The Best Stocks to buy in 2021 for Singapore Investors! (FINANCIAL HORSE)

Financial Horse is a leading investment site in Singapore - Join our Facebook Group and our community of investors!

Basics: Which are the best sectors to buy?

We’ve talked a lot about how 2021 will be the year that investors need to sift through the post-COVID carnage, and figure out what thrives and what dies in this “new normal”.

What are the worst stocks to buy in 2021?

When you face a hard problem, always invert it. To answer what are the best stocks to buy in 2021, let’s first ask what are the worst stocks to buy in 2021.

This will be the bottom tier of the table above (orange and red).

Red Zone

These are stocks that are doing poorly now, and will do poorly post COVID. In the absence of external support, there will be real insolvency risk:

• Airlines

• Department Stores

• Hotels

The common theme for these stocks is that the core industry dynamics are not good even pre-COVID.

Orange Zone

These are stocks that are doing well now but will do poorly post COVID. The biggest one I can think of are:

• Work from home beneficiaries (eg. Zoom, Peloton)

• Consumer defensives (eg. Supermarkets)

• Glove/Mask makers

These stocks are doing very well now, but they’re being priced as though COVID will last for years. Once the vaccine starts kicking in in 2021, we could see valuations take a hit. We’ll want to avoid this sector short term, until some of the excess blows away.

Best industries to buy in 2021?

Green zone are the stocks that are doing not so good now, but should do well post COVID:

• F&B

• Consumer discretionary

• Financials

• Energy

• Real Estate

• Industrials

Yellow zone are the stocks that are doing well now, but should continue to do okay post COVID:

• Tech

• Healthcare

• New Energy

I see the most opportunity in the Green and Yellow Zone, and it is where I will focus most of my investing in 2021.

I spent much of 2020 buying up the Green zone stocks because they were selling at dirt cheap valuations.

After the reflation trade the past 2 months, the whole green zone has become a lot more expensive.

So for now, I’m focussing more on the yellow zone, which has been neglected slightly in this reflation euphoria.

But really, market sentiment is very fickle, and changes on a dime.

So I would stay nimble in 2021, and alternate between Green and Yellow Zone.

BTW – we share commentary on the COVID crisis every weekend, so please join our Telegram Channel!

Best stocks to buy in 2021

The next stage is to identify actual stocks. The full list is in the FH Stock Watch, so do check it out if you’re keen. You can check out my full portfolio there as well (updated weekly)

Green Zone stocks for me in Singapore are:

• Financials (UOB, DBS, OCBC)

• Real EstateCapitaLand, REITs (CICT, MCT etc)

• Industrials (ST Engineering)

The banks have rallied a lot the past 2 months, so I would probably stay away short term. I already have big positions there from this year, so there’s no immediate rush for me to add.

I love real estate. I think high quality real estate is going to do very well in the coming years because of low interest rates and fiat devaluation. Short term rentals will be tricky though, especially when all those office leases come due in 2021. But hey – the more they drop, the more I’m going to add.

Industrials wise, a lot of the GLCs are less competitive these days. The Singtel, Keppel, Sembcorp, they’re okay investments, but not necessarily amazing buys. The only one I really like in this space is ST Engineering, but it’s rallied a lot since the March lows.

China/HK

In time to come, China’s economy will dominate the APAC region. There’s just massive growth potential there.

Green/Yellow Zone stocks for me are:

• Tech (Tencent, Alibaba, Meituan, JD)

• Healthcare (JD Health)

• Financials (CCB, ICBC, BOC, ABC, Ping An)

• Consumer Discretionary (Xiaomi, Nio, BYD, Geely, Moutai)

US/Europe

Green/Yellow Zone stocks for me are:

• Energy (Exxon Mobil/Shell)

• Tech (FAANG, Cloudflare, Shopify, Square)

• Consumer Discretionary (Shake Shack, LVMH, BMW)

I’m pretty bullish on oil. I actually think the better way to play the COVID reopening is not the airlines but oil. That said – there is a big oil supply backlog that will take a year or two to clear, so this is more of a midterm holding. And don’t hold it too long, because I think the oil industry goes on structural decline from here as the world transitions to clean(er) energy.

Tech again is another no brainer. COVID is years of digital transformation rolled into a few months, and the world is never going back to pre-COVID. As an investor, you want to be invested in areas that are growing. What Google/Facebook did to print media and advertising, will eventually be replicated across many industries. With low interest rates locked in at least until 2023, that’s another powerful tailwind for Tech.

One outcome from COVID is that the rich/middle class now have more money than they did pre-COVID. Business in certain sectors are booming, and all the liquidity and stimulus is creating a lot of excess in the markets. And without travel there’s very few places to spend that money. Consumer discretionary is one of those that could benefit in the midterm.

Closing Thoughts

This article was a simple taste of what I think 2021 will be about.

A historical parallel to COVID’s impact is WWI/WWII. Back then, people were euphoric on V-day as well. They expected that after the war, everything would go back to the way it was before the war. But then, as now, it turned out to be completely untrue.

I think the same thing happens this time around. The only question is what changes, and what stays the same. Love to hear your thoughts!

Will the Stock Market Crash in 2021?

Check out Financial Horse's 2021 Stock Watch!_ _Join our Mailing List for weekly updates!