The end of the year perhaps best signifies ambivalence, where nostalgia conflicts with the innate hope for the future. While most people would be happy to bid adieu to a year of extraordinary hardship, 2020 has been nothing short of a boon to investors. While investors hope that this trend continues, let's take a look at some of the major market trends and stocks to watch in 2021.
Stocks to Watch in the EV Sphere
Apple (NASDAQ:AAPL) – Yes, we are talking about that Apple. The richest company on the planet made waves earlier in December amid reports that the manufacturer of the iconic iPhones has revived its plans to launch a consumer-oriented EV by 2024. The news spurred a ferocious rally in lidar and battery stocks as investors anticipated lucrative partnerships ahead. During the course of 2021, apart from developments related to Apple’s existing product mix, any pertinent news on this front would continue to drive the stock price action, thereby meriting continued vigilance from investors.
NIO (NYSE:NIO) – With year-to-date gains of over 1000 percent, NIO shares have been one of the best performing investments in 2020. However, in what may be a historic opportunity, the proverbial party is just getting started. NIO is slated to reveal its first sedan during the NIO Day event, currently slated for early January 2021. The company is also planning to go beyond China and enter the European market in 2021. Additionally, NIO continues to ramp up production, with expectations of a monthly run rate of 25,000 units by the end of 2021 or early 2022. All of these developments make the stock an attractive bet for 2021.
Lordstown (NASDAQ:RIDE) – The company manufactures light-duty electric pickups and may truly shine in 2021 with the commencement of the Endurance truck’s production. Bear in mind that the pickup truck has already gained over 80,000 non-binding reservations. Recently, the company entered into a partnership with Camping World Holdings – the largest retailer of RVs in the United States. Under the disclosed terms, the two companies would jointly establish a nationwide EV service and collision network. What’s more, the company is expected to play a pivotal role in manufacturing the next-gen delivery vehicles for the U.S. Postal Service should Workhorse (NASDAQ:WKHS) manage to win the contract award in 2021. All of these developments make Lordstown an attractive bet for 2021.
Arrival Inc. – The British mobility startup is slated to merge with the SPAC, CIIG Merger Corp. (NASDAQ:CIIC), in Q1 2021. Arrival’s sizable backorder, a relatively small timeframe to bring its products to the market, and a vast Total Addressable Market (TAM), expected to reach 8 million commercial and passenger fleets by 2030 in the US alone, are some of the reasons that make this an ideal stock pick for 2021. Arrival’s star attraction is its ability to employ “low CapEx, rapidly scalable Microfactories that can be placed anywhere in the world” to manufacture affordable electric vans and buses. What’s more, the company expects to commence formal production toward the end of 2021.
Electric Last Mile – The last-mile e-commerce delivery solutions provider is expected to merge with the SPAC, Forum Merger III Corporation (NASDAQ:FIII), in 2021. The company’s production plant in Indiana is already retrofitted for EV production, with the commercial launch of the Class 1 delivery vans expected in Q3 2021, thereby allowing the company to gain a first-mover advantage in the United States.
Lidar and Battery Stocks to Watch in 2021
Lidar and battery stocks have generated significant gains during the course of 2020, and this bullish regime is nowhere close to ending amid the ongoing global transition toward EVs. Our favorite lidar stocks for 2021 are Velodyne (NASDAQ:VLDR) and Luminar (NASDAQ:LAZR). You may read more about these two stocks by following this link as well as this one. Additionally, investors should keep an eye on lidar players Innoviz and Aeva, both of which are slated to go public in 2021.
As far as battery players are concerned, we are quite optimistic about Microvast’s prospects. The company is expected to go public in a few weeks by merging with the SPAC, Tuscan Holdings (NASDAQ:THCB). The most appealing feature of Microvast batteries is their combination of fast charging and long cycle life with enhanced safety. As an illustration, Microvast’s battery systems can be fully charged at the 6C rate, corresponding to a 100 percent charge in 10 minutes.
QuantumScape (NYSE:QS) is another battery stock that has the potential to generate outsized gains in 2021. The solid-state battery manufacturer is one of only a handful of SPAC merger stocks that have breached the $100 stock price threshold. The company recently announced that its solid-state separators are capable of charging to an 80 percent capacity in as little as 15 minutes. Bear in mind that these batteries do not utilize carbon or carbon/silicon anode. They also do not use excess lithium on the anode, boosting energy density in the process. By eliminating the side reaction between the liquid electrolyte and the carbon in the anode of conventional lithium-ion cells, QuantumScape’s product claims to provide an enhanced driving range for EVs. While a formal product launch is not expected until around 2025, the company remains one of the most promising battery plays.
Stock Picks for the “New Normal” Era
We all know that the coronavirus (COVID-19) pandemic has changed the global social paradigm. Even though vaccines are now being disseminated, it would take around 2 years for the entire world to be vaccinated, given the logistical complexities involved. In the meantime, spatial distancing measures would continue to dominate our social life, creating opportunities for investors to generate outsized gains.
Amazon (NASDAQ:AMZN) remains our favorite pandemic stock play. The e-commerce giant continues to benefit from booming online sales as well as the growing enterprise cloud adoption. Even though the stock is not cheap, it retains the potential for outsized gains in 2021 amid the prevailing secular trends.
Peloton (NASDAQ:PTON) continues to be an attractive new normal stock bet. Even apart from the spatial distancing factor, some consumers prefer to exercise within the confines and privacy of their homes instead of going to the gym. This is the reason why most analysts remain bullish on the prospects of this company even beyond the pandemic.
Streaming services have truly shone brighter than ever in 2020. What’s more, this trend toward online viewership is expected to continue to accelerate. As a case in point, Warner Bros. will release all of their new movies in 2021 simultaneously on HBO Max as well as in theaters. It is, therefore, a no-brainer that investors maintain exposure to Netflix (NASDAQ:NFLX), AT&T’s (NYSE:T) HBO Max, Disney Plus (NYSE:DIS), etc.
“Promising Deliverables”
In this category, we will highlight some of the stocks that have a great potential of generating outsized gains in 2021 and yet may have flown under the radar of most investors.
Pershing Square Tontine Holdings Ltd (NYSE:PSTH) – This is the largest SPAC currently on the market, featuring a market capitalization that exceeds $5 billion. What’s more, the SPAC has yet to finalize its merger target. A few weeks back, rumors emerged that suggested that Michael Bloomberg might take his media empire public by merging with Pershing Square. While these reports did not pan out, the investor interest in the stock remains as strong as ever.
VG Acquisition Corp. (NYSE:VGAC) – This is a SPAC launched by the Virgin Group. Again, no merger target has been disclosed as yet. However, word on the street indicates that the SPAC is likely to merge with a major EV player.
Virgin Galactic (NYSE:SPCE) – Staying with the Virgin Group, Virgin Galactic maintains prospects for outsized gains in 2021. While the spaceflight company’s last powered flight earlier in December suffered a minor setback, future flights during the new year will create further capital gain opportunities. The company is also planning to take its founder, Richard Branson, to space in 2021.
A Few Thoughts Regarding Reflation Expectations
The accommodative fiscal and monetary policies in the US are expected to continue in 2021 and beyond, given the magnitude of the economic shock from COVID-19. As such, the market expects rates to remain at historical lows for a couple of years at least. Nonetheless, investors should pay close attention to the 10-year breakeven as these represent the best measure of the market’s inflation expectations. Any major thrust upward, though unlikely, would create a dilemma for the Fed. Nonetheless, in the prevailing paradigm, we expect the dollar to continue losing its value versus its major peers, including the Euro and the JPY. This, in turn, bodes well for precious metals and commodities. Readers should note though that a sustainable bullish uptrend in commodities would only materialize once the global demand recovers. We recommend a healthy exposure to precious metals, including Gold and Silver, as well as cryptos, such as Bitcoin and Ethereum.
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