What to Buy for 2021? Here Are 23 Stock Ideas From CFRA Equity Analysts

CFRA Research provides independent and actionable research and analytics; in it's flagship newsletter, The Outlook, several CFRA equity analysts review trends that will impact investors in 2021 -- and highlight some of their top investment ideas for the year ahead. Quite simply, the world changed in 2020 when, on March 11, The World Health Organization (WHO) declared a novel coronavirus (Covid-19) outbreak that began in Asia as a global pandemic. The fallout from that moment forward included a near shutdown of most economic activity, skyrocketing unemployment, a historically unprecedented drop in U.S. GDP, and, sadly, the death of over 250,000 U.S. citizens (1.5 million worldwide) as of this publication. The outlook for 2021 is thankfully brighter as the world awaits vaccine deliveries. Oh, and did we mention the U.S. presidential election result? President-elect Biden is due to be sworn in on Jan. 20, 2021. With the 2020 backdrop in mind, here are some selected 2021 predictions from CFRA's equity analysts. Angelo Zino Apple will see its iPhone segment increase 19% in FY 21, by our estimate; this would mark the highest growth pace since moving to larger screen devices. The shift to 5G, the addition of a fourth device, and OLED screens across all phones (rather than exclusively on the high-end phones) will likely appeal to consumers. In addition, we highlight relatively easy comparisons after AAPL has seen two consecutive years of iPhone revenue declines while wireless carriers appear to be aggressive with promotions out of the gate with these new phones. After much speculation, we believe Dell will finally spin off its stake in VMware , which will likely take place in the last quarter of 2021. We think such a move, which we place at about a 70% probability, will help extract significant shareholder value on both sides and multiple expansion. We see a potential spinoff helping to simplify DELL's ownership structure and come with a cash dividend that will help improve Dell's financial position. We think a tax-free spinoff makes more sense than a sale. A transaction could also help improve DELL's credit rating. Sel Hardy Demand for Covid-19 related products and services will continue even after the first vaccines are distributed. We think Thermo Fisher Scientific is the best placed company to continue to absorb this demand. We expect increased use of personal protective equipment (PPE) going forward, as we see higher standards for hygiene and infection control becoming the new normal. In our view, the largest health care distributors in the U.S., such as McKesson , AmerisourceBergen , Cardinal Health , Owens Minor , and Patterson Companies , are set to continue to benefit from this trend going forward. Kenneth Leon The housing market is a cornerstone of the new normal economy with major shifts to work at home and increased home improvement projects since the start of the pandemic. We think any correction in the homebuilding and home improvement retail sub-industries would be an enhanced buying opportunity in early 2021, if the equity market shifts gears to underperforming cyclical industries directly hurt by Covid- 19. Single-family homes are likely to benefit from a multiyear secular shift with new household formation from the increasing number of millennial-led families who continue to seek more space and safety from pandemic concerns. Entering the new year, these sub-industries have high cash flow generation and strong balance sheets with manageable debt levels at low-interest rate costs. Our top picks are D.R. Horton , KB Home , Meritage Homes , and Home Depot . Camilla Yanushevsky We see landlords in 2021 buying more mall-based retailers as a last-ditch effort to keep vital stores and the malls they reside in alive. With the demise of department store anchors, it comes as no surprise that recently, some of the largest mall owners in the country, such as Simon Property Group Inc. and Brookfield Property Partners, have been buying up mall-based apparel retailer tenants at discounted prices. Additionally, SPG has also been in talks with Amazon about transforming its anchor department stores into fulfillment centers. That said, these centers typically fetch lower rents of $5 to $10 per square foot compared to department stores' $20 psf and would drastically slash mall values. Tuna Amobi The Covid-19 pandemic will likely foment a 'haves' vs. 'have-nots' dynamic that will further delineate potential winners and losers across the media and entertainment industries. We surmise that potential winners could further entrench their competitive position on the back of Covid-19 demand tailwinds and will likely include some of the major streaming platforms, such as Netflix and Walt Disney . Also, while the cable industry will likely experience a significant increase in cord-cutting to all-time levels amid the economic fallout of the pandemic, we expect the major operators such as Comcast and Charter to mostly offset the intensifying losses of their traditional video subscribers with a countervailing acceleration in broadband internet subscriptions to record levels, while the smaller cable operators could remain vulnerable to the economic and likely persisting secular headwinds. Matthew Miller Copper will test the 2011 record high price of $4.61/lb as strong demand growth combined with limited supply growth potential will continue to support the strong momentum in the copper bull market. CFRA expects copper prices to see sequential increases throughout 2021 and end the year near the all-time high. Our top picks to benefit from this trend are Freeport-McMoRan and Teck Resources . Don't be fooled by gold's recent underperformance: it will shine bright in 2021. Gold will likely see a surge in demand from both gold-backed ETFs and central bank purchases. CFRA thinks the unprecedented level of negative real yields, significant increases in quantitative easing and stimulus, elevated asset valuations, and the weakness in the U.S. dollar all support a gold bull run continuing in 2021. Our top picks to benefit from a higher gold price are Agnico Eagle , Wheaton Precious Metals , and Kinross Gold ; all three trade in Toronto (prices are in Canadian dollars). Chris Kuiper Industrial REITs benefit from the growth in e-commerce, which increases the demand for more space. E-commerce sales were growing steadily at 15% year-over-year for the past decade prior to the pandemic. The lockdowns forced many to turn to e-commerce, particularly those that resisted it before (such as older demographics). E-commerce growth surged to a year-over-year high of 44% in Q2 and was still elevated at a 37% growth rate in Q3. We see this step-change in demand, compressing years of growth into only a couple of quarters and see high demand and strained supply continuing through 2021. Our top pick is Prologis . Subscribe to CFRA Research's The Outlook: https://www.cfraresearch.com/

What to Buy for 2021? Here Are 23 Stock Ideas From CFRA Equity Analysts

Top investment ideas from seven of CFRA Research's equity analysts.

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