These 5 Stocks Could Generate Better Returns than FAAMG in 2021
2020 has been a great year so far for FAAMG stocks, which represent the top five top performing tech companies - Facebook, Amazon AMZN, Apple AAPL, Microsoft and Google by Alphabet. Overall, FAAMG accounts for 20.5% of the weight of the S&P 500 index.
The new acronym for Goldman Sachs is a modification of FAANG in which Netflix NFLX has been replaced by Microsoft due to its comparatively lower market capitalization. FAAMG can be used interchangeably with GAFAM.
With a year-to-date increase of 81.2% (YTD), Apple is currently the best-performing stock among FAAMGs, followed by 73.5% on Amazon. Microsoft, Facebook and Alphabet gained 43.5%, 30.1% and 28.4%, respectively, outperforming the S&P 500, which is up 18.8% since the beginning of the year.
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The group has benefited from increased demand for e-commerce services and increased media consumption as people are largely confined to their homes due to the lockdown, on-site accommodation guidelines and social distancing measures amid the coronavirus pandemic . Since vaccination programs will take several months to reach a large part of the world's population, these factors are likely to continue to benefit the FAAMG group in 2021 as well.
Nevertheless, there are several stocks that have outperformed FAAMG stocks in the course of the year to date and that are expected to continue the momentum next year.
5 better bets than FAAMG for 2021
Here we select five fundamentally strong stocks that, compared to FAAMG, offer good investment opportunities in 2021.
Tesla TSLA is high on our list as electric vehicle sales are expected to improve in the new year due to an improved economy and comparatively lower interest rates. It's not the next year, however, and EV sales are projected to reach 26.95 million units by 2030, down from 3.27 million units sold in 2019, a CAGR of 21.1%, according to a report from MarketsAndMarkets .
According to a study by the Boston Consulting Group, electric vehicles are expected to make up a third of the global automotive market by 2025 and more than 50% by 2030, slightly exceeding sales of internal combustion engine (ICE) vehicles.
Tesla is poised to capitalize on the robust prospect for electric vehicles. The company has a pioneering advantage in the field of electric mobility with vehicles with long range, superior technology and software advantage. With the sedan model 3 as its flagship, the automaker has established itself as a leader in the EV segment. The ramp-up of model Y production further increases sales growth. The solid production of the Shanghai Gigafactory is also a good sign for future growth.
In addition to increasing automotive sales, the company's power generation and storage revenues are also improving Tesla's prospects. Particularly in solar and storage provisioning, there should be significant growth in the coming days if the Megapack and Powerwall products are positively received. A brilliant selection of upcoming products and aggressive expansion efforts are a good sign for Tesla.
The EV maker had already seen its shares jump a whopping 665.3% since the start of the year, clearly outperforming the Zacks Auto Manufacturers rally - domestic industry of 243.9%. Additionally, Tesla's forecast earnings growth for the next year is still a healthy 58.9%. Zacks' consensus estimate for 2021 earnings also rose 2% over the past 30 days to $ 3.56 per share. Tesla currently has a Zacks Rank 1 (Strong Buy). The full list of today's Zacks # 1 Rank stocks can be found here.
The Trade Desk's TTD shares are up a whopping 273.8% since the start of the year, outperforming the Zacks Internet Services industry's 34.1% growth. The digital advertising company is benefiting from the dynamism of programmatic ad buying. In addition, the advent of digital content has increased the use of this company's inventory for all forms of ConnectedTV ("CTV"). In addition, the recovery in ad demand and the spending scenario is expected to fuel return on sales.
Digital advertising spending significantly exceeded traditional media purchases last year. Citing reports from eMarketer, WNIP also found that the digital ad market in the U.S. alone is valued at $ 225 billion by 2024, up from nearly $ 150 billion this year. This gives The Trade Desk plenty of room to expand, and marketers need to reach consumers outside of Google and Facebook.
The Trade Desk currently has a Zacks Rank of 1. The Zacks consensus estimate for 2020 earnings is $ 4.44 per share after revising up 5% in 30 days. For 2021, the consensus mark for earnings over the same period has shifted 2% north to $ 4.58 per share.
NVIDIA Corporation NVDA is benefiting from the pandemic-induced work-from-home and learn-at-home wave. The graphics chip maker saw solid demand for GeForce desktop and notebook GPUs, which is boosting gaming revenue. Additionally, an increase in hyperscale demand is a tailwind for the company's data center business.
In addition, the acquisition of Arm is intended to help NVIDIA offer a comprehensive technological ecosystem for data centers, IoT, autonomous vehicles and mobile domains. The company is now well positioned to enhance its inference technology, drivers, and accelerators by using Arm's robust architecture and chip designs.
NVIDIA shares are up 126.1% year-to-date, outperforming semiconductor - general industry growth of 34.8%. The Zacks Consensus estimate for FY2022 earnings has been revised upwards by 5 cents in the past 30 days to $ 9.71 per share. The number shows a growth of 18.7% compared to the previous year.
Zscaler ZS counts on the increasing demand for cyber security solutions due to numerous data breaches. The increasing demand for privileged access security for strategies for digital transformation and cloud migration is a major growth driver.
That being said, the company's edge cloud for policy enforcement, multi-tenancy, proxy for SSL or TLS verification, and untrustworthy network access are robustly positioned to assert themselves in the thriving remote work culture.
The portfolio strength of the Zacks Rank # 2 company strengthens its competitive advantage and helps add users. In addition, a strong presence in various industries such as banking, insurance, healthcare, public sector, pharmaceuticals, telecommunications services and education is another important catalyst.
Zacks' consensus estimate for FY2021 earnings is 37 cents per share after revising up 27.6% in 30 days. For the 2022 financial year, the consensus mark for earnings in the same period has shifted 9.6% north to 52 cents per share. Zscaler's shares are up 344.7%, outperforming Zacks Internet Services industry's 34.2% return year-to-date.
The Wayfair W share has gained 215.2% since the beginning of the year, outperforming the electronic commerce industry's 64.3% growth.
Increased direct retail business in the US and international regions has fueled the growth of this Zacks Rank # 2 company. In addition, a growing active customer base was also a tailwind. In addition, the company is aggressively investing in international regions to strengthen its presence.
The Zacks consensus estimate for current year earnings is $ 4.74 per share after revising up 8.7% in 30 days. The consensus mark for next year earnings has moved 4.6% north to $ 2.28 per share over the same period.
Zack's top 10 stocks for 2021
In addition to the stocks discussed above, would you like to find out more about our top 10 tickers for the whole of 2021?
These 10 are carefully selected from over 4,000 companies that fall under the Zacks rank. They are our top buy and hold tips.
Start your access to the new Zacks Top 10 stocks >>
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NVIDIA Corporation (NVDA): Free Stock Analysis Report
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Apple Inc. (AAPL): Free Stock Analysis Report
Netflix, Inc. (NFLX): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Research Report
Wayfair Inc. (W): Free Stock Research Report
The Trade Desk Inc. (TTD): Free Stock Analysis Report
Zscaler, Inc. (ZS): Free Stock Analysis Report
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