a crucial partnership with Alphabet (NASDAQ:GOOGL,NASDAQ:GOOG) subsidiary Google, whereby “… millions of future Ford and Lincoln vehicles at all price points will be powered by Android, with Google apps and services built-in.” Other strategic partners include Volkswagen (OTCMKTS:VWAGY) and Rivian.
Ford stock is around $13 and up 48% so far this year. However, the shares have declined almost 10% over the past month. Forward P/E and current P/S ratios are 10.16 and 0.39, respectively. Potential investors could find value around these levels.
52 week range: $14.22 — $46.10
Dividend yield: 0.82%
Phoenix, Arizona-based Freeport-McMoRan is one of the most important names in copper mining. Its assets include the Indonesian Grasberg mining complex, the world’s largest copper and gold mine in terms of recoverable reserves.
Freeport released Q2 results in late July. Total revenue increased 89% YOY to $5.75 billion. Net income totaled $1.08 billion, or 73 cents per diluted share, up from a net income of $53 million, or 3 cents per diluted share, a year ago. Cash and equivalents ended the quarter at $6.3 billion.
Following the announcement, CEO Richard C. Adkerson said:
“During the first half of 2021, we reduced our net debt by $2.7 billion and achieved our targeted net debt level, positioning us for increasing cash returns to shareholders and investments in future growth in accordance with our financial policy.”
Congress recently passed a trillion-dollar infrastructure package and other countries are following suit in putting more resources into infrastructure projects. Copper is a vital commodity in construction, particularly in electricity and plumbing. Therefore, a booming economy keeps fueling long-term demand for copper.
Freeport is expected to increase copper production by 20% in 2021 and 15% in 2022. The soaring price of copper over the past year combined with solid demand indicates a significant increase in earnings and dividends in the coming years.
FCX shares are just shy of $36 and up 41% YTD. However, they have declined almost 14% over the past several days. The recent dip may offer a buying opportunity for long-term investors who want to play bullish on global economic growth. Forward P/E and current P/S ratios are 13.44 and 2.85, respectively.
52 week range: $66.74 — $137.47
Dividend yield: 1.14%
Oshkosh is a leading maker of access equipment, specialty vehicles (such as military vehicles) and specialized heavy-duty trucks and equipment (such as airport fire apparatus). It serves a wide range of end markets, where it is usually the market share leader in North America.
Oshkosh announced Q3 results in late July. Net revenue increased 40% to $2.21 billion. Net income soared to $214 million, or $3.07 per diluted share, up from $80 million, or $1.17 per diluted share, a year ago. Adjusted net income soared 64% YOY to $145 million. Cash and equivalents ended the quarter at $1.17 billion.
CEO John C. Pfeifer said:
“I’m proud of the focus shown by Oshkosh team members who persevered through a challenging supply chain environment to deliver solid sales and adjusted earnings per share of $2.09 during the third fiscal quarter.”
Aside from increased levels of infrastructure spending, President Joe Biden’s single most important spending priority has been to speed up the transition to greener energy. Oshkosh’s product mix allows the company to benefit from both of these themes.
The company is currently making battery-powered versions of many of its specialty trucks. For example, earlier this year, it won the contract to build a new generation of mail trucks for the U.S. Postal Service.
OSK stock trades around $115 and has surged 35% so far this year. OSK shares also offer a dividend yield of 1.1%. Forward P/E and current P/S ratios are 14.47 and 1.07, respectively. Potential investors could consider buying the dips.
Silicon Motion Technology (SIMO)
52 week range: $35.13 — $81.87
Dividend yield: 1.91%
Taiwan-based Silicon Motion is an important name in the semiconductor industry. It is the leading supplier of NAND flash controllers, which play ” a vital role in the system, providing the physical interface between the host and the Flash memory devices and also making effective use of the Flash memory to provide the levels of reliability and performance required.”
SIMO’s products are mainly used in smartphones and tablets, personal computing, flash drives and enterprise and data centers. Given the increase in digitalization over the past year, the company has seen its sales increase double digits.
Management issued Q2 results in late July. Net revenue was $221 million, up 21% compared to the first quarter. Non-GAAP net income increased to $53 million, or $1.50 per diluted share, compared to $39 million, or $1.11 per diluted share, in the prior quarter. Cash and equivalents ended the quarter at $412 million.
On the results, CEO Wallace Kou remarked, “We delivered better than expected revenue in the second quarter, primarily because of our focus on sales of higher-value products. This focus also led to higher than expected gross profitability.”
SIMO shares have soared 85% over the past 12 months. The shares also offer a dividend yield just under 2%. SIMO stock hovers around $74, up nearly 55% YTD. Forward P/E and P/S ratios stand at 12.48 and 15.37, respectively. Buy-and-hold investors could consider getting into the shares around these levels.
SPDR Portfolio S&P 600 Small Cap ETF (SPSM)
52-Week Range: $26.04 — $45.41
Dividend Yield: 1.01%
Expense Ratio: 0.05% per year
Our final choice is an exchange-traded fund (ETF) that focuses on small cap companies. The SPDR Portfolio S&P 600 Small Cap ETF started trading in July 2013 and has around $4.2 billion in assets.
SPSM has 611 holdings. In terms of the sub-sectors, financials and industrials have the top spots each with about 18%. Next are consumer discretionaries (14.43%) and healthcare (11.34%) shares. Health-care technology provider Omnicell (NASDAQ:OMCL), logistics and transportation company Saia (NASDAQ:SAIA), engineering consulting group Exponent (NASDAQ:EXPO) and electronic components developer Power Integrations (NASDAQ:POWI) lead the stocks in the ETF.
Over the past year, SPSM is up about 48% and hit a multi-year high in June. Trailing P/E and price-to-book (P/B) ratios stand at 16.91 and 2.09, respectively. Despite the strong performance of small-caps in the past year, many names in the fund still look attractive.
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.