If you were looking for smart stocks to buy at the beginning of 2021, arguably your best bet would have been Support.com (NASDAQ:SPRT). At the end of August, Investor’s Business Daily said that if you had invested $10,000 in the provider of remote-work tech support at the beginning of January, you would now have $168,319.
That 1,538% year-t0-date (YTD) gain has made SPRT the second-best performing stock in the S&P 1500 Index. Of course, since that article, SPRT has lost a little shine. Now it’s up a measly 868% YTD.
Jokes aside, the idea of investing $10,000 now and increasing it tenfold over nine months seems too good to be true. Nonetheless, to pursue that idea, this list will feature 10 stocks to buy whose share prices add up to just about $10,000. Additionally, these stocks will come from a variety of sectors.
Most importantly, though, I’m hoping (albeit unrealistically) that these picks will deliver similar blockbuster results over the next nine months. Who knows if they actually can. Still, these stocks are solid investments to consider moving forward, outsized gains or not.
- Nucor (NYSE:NUE)
- PerkinElmer (NYSE:PKI)
- Jones Lang LaSalle (NYSE:JLL)
- Target (NYSE:TGT)
- Deere & Company (NYSE:DE)
- MSCI (NYSE:MSCI)
- Charter Communications (NASDAQ:CHTR)
- Shopify (NYSE:SHOP)
- Chipotle (NYSE:CMG)
- Amazon (NASDAQ:AMZN)
Stocks to Buy: Nucor (NUE)
Share price: $112 as of the close of Sept. 10
Sector: Basic materials
Nucor is the first entry on this list of stocks to buy. The manufacturer of steel and steel products also has the lowest-priced stock out of all of my 10 picks.
What this name lacks in size, though, it makes up for in performance. Currently, it has a one-year total return of nearly 143%, almost four times greater than the returns of the entire U.S. market. NUE stock has also delivered for shareholders long-term, generating an annualized five-year total return of 20.7%.
“All right, I don’t think Nucor’s done. We will have to go into severe recession for this one to not have pricing power. And with this infrastructure bill, it is in the catbird seat because almost every firm’s earnings estimates are too low.”
I recommended NUE back in mid-May, when it was trading around the same price Cramer bought it for. This is one of the stocks in the S&P 500 Dividend Aristocrats Index that I believe will continue to perform for years to come.
Share price: $186 as of Sept. 10
Based in Massachusetts, PerkinElmer provides diagnostic solutions to customers in some 190 countries. In 2020, the company generated approximately $3.8 billion in revenue and $1 billion in operating income. In the trailing 12 months (TTM), its free cash flow (FCF) was $1.38 billion.
At the end of July, PKI also announced that it would buy San Diego’s BioLegend, a life science antibodies and reagents provider. PerkinElmer is paying $5.25 billion for the deal in a combination of cash and PKI stock.
BioLegend is expected to generate $380 million in revenue in 2022. In addition, it should add 30 cents in profits in its first full year under PerkinElmer ownership and 50 cents in the second year. Post-closing, the merged entity expects to find $100 million in annual revenue synergies by the fifth year. All in all, PerkinElmer believes this acquisition is “transformative” because it extends the company’s already strong position within the life sciences industry.
This pick of the stocks to buy currently has an FCF yield of 6.73%. I consider anything over 4% to be worthy of investor interest.
Stocks to Buy: Jones Lang LaSalle (JLL)
Share price: $234 as of Sept. 10
Sector: Real estate
Representing the real estate sector for this list of stocks to buy is Chicago-based Jones Lang LaSalle. JLL is a provider of real estate services and investment management for owners, tenants and investors.
As a Canadian, I couldn’t help notice this company’s Aug. 24 press release. That’s because the company announced it would take over the operation of Ivanhoe Cambridge’s retail properties in Canada. So, starting Oct. 1, one of North America’s largest retail property managers will take the reins at over 20 shopping centers across the Great White North.
That’s a nice chunk of business to have. But, of course, you don’t have $17.4 billion in TTM revenue if you don’t have fingers in a lot of pies. Through the first half of 2021, JLL has grown sales by 6% year-over-year (YOY), fee revenue by 15% and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) by 158% (Page 3).
Currently, JLL has a TTM FCF of $770 million for an FCF yield of 6.32%. Consider buying JLL stock today.
Share price: $244 as of Sept. 10
Sector: Consumer defensive
When it comes to why you should consider Target as one of the stocks to buy, I could let my previous articles do the talking. I last recommended TGT stock back in late July. Before that, I had recommended the stock in June — twice.
Looking back, it seems like I’ve been high on this discount retailer since the beginning of time. However, I only really got on the TGT bandwagon when Target hired CEO Brian Cornell in 2014 and started turning the business around.
The company you see today is completely revamped, revitalized and taking no prisoners. At the end of August, Supermarket News named Target “Retailer of the Year.” Cornell said the following on the news:
“The strength of Target’s unique, multi-category assortment is a key competitive advantage, and the investments we’ve made across food and beverage drove strong growth in the category, as we posted nearly $9 billion in market share gains across the breadth of our business in 2020.”
Target’s hitting on many fronts: grocery, its private label brands, e-commerce, its in-store experience and more. The list just goes on.
Stocks to Buy: Deere & Company (DE)
Share price: $362 as of Sept. 10
If you’re into dividend stocks, Deere could be the one for you. On Aug. 25, the maker of tractors and other heavy equipment raised its quarterly dividend by 17% to $1.05 per share. That’s up from 90 cents in the previous quarter. DE stock’s annual rate of $4.20 per share now yields a respectable 1.16%. CEO John May had the following to say about the increase:
“The latest increase in our quarterly dividend is a reflection of Deere’s recent strong performance and the success of our new strategy and operating model […] It also shows our confidence in the company’s future direction.”
In Deere’s most recent quarterly results, the company blew past analyst estimates. In the third quarter, DE’s earnings per share were $5.32, more than double the company’s Q3 2020 earnings. As a result of its strong showing, the company upped its earnings in 2021 to $5.8 billion at the midpoint of its guidance.
Back in February, I included DE stock in a group of seven blue-chip stocks to buy. I thought its position within the all-important agriculture industry made it an excellent long-term bet. After all, everybody has to eat.
This name has an FCF yield of 4.73% — one of the lower yields on this list. Sometimes you just have to pay up for quality.
Share price: $650 as of Sept. 10
Sector: Financial services
Right now, the 13 analysts covering MSCI stock on Marketwatch give it a consensus rating of Overweight and a $650 median target price, on par with where it’s currently trading. That suggests analysts believe the indexing and data analytics say the company is fully valued.
Moreover, a quick look at this company’s free cash flow — TTM of $830 million — makes for an FCF yield of 1.57%. That’s generally below where I like to go when considering stocks to buy.
However, this company’s August acquisition of Real Capital Analytics (RCA) for almost $950 million gives it an even stronger offering for real estate transaction data. RCA’s database goes $20 trillion deep, providing “more than 200,000 investors and lenders” with access to these commercial property transactions.
I recommended MSCI stock back in May 2020 when it was trading at around $320. This name has doubled in the 15 months since. If you’re considering a three- to five-year hold, I wouldn’t have a problem buying at current valuations, but I would definitely keep some dry powder for a future correction.
Long-term, it’s hard not to like this conservatively financed business.
Stocks to Buy: Charter Communications (CHTR)
Share Price: $787 as of Sept. 10
Sector: Communication services
I honestly can’t remember the last time I covered this telecom company, if I’ve covered it all. But Charter Communications has quietly delivered for shareholders in a big way. Year to date, it’s got a total return of about 21%.
However, over the past 10 years, it’s been a different story. CHTR stock has a 31.31% annualized total return. That’s tremendous performance over the long haul.
Unsurprisingly, this name has also caught the attention of fellow InvestorPlace contributor Josh Enomoto, who recently called out the fact that Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) owns a piece of Charter. In fact, it’s one of Warren Buffett’s larger holdings, worth $4.16 billion and good for a 2.8% share of the company.
Enomoto makes the argument that Charter’s Spectrum cable business operates in some massive states — like Texas, California and New York. He suggests that it’s got plenty of business to go after in just those three states. Plus, Charter operates in 41 other states as well, so it should have ample room to keep growing.
If this pick of the stocks to buy is good enough for Buffett and Enomoto, it’s good enough for me.
Share price: $1,484 as of Sept. 10
Next up on this list of stocks to buy, e-commerce platform Shopify is having a crappy year in the markets. SHOP stock is up a measly 29% YTD. Thank goodness I didn’t write an article called Shopify Stock Will Hit $10,000 Sooner Than You Think like I did for Amazon back in May 2020.
I definitely would have egg on my face. Still, though, Shopify will be just fine, despite the coming and going of top management at the company. Currently, some suggest that CEO Tobi Lutke is the problem.
I definitely would keep an eye on this issue if you own or are planning to own SHOP stock. That said, until something concrete surfaces, investors should probably take this with a grain of salt.
As for analysts, they’re generally still on board with Shopify. For example, the 37 analysts covering SHOP give it an Overweight rating and a $1,700 median price target. That $200 higher than where it’s currently trading. What’s more, one analyst even gives SHOP stock a $3,300 target price.
Shopify’s recent results have been robust. There’s no question it will keep growing. However, at 47 times TTM sales, I would probably wait for a correction with this one before jumping in.
As a Canadian myself, it’s great to see this homegrown tech story continue to kill it each quarter. I hope Shopify keeps going. It’s a great success.
Stocks to Buy: Chipotle (CMG)
Share price: $1,901 as of Sept. 10
Sector: Consumer cyclical
On Sept. 9, Cowen analysts raised their target price on Chipotle to $2,250 per share, well above its current share price. Cowen sees the restaurant chain’s digital sales sparking an ongoing rally. The analysts also like that it’s selling more “higher margin offerings” as part of its food offerings. Fairlead Strategies founder Katie Stockton said the following on the company:
“Chipotle has historically been a leader in this space […] And even though it’s consolidated or digested those gains, it really still looks just fine from a long-term momentum perspective.”
The moves this company has made for its digital business have paid off. In Q2, digital sales rose by 10.5% and now account for almost half its overall revenue.
By almost any valuation metric, though, CMG stock is not cheap. It’s got an FCF yield of less than 1%. That said, if you’re looking for quality in the restaurant industry, Chipotle is an easy winner as one of the stocks to buy.
Share price: $3,469 as of Sept. 10
Sector: Consumer cyclical
Amazon has so many different projects going on that it’s hard to know what to call it. Is it an e-commerce company? A tech company? A retailer? A media business? A cargo business? The list goes on.
What I do know, however, is that this pick of the stocks to buy is growing its free cash flow in a big way. In 2020, Amazon’s FCF was almost $26 billion. Two years earlier, in fiscal 2018, it’s FCF was just $17.3 billion.
In Amazon’s Q2 results, you may have noticed that its TTM FCF decreased by 62% YOY to $12.1 billion. Normally, one might be alarmed by such a drop. However, in this case, Amazon was just investing in equipment and properties for its business. As a result, purchases of property and equipment in the TTM ended Jun. 30 were $52.3 billion, a 115% increase YOY.
Even when Amazon was a much smaller company, Jeff Bezos wasn’t afraid to divert profits and cash flow to invest in the parts of the business that needed capital, staffing and more. The company’s new CEO, Andy Jassy, is no different.
Earlier this month, InvestorPlace contributor Mark Hake suggested that, based on the company’s FCF margins, AMZN stock could trade for over $4,000 in the next year. I don’t think there’s any doubt it will.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.