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2021 investments: post-lockdown stocks
Certain economic sectors could be about score some big wins during the post-pandemic global economic resurgence. If you are looking to make some 2021 investments, you might consider these assets for your portfolio.
Making 2021 investments with post-lockdown stocks
The state of play
Certain stock classes could make solid 2021 investments as they are likely to face significant upward momentum while economies worldwide begin to recover.
Previously shuttered or restricted businesses like high street retailers, hospitality companies, and travel firms are poised for rapid growth this year, as well as in 2022.
A word of caution: any short-term booms may not necessarily translate into massive long-term growth. Instead, as economies and company operations normalise, they may return to their usual cyclical patterns or operating procedures.
With that in mind, we’ve picked out some stock sectors that could potentially benefit greatly from a post-lockdown economic surge.
Stocks groupings to watch in 2021
The second half of 2021 is shaping up to be very strong for hospitality companies. In the UK alone, sales are estimated to rise by £2.5bn in the week beginning May 17th when venues will start offering inside seating and services again after months of closures. Overall UK hospitality sales growth is forecast at 63.3% across the rest of 2021.
Investors and traders may want to raise a glass to pub stocks, as well as firms like the Restaurant Group. JD Wetherspoons, City Pub Group and Marston’s have all been eyeballed for their potential going forward.
But remember, when investing or trading, to cast a wider eye. Drinks supplier Diageo could build on its strong position, for instance, with the reopening of worldwide hospitality markets. The firm has expanded its buybacks programme, expected to total £4.5bn, as sales and revenues pick up. £1bn is expected to be returned to shareholders by the end of the next financial year before the programme concludes in 2024.
The fact that Diageo can do this suggests it has robust cash generation. It also highlights that the board is shareholder-friendly – something investors will no doubt appreciate.
It’s no secret airline stocks have had their wings clipped throughout the pandemic. Share prices are still rocky. We’re not cleared for take-off just yet. American carriers, such as American Airlines, or Southwest, have been rocked considerably. British Airways owner IAG has too been burning through cash. It recently turned to the bond market to raise funding, issuing an €825m convertible bond on May 11th.
But the skies are brightening for airlines. Demand for trips, both domestic and international, has already begun to pick up. Ryanair made 7,000 trips in April of this year alone, carrying one million passengers, compared against the 40,000 total passengers carried across the entirety of 2020.
It all depends on the continued success of vaccine rollouts, local responses to new strains, and international travel rulings. The EU, for instance, said in April it was mulling over opening up travel to vaccinated tourists, providing they can offer proof of inoculation, and introducing a mechanism to allow individual countries to lockdown if Covid-19 cases pick up again.
In practical terms, this could see a strengthening of share prices for airlines which could make them ideal late 2021 investments, or certainly worth looking at in 2022.
The Zacks Airline Industry, a grouping of 28 stocks, has outperformed the S&P 500 in the year up to May 2021. It had risen by 107.9% over this period compared with the broader S&P 500 up 46.6%.
Headwinds are still blowing, but as the skies clear, airline stocks might become essential components of post-lockdown portfolios moving forward.
Online retailers are still worth a watch, regardless of lockdown or not. Ecommerce has soared throughout the pandemic; thus, online sellers might be key 2021 investments. For instance, in the UK, non-food online sales were up 57.4% in April compared with March, and up 4.3% y-o-y. Total annual growth in the US for 2020 was 35%.
Retail retailers like ASOS and Boohoo, digital fashion outlets, may be stocks to watch for UK investors. ASOS has realised 23% sales growth across the past five years, whereas Boohoo’s five-year revenues have grown 55%.
In relation to outlets and retailers, investors may wish to take a look at credit card issuers or payment platforms like Mastercard, Visa and PayPal. All of them stand to gain from the ongoing general shift towards online shopping.
GameStop, a Reddit favourite, could be worth a look at too. It has made some sweeping management changes and has raised $551m in funding to be an eCommerce transformation.
GameStop shares are something of a “memestock” – i.e. a stock that has been juiced by a new breed of online investors – but, despite this Reddit-based interest, GME looks like it might actually perform quite well. The transition from primarily store-based to digital sales will be key here. GameStop stocks picking up any further Reddit attention will be important to watch too.
Lockdown or no lockdown, your 2021 investments and trades still carry risks
Of course, the spectre of Covid still casts a long shadow. We are by no means completely out of the pandemic. Vaccines will be important, as will responses to any mutant strains that could emerge across the rest of the year.
In addition to the pandemic, there are your usual investing and trading risks. While you can make money, you can also lose it too. Always do thorough research before investing or trading. Only do so if you can afford to take any potential losses.
Warren Buffett dumps airlines, Berkshire posts biggest quarterly loss
Is Warren Buffett losing his touch? Stock in Berkshire Hathaway, the legendary company founded by the Oracle of Omaha, is down 22% year-to-date, compared to a 12% loss for the S&P 500. It’s the company’s worst performance against the benchmark index in a decade.
On top of that, earnings released over the weekend revealed a near $50 billion loss in the first quarter; the company’s biggest ever.
According to Berkshire Hathaway, up until the coronavirus pandemic hit the US proper many of its businesses were showing year-on-year revenue and earnings growth, but that quickly changed in April:
“As efforts to contain the spread of the COVID-19 pandemic accelerated in the second half of March and continued through April, most of our businesses were negatively affected, with the effects to date ranging from relatively minor to severe,” the company said in its regulatory filing.
Chart: Berkshire Hathaway (blue) performance versus the S&P 500 cash market (purple) since January 1st 2020, Marketsx.
Turbulence for airline stocks hits Berkshire earnings
Buffett announced during the company’s AGM that he had sold off his stakes in American Airlines, Delta Airlines, Southwest Airlines and United Airlines. “Our airline position was a mistake,” Buffett told investors during the virtual gathering, after disclosing that he sold the airline stocks for $6.1 billion, much less than he paid for them.
The news sent AAL down 7.7%, DAL down 6.4%, LUV down 5.7%, and UAL down 5.1% on Monday. Buffett put the blame for the sale squarely on the pandemic, stating that he believes the companies are well-managed, but that “the airline business… changed in a very major way” and that the future was much less certain.
Even if passenger volumes do return to normal within the next few years, airlines could struggle with the repercussion of taking billions of dollars in loans as part of the US government’s bailout package. As well as repaying these, the Treasury now has warrants to acquire their shares at a discount if it chooses to exercise the right.
Why isn’t Berkshire Hathaway snapping up cheap stocks?
Berkshire had a record $137 billion in cash at the end of the first quarter. The company’s shareholders have been wondering why the Oracle of Omaha hasn’t taken advantage of the huge drop in stock prices on the back of the COVID-19 pandemic. By March 23rd the S&P 500 was down 35% from the February 19th record.
Buying while others are selling is a classic Buffett move, after all. One of his (many) famous suggestions is to be greedy while others are fearful. He used the financial crisis to snap up shares in major US banks like Bank of America and Goldman Sachs for cheap.
But currently he doesn’t “see anything that attractive”. He told investors during the AGM that Berkshire is “willing to do something very big” should the right opportunity come along.
“I mean you could come to me on Monday morning with something that involved $30, or $40 billion or $50 billion,” Buffett said. “And if we really like what we are seeing, we would do it.”
Three ways to trade like Warren Buffet with Marketsx
Looking to trade like the Oracle of Omaha? Marketsx gives you plenty of options. You can take a position on CFDs for Berkshire Hathaway stock or some of Buffett’s favourite companies, like Apple, Bank of America, and Coca-Cola individually.
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