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One of the wildest years on record for equities is nearly over. Yet when the curtain closes on 2020, the benchmark S&P 500 will probably have ended the year higher by a double-digit percentage. This isn’t too shabby, considering that we’ve been navigating our way through the worst recession in the U.S. in decades.
The good news for investors is that a new year breeds new opportunity. A focus on fiscal stimulus and an incredibly dovish Federal Reserve offers hope that we could see a roaring bull market for years to come.
Best of all, investors don’t need to have a cash pile the size of Fort Knox to build wealth in the stock market. If you have $100 that can be put to work right now, here are four of the best stocks you can buy for 2021.
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Walgreens Boots Alliance
Forget about investing in highly volatile coronavirus disease 2019 (COVID-19) vaccine developers. Instead, I’d suggest putting $100 to work in the ancillary players that’ll find new life during the administration of these vaccines. Pharmacy-chain Walgreens Boots Alliance (NASDAQ: WBA) is a great example that comes to mind.
The biggest challenge for Walgreens is competing in an increasingly digital world. But with over 200 million American adults likely eligible for a COVID-19 vaccine in 2021, qualified physicians, nurses, and pharmacists will be needed to administer these vaccines. The COVID-19 inoculation campaign could drive an incredible amount of traffic to Walgreens’ locations and give the company an opportunity to latch onto customers at the grassroots level.
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Beyond the coronavirus, investors should also be pleased with Walgreens’ ongoing transformation. The company is on track to cut at least $2 billion in annual spending by 2022, all while reinvesting heavily in digitization. Though it represents a small percentage of total sales, direct-to-consumer sales should remain a double-digit growth opportunity.
Further, Walgreens has partnered up with VillageMD to create full-service clinics in up to 700 of its locations. This would effectively make Walgreens a one-stop shop for a person’s medical needs.
To be crystal clear, I’m not expecting any major changes in how cannabis is scheduled at the federal level with President-elect Joe Biden in office. Biden has called for the decriminalization and rescheduling of marijuana, which isn’t the same as legalizing the drug. Nevertheless, state-level legalizations and organic growth have provided plenty of opportunity for U.S. pot stocks.
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What makes Trulieve Cannabis so special is the company’s focus on the Florida market. Rather than spreading itself thin like other multistate operators, Trulieve has opened 69 of its 74 dispensaries in the medical marijuana-legal Sunshine State. By saturating the Florida market, Trulieve has done an excellent job of building up its brand without having to spend a fortune on marketing. It controls an estimated 50% of Florida’s medical cannabis market.
Trulieve Cannabis also happens to be the most nominally profitable marijuana stock on the planet. It’s been profitable on a recurring basis for quite some time, which is the reason it deserves a healthy premium.
Annaly Capital Management
Mortgage real estate investment trusts (REITs) have been a truly unexciting industry to park your money in for the past eight years. However, that’s about to change, which is why $100 invested in Annaly Capital Management (NYSE: NLY) could be a genius move.
With coronavirus vaccines beginning to make their way to the public, we’re likely to see a resurgence in U.S. economic activity in the months and years to come. Historically, when emerging from a recession, the yield curve tends to steepen. Put another way, the gap between long-term and short-term yields widens.
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Mortgage REITs like Annaly borrow at short-term rates and, using leverage, acquire assets with higher long-term yields. This gap between higher long-term yields and lower short-term borrowing rates is known as net interest margin (NIT). Over the coming years, Annaly should see its NIT rocket higher, which would propel its profits and robust dividend payout.
Also of note, a majority of Annaly Capital Management’s assets are agency-only mortgage-backed securities (MBS). Agency means these assets are backed by the federal government in the event of default. Though the yields on agency MBSs are lower than non-agency assets, it allows for leverage to be used to boost profits.
The next couple of years should also be highly favorable for gold stocks like Yamana Gold (NYSE: AUY). On the macro side of the equation, the nation’s central bank is choosing to keep interest rates at or near historic lows. At the same time, it’s also buying bonds and flooding the market with new money. This combination of exceptionally low bond yields and a pressured U.S. dollar should be a big-time positive for the price of gold.
More specific to Yamana, it’ll see its gold equivalent ounce (GEO) production surge, once again, in 2021. After upping its GEO forecast by 25,000 ounces to 915,000 ounces following its third-quarter performance, Yamana foresees north of 1 million GEO in 2021 and 2022. Production growth at the flagship Canadian Malartic mine, as well as mainstay Jacobina, may deliver record cash flow next year.
Best of all, growing cash flow has allowed Yamana to pay down its debt. As of Q3 2020, net debt stood at $619.1 million, which is down from around $1.7 billion in the mid-2010s. It’s possible Yamana achieves its goal of being net-cash positive by the end of 2021.
Sean Williams owns shares of Walgreens Boots Alliance. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
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