In this article we will take a look at the 10 best stocks to invest in 2021 for long-term profits. You can skip our detailed analysis of these stocks’ outlook for 2021 and some of the major growth catalysts for bank stocks and go directly to 5 Best Stocks to Invest in 2021 For Long-Term Profits.
As consumer spending and employment slowly start to recover, investors are hopeful about the much-awaited stability in financial markets. It’s becoming harder for beginner investors to find the most promising socks for long-term gains. In an era of meme stocks, market speculation and soaring valuations, it has become extremely important to practice caution and patience and stick to the basics of investing. Long-term profits and gain usually come from investing in growth stocks that promise higher growth in the future. These companies are working on products and services to solve some of the key problems of human societies.
Some of the best stocks to invest in 2021 for long-term profits are operating in sectors like EVs, renewable energy, rare earth mining, biotechnology and gaming. We chose the stocks by scrutinizing future growth potential of some of the best growth stocks as well as gauging their fundamentals. We pay a lot of attention to the fundamental value and future growth catalysts and try to steer clear of any kind of bias or speculation. Earlier this year we saw how the onslaught of Reddit investors clobbered major hedge funds. That was not surprising. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context and industry outlook in mind, let’s start our list of 10 best stocks to invest in 2021 for long-term profits.
10. Match Group, Inc. (NASDAQ: MTCH)
Number of Hedge Fund Holders: 72
Dating app company Match Group is one of the best stocks to invest in 2021 for long-term profits. Match is a dating giant which owns several dating apps like Tinder, Hinge, Plenty of Fish and OkCupid. The company is set to gain as people begin to socialize following the mass rollouts of COVID-19 vaccines. However, Match also saw a huge spike in usage as people used online dating apps to chat and involve in virtual intimacy during lockdowns. According to data from AppTopia, Match usage jumped 21% between September and October. Match is also set to gain from the cultural changes in the U.S. like increasing social isolation, declining physical intimacy and depression.
Our database shows that 72 hedge funds held stakes in Match Group as of the end of the fourth quarter, versus 61 funds in the third quarter.
Artisan Mid Cap Fund, in their Q4 2020 investor letter, mentioned Match Group, Inc. (NASDAQ: MTCH). Here is what Artisan Mid Cap Fund has to say about Match Group, Inc. in their Q4 2020 investor letter:
“Match Group is the global leader in online dating services across a portfolio of 45 brands that includes Tinder, Match.com, OkCupid and Plenty of Fish. Dating has been challenged in a socially distanced world, but the company’s growth through the pandemic has proven more resilient than feared. Specifically, Tinder’s paid member count in the most recent quarter was up 6% QOQ and 16% YOY, and user engagement remains above pre-COVID levels. We believe the company is well-positioned to accelerate post-pandemic as social distancing measures are lifted, more people return to face-to-face interactions and as new features are launched which should drive further engagement and monetization on the platform.”
9. Shopify Inc. (NYSE: SHOP)
Number of Hedge Fund Holders: 90
Shopify is one of the best stocks to profit from the burgeoning market of ecommerce. Shopify’s technology allows millions of people worldwide to make online stores easily and start selling their products. Ecommerce is just getting started A report from CBRE suggests that digital-impacted sales, which include purchases initiated through online channels, are expected to account for about 58% of total retail sales by 2022. Recently, Stifel started covering Shopify stock with a Buy rating and $1,200 price target. The firm likes the stock amid international expansion, growth in enterprise merchants and the development of new products.
According to our database, the number of Shopify’s long hedge funds positions increased at the end of the fourth quarter of 2020. There were 90 hedge funds that hold a position in Shopify compared to 81 funds in the third quarter. The biggest stakeholder of the company is Stephen Mandel’s Lone Pine Capital, with 1.8 million shares, worth $2.03 billion.
“While we are pleased with the results of these specific purchases, we made a huge mistake of omission at that time. This mistake will likely be one of the biggest we ever make in our careers. Specifically, we did deep work on Shopify and loved everything about the business qualitatively. Unfortunately, we ultimately found ourselves unable to get comfortable with the numbers.
We built our model up from the key performance indicators (KPIs) that drive revenues. Our last save of the model dated 8/3/2016 looked as follows: (Page 2). These numbers seemed right from everything we understood about the company. While we tend not to rely on sell-side consensus estimates before finishing our own workup of the business, we do give them a look once we feel comfortable with how we have approached our analysis as it is often helpful to get a sense of what the average participant in the market expects the business to do. With Shopify, the sell-side consensus was so far from where our numbers were shaking out, it seemed almost impossible that we were basing our analysis on the same underlying information. Our natural next step was thus to take the sell-side consensus data and work backwards to figure out the implied expectations on each of the key revenue drivers. Here is what the sell-side consensus looked like as at the time: (Page 2).
Shopify’s actual revenues for 2016-2018 ended up being $389m, $673m and $1,073m. In other words, not only were we justifiably far more optimistic than the consensus estimate, but we also were far too conservative in terms of how the company actually performed.
8. Canadian Solar Inc. (NASDAQ: CSIQ)
Number of Hedge Fund Holders: 14
Canadian Solar ranks 8th in the list of 10 best stocks to invest in 2021 for long-term profits. The company makes solar PV modules. In 2020, Canadian Solar saw a 32% annual growth in total module shipments to 11.3 GW, while net revenue jumped 9% in the period to $3.5 billion. The stock is up 217% over the last 12 months. The company said it sold 1.4 GWp of projects globally in 2020, with 20 GWp solar project pipeline, and won 1 GWh of battery storage contracts. The company also expects to see its market share in the U.S. expand to 10%.
14 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the fourth quarter, down from 25 funds a quarter earlier.
7. Sea Limited (NYSE: SE)
Number of Hedge Fund Holders: 115
Sea Ltd. stock has gained over 430% in the last 12 months. The company is operating in growth domains like digital entertainment, ecommerce, digital payments and games. In the fourth quarter, the company saw a 100% increase in its revenue, as digital entertainment sales soared 72%. Sea Ltd. said its ecommerce GMV in the period gained 123% to $11.9 billion. For the full year, the company expects digital entertainment bookings of $4.3 billion – $4.5 billion, while ecommerce GAAP revenue is expected to be between $4.5 billion – $4.7 billion.
As of the end of the fourth quarter, 115 hedge funds in Insider Monkey’s database of 887 funds held stakes in Sea Limited, compared to 95 funds in the third quarter. Tiger Global Management LLC is the biggest stakeholder in the company, with 9.2 million shares, worth $1.8 billion.
“Sea Ltd (SE): When I wrote our Q4 2019 letter about Shopee launching a Brazilian business, it seemed very few investors or competitors knew or cared.
A year ago, I wrote: “This is the first test for the ecommerce marketplace outside of its Southeast Asia home base. Will the platform’s fun and addicting features overcome a lack of local knowledge and presence? It’s hard to predict consumer behavior and how accepting users will be to a platform – especially one that’s a foreign culture and 10,000 miles away. The only way to know is to experiment and watch the results closely.
Empirically though, it seems that what consumers find entertaining in Asia, generally translates well to Brazil (and Shopee really is as much an entertainment platform, as an ecommerce one).
For example, just look at the top 10 free apps in Brazil. Two are utility messaging apps, so we’ll ignore those (WhatsApp and
Facebook Messenger). But among the remaining eight apps, they’re all entertainment based and overwhelmingly Asian. Four are from China (Kwai, TikTok, VStatus, TikTok Lite), two from Singapore (Free Fire and Shopee, both Sea Ltd apps), and one from the US (Instagram). The commonality is that all these apps are experts at creating addictive habits, as evidenced by their personalized recommendations, avg usage time, number of logins per day per user, etc.” (LINK)
I distinctly remember having conversations with several Brazilian hedge funds as recently as last summer who were investors in Sea Ltd. When the topic of Brazil came up, many of them didn’t even know Shopee was operating in their own backyard!
Part of this stems from the fact that Shopee tends to enter markets with a bottoms-up approach. Instead of going after urban, high disposable income users first (of which these hedge fund professionals were certainly part of), they tend to initially go after those with only a few hundred or thousand USD of annual disposable income. These users tend to reside outside of major cities, have fewer choices for recreational pastime (thus turning to gaming, short-form videos, or online shopping for entertainment), can’t afford “branded” items and thus are willing to take a chance on cheaper (but still good quality) un-branded goods, and are willing to wait several weeks for it to be shipped from Asian factories.
Anyone who has studied Pinduoduo (Nasdaq: PDD) in China, will recognize this strategy and just how large of a market these consumers can be. As Shopee gains popularity in a market, they will then start to slowly move “up-market”, and cater to more urban and higher-income consumers. They’ve already followed this exact strategy in Southeast Asia, and this is the point they’ve reached in Brazil over the past year.
Shopee made its first big social push last fall, hiring over a dozen influencers with 1M+ followers to promote Shopee’s Black Friday sale (LINK). In addition, they also released their first Brazilian TV commercial last year.
It seems these initiatives are working. Shopee now consistently ranks in Brazil’s top 5 apps (while sister app Free Fire, is also the #1 grossing app). In addition, Shopee also moved Pine Kyaw (LINK), one of their key lieutenants in Vietnam who successfully helped Shopee fight off competitors (Tiki, Lazada, Sendo), to Brazil last May.
6. Fastly, Inc. (NYSE: FSLY)
Number of Hedge Fund Holders: 32
Fastly ranks 6th in the list of 10 best stocks to invest in 2021 for long-term profits. The Cloud computing company offers content delivery network (CDN) services that play a key role in delivering internet content include websites, videos and text from servers to end users. Last year, the company bought web security company Signal Sciences for $775. The company’s services would help Fastly to create a strong ecosystem of Cloud and web services.
Abdiel Capital Advisors is one of the 32 hedge funds tracked by Insider Monkey having stakes in FSLY at the end of the fourth quarter. The fund owns over 9.3 million shares of the company.
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Disclosure: None. 10 Best Stocks to Invest in 2021 For Long-Term Profits is originally published on Insider Monkey.