So, this will be my first top 5 picks article, 2020 was interesting and very volatile which is actually a really good thing in my opinion, lots of fear and speculation in the market is a fantastic opportunity to make money, though I’m sure there are a lot of people that did not enjoy the craziness in the markets. If the markets during Coronavirus so far have been any indication 2021 will likely be just as crazy. One of the hardest things to do especially when the markets are volatile is to not let your emotions get the best of you and make poor trading decisions as a result. Other than having a game plan that you stick to is to have a one or two people who also invest that you can bounce ideas off of and who can point out when you are getting to emotional or going away from your plan. If you can’t manage your emotions and stick to a game plan you might panic sell during a market drop and lose a lot of money, like in March for example when my portfolio was down over 50% at one point.
In picking my top 5 I didn’t just want to outperform the TSX since it is not very diverse and has a heavy energy sector so tends to be kind of a dog so I also am aiming to beat the 10% a year benchmark as well. Anyways, here are my top 5 picks to outperform.
- Kirkland Lake Gold Ltd (KL) Current Price $52.60. I really like these guys’ odds of beating the market in 2021. They are actually going to finish 2020 down about 4% including dividends 5.91% if you don’t. This is largely due to dropping gold prices to finish the year. They are actually up 1647.21% in the last 5 years not including dividends and have increased their dividend payments 4 times in the last 2 years and this has generally been by anywhere from 30% to over a 100% increase. They also have no debt; very low operating costs, and have recently drilled and discovered more high-grade gold veins at some of their mines. The future looks really bright for this company going forward in my opinion.
- Manulife Financial (MFC) Current Price $22.65. These guys were hit really hard in March and dropped by almost 50%. Since then they have been slowly coming back up in price but are still down 14.2% for the year. I think they will continue to slowly come up in price through 2021 due to their strong financials, very low P/E ratio and strong dividend. Even now they are still probably a steal at $22.60 with a 8.54 P/E ratio and a 4.96% dividend yield. They seem to be pretty underrated right now and should be in for a solid run in 2021 as things start to open back up.
- General Motors (GM) Current Price $41.64. It’s kind of funny to me that all the auto manufacturers get a bad rap for not being like TESLA even though TESLA has less than 1% of the entire market share. That being said with Biden winning and the large EV push right now GM has jumped on board real fast to get a good EV program going to keep or even increase their current market share. The current renewables/EV push should give GM a good boost through 2021, as well as the fact that their self driving car program is largely considered to be miles ahead of TESLA’s (depending on whose reporting, cause you can get contradicting articles on anything even from the same news source sometimes). Sales should increase as the economy opens back up and potentially even allow them to bring back their dividends (fingers crossed). This should all lead to a good year for General Motors.
- Bank of Nova Scotia (BNS) Current Price $68.80. These guys should be in for a decent 2021. A lot of their Covid relief plans should be coming to a close or already have stopped. Their income has dropped but still been pretty steady through Covid so far and should continue to be pretty decent as we hopefully pull out of lockdowns and the terrible economy that Corona has caused with worldwide poverty increasing for the first time in a few decades. They are down 6.58% for 2020 without dividends and have not fully recovered from March yet. This should give them some room to run going into 2021 and if they hold or increase their current 5.24% dividend this should just add to the bump as well. They could definitely have a 10-15% upside going into 2021, but time will tell I guess.
- Ballard Power (BLDP) Current Price $29.78. This company may end up being a big part of the future but right now, and for a long time, they have been all hype. There is no bigger hype right now than green energy and EV’s. Ballard has been into fuel cell technology for 20 years or so and has still not managed to turn a profit (Fuel cell technology uses hydrogen to power batteries to run a vehicle for anyone who doesn’t know). This means no long charging times and your fill ups will be about the same as stopping at the gas station. Downsides are that hydrogen can explode (though it can be safe in a crash with proper containers), and hydrogen is expensive to produce using green energy and easy to produce using fossil fuels (kind of defeats the purpose. The upside is water and heat are the only waste produced when it is used for power. They are up 218% for 2020 and will likely finish 2021 even higher (after a bunch of volatility) with the green energy push worldwide and soon to hit the states even harder with Biden in power.
These are my top picks to underperform the TSX and/or 10% for the year. That’s not necessarily to say they are bad buys I just don’t see big gains for them in 2021.
- Boeing (BA) Current Price $214.06. These guys have had a rough time even before Covid due to the 737Max crashes. They were already hurting and Corona made it so much worse when it hit the entire airline sector. The Max is back in service in more countries everyday, but with air travel so restricted still airlines aren’t buying many planes. I don’t really see them fully recovering until a year or 2 after the airlines recover so I don’t expect a great year from them. They are down 34.37% for 2020.
- FIAT Chrysler (FCAU) Current Price $18.09. They are about to become even bigger due to their merger that is supposed to be completed in the first quarter of 2021. That being said I feel that the merger is currently priced into the stock and as a result I see it cooling off some post merger rather than continuing to run. This doesn’t make it a bad stock to own; I just don’t see much upside potential for it until the merger and finances have settled out to the new normal after 2021. It will be interesting to see what they pay for dividends (or not) after the merger though. They are up 21.68% for 2020.
- Finning International (FTT) Current Price $27.03. Oil was hit almost as hard as the airlines thanks to Corona. That being said oil has been on a slow but relatively steady recovery since March. Finning is not doing too badly in that regard but, they are very close to their 52 week high despite lower earnings during Corona and as a result I figure they are probably due for a small pullback in 2021 and will probably underperform for the year. They are up 7.45% for 2020 despite a drop in March of more than 50% (would’ve been nice to by around then, but oh well, can’t win them all).
- Canopy Growth. (WEED) Current Price $31.32.While I do see them making a lot of money at some point (as long as they have the funds to run until then), that point is not right now or in the near future. As a result, this stock is mostly hype right now and has had a really solid run up since the election. I think investors are in for another year of negative earnings for Canopy and seeing as how they are near their 52-week high, unless more places legalize in 2021 I think the stock will struggle a bit in 2021. They are up 28.28% for 2020.
- Bell (BCE) Current Price $54.43. I actually really like Bell stock. They make a lot of money and pay a really good dividend, but their stock has been pretty stagnant through 2020 and until Corona is over I don’t see any big changes happening in that regard. I don’t really expect their stock to move up or down very much through 2021 at this point. They are down 9.92% for the year not including dividends, but their yield is over 6% right now so that’s only a 3-4% drop for the year which is basically nothing compared to every other stock I own. I believe it was my only one for the year that moved less than 10% in either direction.
As fun as it is to pick how you think a stock is going to do and see if your right or not, I think your best bet is to find some good companies you like and only buy them when they are below or at a set price you are willing to pay for that company. A stock might oil go up 10% in a year but a various times through the year be up or down much more than what the price was at the start of the year or the end. Take Penske auto group for example, they are up 18.14% over the past year but by buying it at prices I think are a discount I am up 72.8% for the year with an average cost of $34.37 vs. the current price of $59.39. This is not including dividends. Obviously this is a pretty extreme example because I was able to buy in the middle of the March market crash, but you can definitely outpace the market just by only buying a good stock when you feel it is trading at a discount. I generally will set target price alerts on all my stocks and generally won’t even look at them until they get close to the target price. Every so often I will look at all the stocks and see if the target prices need to be raised or lowered depending on how the stock is doing. If no stocks are near my target then I will find a new stock to buy that I feel is trading at a discount.
Thanks for the read and I hope everyone has a great 2021.
Disclaimer: Every stock in this article is either on my watchlist or currently owned by me. All prices are as of December 31, 2020.