The stock market can be volatile, but historically it’s also been a great way to build wealth. Although the long-term average return of the stock market has been almost 8%, individual stocks can provide explosive growth. Take Tesla, for example, which skyrocketed nearly 700% in 2020 alone. Those kinds of returns are few and far between, but plenty of stocks are capable of producing 100% returns or more in a single year.
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Of course, finding the rocket that’s about to take off requires a combination of analysis, timing and good fortune. Even if you think you’ve found the winning combination, it pays to diversify, as stocks that offer high rewards carry equivalent levels of risk. But if you’re looking for some names that might offer good gains in 2021, take a look at this list of potential winners. Each has a catalyst that may propel it higher, but remember that nothing is guaranteed. You’ll need to do some legwork to determine if these names fit into your portfolio and how much risk you’re willing to shoulder.
- Stock price as of Jan. 11: $413.32
Roku is rapidly becoming the poster child for streaming platforms. Traditional cable and satellite TV providers were estimated to lose north of 6.5 million subscribers in 2020, and that trend seems to be accelerating, not slowing. Roku itself reported 46 million active users in 2020’s third quarter, representing a 43% year-over-year increase. In mid-December, Roku finally gained access to the HBO Max platform, which could be a major driver of growth in 2021. The stock already has momentum, gaining about 150% in 2020 alone, and if current trends continue, the stock could soar again in 2021.
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- Stock price as of Jan. 11: $229.80
Square is an obvious beneficiary of the post-COVID-19 economy. The fintech has already benefited from the dramatic rise in touchless transactions during the pandemic, but after restrictions are lifted, Square should benefit even more. Even in a world in which in-person transactions ground to a halt, Square still reported a 5% year-over-year gain in revenue in the company’s third quarter. The stock soared in 2020, but it could be poised for another banner year in 2021 if the vaccine helps to unlock the global economy. As a company that focuses on small- and medium-sized businesses, which have been disproportionately affected by pandemic restrictions, Square is well-positioned for major revenue gains after the pandemic. The more in-person transactions that are conducted, the more that Square benefits.
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- Stock price as of Jan. 11: $38.62
EverQuote’s stock price skyrocketed in 2019, going up nearly ninefold, making its 20%-plus gain in 2020 seem relatively sedate. But there could be plenty more room to run for this online insurance marketplace. Over $5 billion is spent annually by insurance companies on digital marketing, with spending expected to grow by 16% annually through 2024. EverQuote is set to continue to benefit because insurance companies like a convenient way to reach customers, and those shopping for insurance like the ability to comparison shop among insurers in a single spot.
EverQuote’s original target market was auto insurance, but it has since branched out to include health, home, renters and life insurance. Business is going through the roof for the company, which keeps upping its sales forecasts. EverQuote seems to be in the right lane at the right time, and that could propel further major stock gains in 2021.
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Southwest Airlines (LUV)
- Stock price as of Jan. 11: $47.99
It seems a foregone conclusion that at some point travel will begin to pick up again and leisure companies will see their customers return. However, not all travel companies are made equally. Southwest Airlines is likely to be one of the prime beneficiaries due to its focus on domestic routes. Pent-up demand for vacations and travel to see loved ones is likely to pick up before business travel, making Southwest a better initial bet than the legacy carriers like United, Delta and American, that rely on business fares to subsidize their high costs.
After a rough 2020, the winds of change might be right around the corner. Analysts have a strong buy rating on Southwest, along with a $47.96 average price target. Depending on the rapidity of the vaccine rollout, Southwest stock might easily provide a double-digit (100%???) return in 2021.
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Teva Pharmaceuticals (TEVA)
- Stock price as of Jan. 11: $11.34
Teva Pharmaceutical had a rough 2020, but it wasn’t directly due to the coronavirus pandemic. Rather, Teva has been going through a large number of company-specific problems that have weighed heavily on the stock. Specifically, it has undergone a bribery settlement, association with the opioid crisis and allegations of price-fixing. However, a new CEO took over in 2017 and has since cut the company’s annual expenditures by $3 billion and reduced its debt by $10 billion. The stock has essentially gone nowhere since 2017, but from a technical perspective, this means it has built a massive base. If and when Teva starts moving, it could be met with a rush of buyers.
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Hawaiian Airlines (HA)
- Stock price as of Jan. 11: $19.10
Hawaiian Airlines has taken a huge hit, like all travel companies, but it is poised for recovery in 2021. Much like Southwest Airlines, Hawaiian Airlines has a completely domestic network, which should recover more rapidly than business travel once the pandemic subsides. However, Hawaiian also has long-haul aircraft that carriers like Southwest do not, allowing it to reach further domestic cities. It also benefits from hubs in one of the most popular states, with many Americans no doubt thinking that a Hawaiian vacation sounds pretty good about now.
Anticipating a rebound in travel, Hawaiian Air recently announced three new destinations on the mainland, Ontario, California, Austin, Texas, and Orlando, Florida. Although a bet on Hawaiian Air is contingent on a recovery in the domestic tourism sector, that seems likely to happen after coronavirus restrictions are lifted.
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Booking Holdings (BKNG)
- Stock price as of Jan. 11: $2,240.74
Booking Holdings is in the same boat as Southwest Airlines and other airlines and travel stocks. With global demand for travel plummeting, there’s no way that Booking Holdings could sustain its revenue and earnings in 2020. The company reported a 47% plunge in revenue in 2020’s third quarter, which one could argue was actually above what might be expected with the world at a standstill. Clearly, Booking Holdings is a pure play on a recovery in travel, but that should be expected once the vaccine reaches critical mass. At that point, Booking Holdings may take off, as revenue might even exceed that in a normal year as pent-up demand for travel translates into an explosion in bookings.
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- Stock price as of Jan. 11: $1,264.80
AutoZone has been a solid long-term performer, with trailing average annual returns of 18.95% per year for each of the past 15 years. However, as with many companies, the stock struggled in 2020, losing about 1% for the year. The tough year is understandable. With fewer people driving to work, going on vacations and visiting friends and relatives, there simply wasn’t as much demand for AutoZone products. Given the company’s long history of successful returns, however, you can expect a recovery as soon as the pandemic passes. If the vaccine receives a rapid distribution and the economy goes back to normal, AutoZone should be a direct beneficiary of the resulting increase in driving, as the more people drive, the more they need supplies and repairs.
- Stock price as of Jan. 11: $45.01
Lazard is an investment bank that has a few catalysts behind it for 2021. For starters, there should be increased underwriting business available once the economy begins to recover post-COVID-19. However, a bigger spark for the stock could come if Lazard changes its management structure from a partnership, as many analysts expect. This would make the company eligible for inclusion in the S&P 500 index, which would lead to an influx of buying as S&P 500 index funds would be required to buy the stock. The company also sports a lower P/E than the overall market, making it cheap to buy.
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Enphase Energy (ENPH)
- Stock price as of Jan. 11: $207.24
Enphase Energy is a renewable energy company, and that alone may be enough to give the company a boost in 2021 thanks to the incoming presidential administration. The Biden administration has already made climate change one of its major policy initiatives, and renewable energy companies like Enphase should benefit from that position. Enphase mainly focuses on energy conservation through solar panels. However, the company is moving to an off-grid solution that is accessible via a mobile app that can provide homeowners with access to power during blackouts. Analysts have a strong buy rating on the stock.
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