What’s Hot And What’s Not For 2021

One thing is for sure, very few investors are starting 2021 with an identical portfolio to that which they started 2020 with. It was one of the most volatile years on record, not only in terms of crashes and rallies but also industry rotation. Trends changed, then changed again, and there’s plenty of reasons to think that 2021 will have many echoes of the year that’s gone before it.

As we head into the centenary of the Roaring Twenties, the stock market is still the belle of the ball when it comes to where to put your money. Interest rates are just too low to send the big money anywhere else. With that in mind, here are some hot, and not so hot, industries and stocks to watch out for in the coming twelve months.

What’s Hot

The recurring theme here is a sharp recovery in names that were on the front line of the COVID-19 pandemic for much of last year. With vaccines finally being rolled out at a large scale, expectations are growing that we’ll be back to something at least close to normal by the middle of 2021.

The final few months of 2020 saw an increased bid flow into these names and their peers as Wall Street caught onto the recovery potential. We can expect that hype to continue to build throughout Q1.

Discount retail suffered more than most in the space a year ago as their digital and e-commerce channels were among the least developed. It’s no wonder that the likes of Ross Stores (NASDAQ: ROST) saw their stock plummet more than 50% in just a few weeks. Considering they came into 2020 at all time highs, this must have been particularly tough for investors.

However, shares are on the verge of retaking all that lost territory after a late end of year run that saw them pop 30% in the final two months as news of vaccines grew. November’s Q3 earnings report also helped, as it showed revenue was only down 2% on the year, suggesting that the comeback is all but complete and the stock is ready to get back to its seemingly perpetual march higher.

In a similar vein, theme parks and restaurant names are expected to tell similar recovery stories of their own this year. In these departments, keep an eye on Six Flags (NYSE: SIX) and Shake Shack (NYSE: SHAK) respectively.

What’s Not

In comparison to the recovery potential and story that investors are looking for in the likes of Ross Stores, there’s a growing sentiment on Wall Street that many of 2020’s brightest stars might have had their day. The unprecedented nature of the pandemic meant that stocks with positive exposure to it went through a phenomenally aggressive re-valuing as hype exploded and investors struggled to ascertain a fair price.

Since hopes for a vaccine really started to build back in October, some of these names have seen their fortunes reverse pretty quickly. Even with new variants of COVID still popping up, 2021 is set to be a year where many of these names come back to earth.

For many, Zoom Video (NASDAQ: ZM) came to encapsulate the pandemic, both as an exploding stock and as a means with which they stayed in touch with family and friends. However, a quick look at their stock chart tells investors all they need to know for 2021. Shares are down more than 40% since setting an all-time high in October, an ugly flow of momentum to take into a new year. It’s also hard to see them beating analyst expectations in the quarters ahead, such has been the hype around their growth.

Along with work-from-home stocks, investors should exercise caution with workout-from-home stocks. They caught a similar rally for similar reasons in 2020 and are likely to lose considerable steam in the coming months as gyms reopen on a large scale and people ditch the yoga mat and resistance bands in the living room for their weekly gym session in a gym. The likes of Peloton (NASDAQ: PTON) fall into this bracket, and though they rallied through December, shares saw some fairly heavy profit taking last week.