After the pandemic-induced downturn of 2020, the stock market quickly rebounded in the later part of the year and entered into a bullish run that has continued throughout 2021. As the new year begins, we now take a look back to review the top 10 best performing stocks in 2021 that have benefited most from this continued bull market.
As we all know, 2020 was a crazy rollercoaster ride.
The S&P 500 Index (representative of the US stock market) fell as low as $2,304.92 at the end of March 15, 2020: Investors’ confidence dropped with businesses closing shops and reducing employees. However, as the world began to reopen and we all returned to our normal lives to some degree, the stock market also followed. It moved from a Covid-influenced bearish run in the first part of 2020 to a bullish run that has lasted throughout 2021.
Since the market opened at $3,764.61 on January 4, 2021, the S&P 500 Index has been on an uptrend — achieving higher lows and higher highs for most of 2021. From January 4, 2021 to December 3, 2021, the S&P 500 has returned 22.6% (also returning 23.8% between December 3, 2020 and December 3, 2021, to make a complete 12 months). In fact, it only closed below the highest closing price of 2020 ($3,756.07) just once — on January 24, 2021 (when it closed at $3,714.24).
This growth has come from stocks in various industries. Pharma (as expected) and technology stocks that soared during the pandemic have continued to grow in 2021, while stocks in the hospitality and travel industry have begun to find their feet again (as our airports and restaurants opened up). Energy, steel, and electronic vehicles (EV) stocks have also joined the uptrend.
In this article, we’ll look at the top 10 best performing stocks of the S&P 500 in 2021 (based on their 2021 yield-to-date — that is, how their prices have gone up between January 4, 2021 and December 3, 2021) and the fundamentals behind their growth.
We’ll conclude by showing you how to buy these stocks (and others) in the UAE.
[Note: Sarwa is not recommending that you buy any of these stocks. Before you buy any stock, ensure it aligns with your personal investment objectives and planning. If you don’t have an investment plan, schedule a free call with a Sarwa wealth advisor and we will guide you through how to create one. All investing involves risk.]
The first on our list of the top 10 best performing stocks in 2021 is Moderna Inc. This is a US-based biotechnology company that produces therapeutics and vaccines for infectious, autoimmune, and immuno-oncology diseases, among others.
The stock of Moderna has grown by 174.5%, from $111.73 at the end of January 4, 2021 to $306.72 at the end of December 3, 2021.
Moderna is one of the companies that have been at the forefront of producing and distributing Covid-19 vaccines. Using its genetic sequencing approach, Moderna was the first to bring a Covid-19 vaccine to market.
In fact, Moderna had its first profitable quarter in Q1, 2021, with net income of $1.2 billion. It would go on to record net income of $2.8 billion by Q2 and $3.3 billion by Q3.
This change in fortune will show in key ratios that investors care about. For example, in Q1, 2021, Moderna began to have a positive return on equity, at 19.76%. The ROE has grown since then to 121.60% in Q3. Net profit margin followed the same trajectory, moving from 21.88% in Q1 (its first positive) to 59.68% in Q3.
[To understand the importance of profit margin and ROE in stock analysis, read, “What You Can Learn From Warren Buffett’s Top Stock Holdings”]
The global demand for Covid-19 vaccines is still high and Moderna continues to be a part of the production and distribution.
Moreover, it remains to be seen how Moderna’s approach — genetic sequencing — can help provide therapeutics and vaccines for other diseases.
MRNA currently has 450.45 million outstanding shares, with market cap of $122.24 billion
The major portion (61.14%) of those shares are held by institutional investors (1,558 of them), of which Baillie Gifford and Company (10.41%), Vanguard Group Inc. (6.7%), and Blackrock Inc. (6.63%) are the top three holders.
Devon is a US-based energy company that specialises in the exploration, development, and production of oil, natural gas, and natural gas liquids.
DVN has grown from $16.13 at the end of January 3, 2021 to $41.77 at the end of December 3, 2021, a 159% return.
Energy companies like Devon have benefitted from the increased demand for oil in the post-pandemic world. Similarly, delayed production increase among OPEC member states has contributed to the increase in oil and gas prices.
For example, the price of Brent Crude Oil grew from $51.09 on January 4, 2021 to peak at $86.4 on October 26, 2021. Light Crude Oil followed the same trajectory, with price going from $47.62 to peak at $84.65 on October 26, 2021. Even Natural Gas went from $2.581 on January 4, 2021 to peak at $6.312 on October 5.
The net income of Devon has grown from $213 million in Q1, 2021 to $838 million in Q3. Profit margins have grown from -14.46% at the end of Q1 to 13.50% at the end of Q3 while return on equity (ROE) has grown from -14.46% to 16.56%.
While there is a possibility that oil prices will keep improving and break its 2014 peak ($100), they can also fall if the current inflation rate falls.
As the push for electric vehicles and environmentally sustainable energy sources rises, it remains to be seen if the largest supplier of energy — oil and gas — will hold its own. Though, in the short to medium term, it is hard to see alternative energy sources surpassing oil and natural gas.
DVN currently has 677 million outstanding shares and a market cap of $28.278 billion.
A whopping 90.11% of its shares are held by 1,072 institutions. Vanguard Group Inc. (11.27%), Blackrock Inc. (8.07%), and State Street Corporation (6.26%), are the top three holders of DVN.
NVIDIA is a global visual computing company that provides the GeForce GPUs (graphic processing units) for gaming and PCs, the GeForce NOW game streaming service, and Data Center platforms and systems for AI, HPC (high-performance computing), and accelerated computing, among other computing solutions.
NVDA grew by 134.1%, from $131.13 at the end of January 4, 2021 to $306.93 at the end of December 3, 2021.
The semiconductor sector has benefitted from a rising demand for chips, led by crypto miners, electric vehicle makers, and mobile and laptop manufacturers.
Tesla has shown the possibilities that the electronic vehicle space holds, while the success of bitcoin has led to a wide range of cryptocurrencies, and increased digitisation of many parts of human life has led to a rise in the demand for mobile phones and computers.
As these developments have increased the demand for chips, their prices have skyrocketed and companies like NVIDIA are enjoying the spoils.
NVIDIA’s net income grew from $1.46 billion in Q4, 2020 to $2.46 billion in Q3, 2021. Profit margins and ROE followed growth in net income with the former rising from 25.98% to 33.81% and the latter from 29.25% to 40.72%.
The demand for chips will continue to grow as interest in cryptocurrency, smartphones, laptops, and electric vehicles shows no signs of abating.
As long as NVIDIA maintains or increases its market share, it will continue to benefit from the semiconductor sector’s growth. More recently, NVIDIA has been taking a lot of market share off AMD in the Global GPU market.
NVDA currently has 2.49 billion outstanding shares with a market cap of $764.87 billion.
The major portion of its shares (66.89%) are held by institutional investors (3,499 of them) of which Vanguard Group Inc. (7.79%), Blackrock Inc. (6.97%), and FMR, LCC. are the top three holders.
Bath & Body Works, Inc. is a US-based retailer of body care, home fragrance products, soaps, and sanitizers.
BBWI experienced a 131.7% growth, moving from $32.01 at the end of January 4, 2021 to $74.16 at the end of December 3, 2021.
Retail companies like Bath and Body Works Inc. have gained a lot from the easing down of the lockdowns and travel restrictions.
Also, more than 90% of BBWI’s supply chain is in the US, which makes it less exposed to travel restrictions compared to other retailers. In fact, BBWI’s stock was growing even during the lockdowns and travel restrictions.
However, while the stock price has been going, fundamental indicators are not consistent. Profit margins grew from 7.12% in Q4, 2020 to 12.44% in Q3, 2021 while net income fell from $860 million to $88 million and ROE from -56.39% to -268.35%.
The Omicron variant of Covid-19 may yet lead to another round of lockdowns or it may not. However, BBWI’s performance in 2020 shows that it can potentially stay profitable and grow even during lockdowns and travel restrictions.
BBWI currently has 257.72 million outstanding shares and a market cap of $19.29 billion.
A large portion of its shares (92.74%) are held by 763 institutional investors of which Vanguard Group Inc. (10.69%), Lone Pine Capital LLC (9.19%), and Blackrock Inc, (7.11%) are the top three holders.
Ford Motor Co is the fifth of our top 10 best performing stocks in 2021. This company designs, manufactures, distributes, and services a wide range of trucks, cars, SUVs, and electrified vehicles across the globe.
F grew from $8.52 at the end of January 4, 2021 to $19.14 at the end of December 3, 2021, a 124.6% increase.
The introduction of electric vehicles has helped Ford grow its net income from $561 million in Q2, 2021 to $1.83 billion in Q3.
Ford’s net profit margin was -1.01% in Q4, 2020; it grew to 2.13% in Q3, 2021. ROE has also moved from -4.11% in Q4, 2020 to 8.42% in Q3, 2021.
Analysts expect the growth in the EV industry to continue; Allied Market Research, a market research company, expects the industry to grow by a CAGR of 22.6% between 2019 and 2027, where it will become an $802.81 billion industry.
As long as Ford continues to be a major player in the electric vehicle space (in addition to keeping its market share in the non-EV vehicle industry), the stock should continue its current momentum.
Ford currently has 3.93 billion outstanding shares and a market cap of $76.69 billion.
Institutional investors (1,714 of them) own 53.96% of its shares with Vanguard Group Inc. (7.59%), Blackrock Inc. (6.79%), and State Street Corporation (4.18%) as the top three holders.
Marathon Oil Corp specialises in the exploration and production of crude oil, natural gas, and natural gas liquids in the US and Equatorial Guinea.
MRO has achieved 123.9% growth, from $6.83 at the end of January 4, 2021 to $15.29 at the end of December 3, 2021.
The company has profited from the same fundamentals as Devon Energy Corporation — rising prices of oil and natural gas.
This is evident in the growth of its net income. In Q4, 2020, net income was negative (-$338 million). By Q1, 2021, it has turned positive ($97 million). This growth continued and net income was $184 million in Q3, 2021.
Profit margin was -46.85% in Q4, 2020 and, though still negative, it has grown to -0.87% in Q3, 2021. ROE also grew from -13.02% to -0.38% during the same period.
Like Devon, the long-term future of Marathon depends on the growth of EV and alternative energy sources. In the short term, growth will depend on what happens to the prices of oil and natural gas.
MRO has 778.54 million outstanding shares and a market cap of $11.904 billion.
A large portion of these shares (75.36%) are held by 797 institutional investors with Vanguard Inc. (11.17%), Hotchkis and Wiley Capital Management, LLC. (6.99%), and State Street Corporation (6.58%) as the top three holders.
Diamondback Energy is a US company that explores and produces oil and natural gas. Its oil and natural gas reserves are in the Permian Basin, West Texas.
FANG grew from $48.94 at the end of January 4, 2021 to $106 at the end of December 3, 2021, a 116.6% return.
Like Devon Energy and Marathon Oil, Diamondback has benefitted from the upward trend in the price of oil and natural gas.
For Q4, 2020, Diamondback’s net income was negative (-$739 million). However, for Q1, 2021, net income was $220 million; and it would later grow to $649 million for Q3. Also, for Q4, 2020, profit margin was -160.58%; by Q3, 2021, it was 7.95%. ROE followed suit, growing from -34.23% to 16.43%.
In the short term, the future of FANG depends on how well oil and natural gas can continue its current bullish run. Over the long term, it depends on how well the sector can compete with alternative energy sources and EVs.
FANG has 181.8 million outstanding shares and a market cap of $19.20 billion.
A large portion of the shares (88.92%) are held by 920 institutional investors of which Vanguard Inc. (11.27%), Blackrock Inc. (6.41%), and JP Morgan Chase and Company (5.95%) are the top three holders.
Nucor Corp is a US based company that manufactures and sells a wide range of iron and steel products.
NUE has grown by 110.4%, from $52.51 at the end of January 4, 2021 to $110.50 at the end of December 3, 2021.
Nucor Corp. has benefitted from the rise in the price of iron over the past few months. As the largest player in the US iron and steel industry, Nucor was able to grow its net income from $397 million in Q4, 2020 to $937 million in Q1, 2021, and then to $2.1 billion in Q3.
This growth in income has led to a rise in profit margin and ROE. The former has grown from 3.56% in Q4, 2020 to 7.59% in Q1, 2021, and 15.78% in Q3, 2021. Also, the latter has risen from 6.64% to 14.71% and then to 39.81%.
The new infrastructure bill proposed by US President Joe Biden will lead to the construction of more roads, bridges, and other public infrastructure. This will increase the demand for iron and steel and, as one of the top players in the US iron and steel industry, Nucor Corp will most probably benefit.
Nucor Corp is also expanding its operations, purchasing a coil processing facility and committing $100 million to building a melt shop.
NUE has 285.8 million outstanding shares and a market cap of $30.37 billion.
A large portion of Nucor’s shares (81.51%) are held by 1,277 institutional investors of which Vanguard Group Inc. (12.88%), State Farm Mutual Automobile Insurance Co. (9.53%), and Blackrock Inc. (8.29%) are the top three holders.
Fortinet Inc. is a global provider of broad, integrated, and automated cybersecurity solutions (including both hardware and software).
FTNT grew from $145.56 at the end of January 4, 2021 to $302.82 at the end of December 3, 2021, a 108% return.
As more people embraced WFH (work from home) during the pandemic, the demand for cybersecurity solutions soared. Even in the post-pandemic world, data centers across the globe are purchasing cybersecurity upgrades. Cybersecurity has been a big talking topic as every industry continues to experience digitisation.
Fortinet has tapped into this demand, growing its net income from $107 million in Q1, 2021 to $163 million in Q3 though profit margin (18.01% to 17.73%) and ROE (63.48% to 55.18%) have reduced within the same period. (The former is because operating expenses are growing faster than revenue and the latter is because equity is rising faster than net income.)
The demand for cybersecurity solutions will most probably continue. Mordor Intelligence, a market research company, expects the industry to grow by 14.6% CAGR from 2021 to 2026, to bring the market to $352.25 billion from $156.24 billion in 2020.
With FortiGate, a next-generation firewall security solution, Fortinet has shown its commitment to provide better products to meet the growing demands for cybersecurity.
FTNT has 163.5 million outstanding shares and a market cap of $51.19 billion.
Institutional investors (1,241 of them) own 70.66% of FTNT shares with Vanguard Group Inc. (9.38%), Blackrock Inc. (6.85%), and Price (T.Rowe) Associates Inc. (6.83%) as the top three holders.
Gartner Inc. is an international research and advisory company that provides research, consulting, and conference services to businesses and business professionals.
This year the stock experienced a 95.7% growth, rising from $158.07 at the end of January 4, 2021 to $309.40 at the end of December 3, 2021.
Gartner’s growth has been attributed to its operational efficiency, diverse addressable market, low customer concentration, and integrated research and consulting team.
It seems then that most of its growth has been driven by internal rather than industry factors.
The company’s net income increased from $120 million in Q4, 2020 to $149 million in Q3, 2021. Profit margin rose from 6.51% to 15.50% and ROE followed suit, growing from 26.64% to 98.98%.
The consulting industry alone is expected to grow at a CAGR of 8% to become a $1.2 trillion industry in 2025, according to projections by Research and Markets, a market research company.
Gartner’s future growth depends on how it can protect and increase its market share.
IT has 82.24 million outstanding shares and a market cap of $25.44 billion.
A whopping 94.06% of its shares are held by 936 institutional investors of which Vanguard Group Inc. (11.19%), Blackrock Inc. (6.88%), and BAMCO Inc. (6.65%) are the top three holders.
While these stocks have outperformed others in 2021, there are still other factors to consider before buying a stock.
People who generally profit from the stock market are those who follow a concrete strategy that includes risk management. Keep in mind that all investing involves risk.
Before you decide to buy any stock, ensure you read, “How To Make Money Trading Stocks: A Beginner’s Guide” for all the foundational insights.
Once you are ready to start trading, you will need a stock trading platform.
[For more on how to buy stocks in the UAE, read, “How To Buy Stocks in The UAE: The Ultimate Guide.“]
Sarwa Trade offers such a platform where you can buy international stocks (including the ones reviewed above) with zero commission/fees and no minimum capital requirement. You can also purchase a fraction of a stock (e.g. 0.1 of Apple) if you can’t afford a single share. On Sarwa Trade, you’ll also enjoy bank-level SSL security, an intuitive dashboard, and supportive customer service.
Still unsure where to start? Schedule a call with our wealth advisors and they’ll be happy to answer all your questions.
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