The coronavirus pandemic has wreaked havoc over the past year -- but that doesn't make this a bad time to start investing. Since last January, the S&P 500 is up nearly 17.6% to breach new all-time highs.
After the emergence of a new bull market, buying companies with substantial business growth at the right price is a surefire way to put momentum into your portfolio. Today, let's look at why a semiconductor giant, a coronavirus vaccine drugmaker, and a medical cannabis company are among the three best profit opportunities for 2021.
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1. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing, or TSMC (TSM +0.42%), is the world's largest contract manufacturer of semiconductors, with more than 56% market share in the chipmaking sector. For its full fiscal 2020, which ends this month, the company expects it can grow its revenue by more than 20% year over year to $84.6 billion. What's more, TSMC is highly profitable, with a stunning 38.5% profit margin.
As of now, the company produces 10,761 different products for smartphones and home personal computers. To meet its goal of commencing 3-nanometer semiconductor production by 2022, it invests about $20 billion per year of its sales in capital expenditures to ramp up production for new technologies.
With annual targets of 20% return on equity and 5% to 10% earnings growth for the next few years, TSMC is a top blue-chip growth stock. Besides, the company also pays a dividend of 1.49% per year, which has never been reduced since its inception in 2004. At 37 times earnings, TSMC's premium undoubtedly reflects for its potential.
2. Pfizer
Pfizer (PFE 1.39%) has been among the hottest coronavirus stocks since the company and its partner BioNTech (BNTX 5.75%) received regulatory clearance for their coronavirus vaccine, BNT162b2. The vaccine is 95% effective at preventing COVID-19, with no severe side effects aside from minor occurrences of headache or fatigue.
Governments worldwide have already placed 870 million orders for the vaccine. At a price of $19.50 per dose, this means that Pfizer may already have close to $8.5 billion in potential revenue in the bag, after accounting for a 50-50 gross profit split with BioNTech. The two firms also plan to scale their production capacity to 1.3 billion doses this year.
That's fantastic news, as Pfizer is in dire need of new catalysts to grow its revenue. Last year, the company spun off its generic drug business, Upjohn, because of fierce competition in that sector. Pfizer's agreement meant a loss of $8.5 billion in annual revenues and $0.55 in earnings per share (EPS).
For 2020, the company expects to generate $42.4 billion in revenue from its core biopharma business and $2.38 EPS. Between now and 2025, Pfizer projects it can grow its sales by 6% per year, excluding the effects of the coronavirus vaccine.
Right now, Pfizer's stock is only valued at 24 times earnings and 4 times sales. It also pays a handsome dividend of 4% per year, about twice the S&P 500 average of 2%. If you're looking for a biotech that's primed for growth, look no further than Pfizer.
3. GW Pharmaceuticals
GW Pharmaceuticals (GWPH +0.00%) currently markets the first-ever cannabis-based treatment approved for certain types of seizures in the U.S. and the European Union. The drug is called Epidiolex, and it is 50% effective in preventing seizures. In the first month of 2020, GW Pharmaceuticals' flagship drug generated an impressive $378.6 million in revenue.
Aside from Epidiolex, GW Pharmaceuticals has ambitious plans to use a THC/CBD mixture, nabiximols, to treat patients with multiple sclerosis. The company expects it can address a further 1 million patients if nabiximols is successful in phase 3 clinical testing. Between 26% and 50% of patients with multiple sclerosis are already self-medicating with various forms of cannabis.
Right now, the stock is a bit expensive at 7.64 times sales. However, it's reassuring that Epidiolex will have patent protection up until 2035. That gives the company more than a decade to expand its cash flow. For those who are passionate about marijuana stocks, GW Pharmaceuticals is an enticing choice.
