5 tech and innovation stocks to watch in 2021
Trying to pick 5 US tech and innovation stocks in 2021 is a bit like asking the kid in the candy shop to select just 5 lollies; there are just so many great stocks to choose from.
This is a challenge for any investor who is turning their attention to the mighty US stock markets – where to start and what stocks to watch?
The conundrum is compounded by the fact that US stocks indices are at record highs, and for as many bulls as there are, there are a plethora of bears who think inflation and bond yields are about to wreak havoc on the higher-valued tech and innovation stocks.
With all this in mind, how do you pick some winners for the rest of 2021 without wanting to turn your investing dollars into a casino punt?
The first point you need to understand is that unless you are a well skilled trader (of which there are few), you want to watch/buy 5 stocks in 2021 that have the capacity to make you excellent returns over the next few years, irrespective of whether the share price rises or falls in the short term.
A case in point is Tesla, which was the winner winner chicken dinner in 2020, rising nearly 700%. Despite punching the lights out with the second quarter 2021 earnings result, the shares are struggling to perform relative to the S&P 500 in 2021, but 2022 will most likely be a different story.
Investing in stock markets comes with up-and-down price movements due to unforeseen events, such as a COVID-19 Delta variant outbreak or merely profit-taking after stock price rises.
With this in mind I have selected 5 companies to pop on your watch list that can offer growth in a secular megatrend, meaning they have the capacity to grow revenues and earnings through the economic cycles over the next 5 to 10 years.
- Stock price: US$336.99
- Ticker code: CVNA
- Market cap: US$58 billion
According to Morgan Stanley, Carvana will become the leading online ecommerce platform for used cars.
Often it is hard to understand the business model when it is not available in Australia. A quick Google search, however, will allow you to discover via independent YouTube commentators just what an innovative and technology-driven online user experience this company offers, including 3D visuals, online customised purchase contracts and financing options.
All features are just a click away. The car vending machine, and the ability to test-drive and offer returns after a week, show just what a superior user experience Carvana provides compared to the lengthy wait times and limitations of the traditional in-store used car sales model.
- Stock price: US$48.77
- Ticker code: DKNG
- Market cap: US$19 billion
Some US experts are forecasting the online gambling and sports betting market to grow from US$3 billion in 2020 to US$15 billion in 2025.
The deregulation of online gambling in an increasing number of US states (as tax revenues from in-situ casinos has fallen with the pandemic) is one of the primary drivers for the interest in the recently listed DraftKings.
The company came to the market via a SPAC in December 2019 and traded as high as US$71 earlier in 2021. At the current levels of US$49 the stock is consolidating, and investors will be looking to the next quarterly earnings for confirmation of the positive trends and exposure into the online gambling and sports betting markets.
- Stock price: US$164.50
- Ticker code: NKE
- Market cap: US$260 billion
I don't think anyone can look past the digital ecommerce trend when it comes to stocks to watch. Although Amazon is often the go-to tech giant in this space, I thought I would propose an unlikely innovation contender.
As well-known as Nike is, I wonder how many of you have used its ever-expanding online shopping experience? Nike is a company that is successfully transitioning from a traditional manufacturing, wholesale supplier business to a digitally driven, direct-to-consumer (DTC) business model.
Morgan Stanley is extremely upbeat about the prospects for Nike to expand this new model, which should, in turn, increase the size of the total addressable market and thus future sales and margins for the company.
- Stock price: US$256.25
- Ticker code: CRWD
- Market cap: US$58 billion
A technology watch list wouldn't be complete without an enterprise software-as-a-service company, and specifically a cloud-based software cybersecurity stock.
CrowdStrike provides specialised endpoint (user) protection solutions. Google noted in its second quarter update that the increase in cyber and ransomware attacks was a "wake up call".
CrowdStrike's growth rate has surprised many, and revenue rose 82% year-on-year for the fiscal 2020 period.
According to tech analyst and investor Beth Kindig in a recent Forbes article, Cybersecurity Ventures expects cybercrime will cost the world US$10.5 trillion by 2025. It is hardly surprising that demand for CrowdStrike's software services is growing so swiftly.
Investors should note that stocks such as CrowdStrike are richly valued, and expectations remain high that the company can continue to generate strong revenue growth and shrink the bottom-line losses.
- Stock price: US$146.77
- Ticker code: AAPL
- Market cap: US$2.4 trillion
How many of you have a suite of Apple products in your home, and how much do they form a part of your daily life? Apple's second quarter earnings results proved yet again why it is one of the largest and most profitable companies in the world.
The June quarter results broke records across the board for revenue sales, gross margins and net cash of US$72 billion. The immensely robust fundamentals of this company are reflected in the free cash flow generation, margin expansion, installed devices (iProducts) and user loyalty. Apple is a stock you own and don't trade.
Danielle Ecuyer has been involved in share investing in Australia and internationally for over 3 decades.
Due to the success of her first book Shareplicity: A simple approach to share investing (Major Street Publishing $29.95), her second book Shareplicity 2: A guide to investing in US stock markets (Major Street Publishing $34.95) is now available. Find out more at www.shareplicity.com.au.
Note: Danielle Ecuyer owned Apple and CrowdStrike at the time of writing the article.
Disclaimer: The views and opinions expressed in this article (which may be subject to change without notice) are solely those of the author and do not necessarily reflect those of Finder and its employees. The information contained in this article is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort. Neither the author nor Finder has taken into account your personal circumstances. You should seek professional advice before making any further decisions based on this information.