Turning the calendar to a new year means new opportunities for long-term investors to put their money to work in the greatest wealth creator on the planet: the stock market. Following a shaky start to 2020, the benchmark S&P 500 ended the year higher by 16%. That's nearly double its annual average return over the past four decades.
Though a lot of credit is bestowed on tech stocks and growth stocks for last year's robust gains, a more encompassing round of applause is owed to large-cap stocks (those with a $10 billion or larger market cap), which predominantly fueled the rally. Large-cap stocks usually have time-tested businesses and are, in many instances, profitable. They may not offer the same upside potential as small-cap stocks, but they're perceived to be considerably safer.
If you want to take advantage of what large-cap stocks have to offer, the following five could make you a lot richer in 2021.
The healthcare sector is often filled with growth stocks and defensive plays for investors to choose from. If you happen to be more of a growth-oriented investor, you're going to like specialty drug developer Vertex Pharmaceuticals (VRTX -0.79%).
What allows Vertex to stand out is its incredible success in developing treatments for cystic fibrosis (CF). CF is a genetic disease characterized by thick mucus production that can obstruct a patient's lungs or pancreas. CF has no cure, but Vertex's numerous generations of mutation-specific treatments have progressively improved a patient's quality of life.
Combination-therapy Trikafta, which is the company's most recent next-generation CF treatment, was approved roughly five months in advance of its scheduled Food and Drug Administration review data and took less than half a year to top $1 billion in annual sales. Trikafta looks like it could bring in north of $6 billion in peak annual sales.
Vertex's leading role in CF research, coupled with a half-dozen other non-CF treatments in its pipeline, makes it a high-growth large-cap stock that investors can trust.
Among a sea of exceptionally pricey, high-growth, cloud-based companies, salesforce.com (CRM 2.63%) stands out for its value. After all, it's not often you can find a cloud company that trades for a single-digit forward sales multiple anymore.
Salesforce is the kingpin of cloud-based customer relationship management (CRM) software. This software can be used by any consumer-facing business to log customer information, supervise service issues, oversee marketing campaigns, and boost add-on sales to new and existing clients. Salesforce's share of the global CRM market amounts to nearly as much as the No. 2, No. 3, and No. 4 companies combined, in terms of global share.
What's particularly intriguing is the company's $27.7 billion cash-and-stock deal to buy enterprise-communications company Slack Technologies. It may be salesforce's priciest deal to date but will provide the company with a seamless means to cross-sell its CRM solutions on Slack's rapidly growing enterprise platform.
Look for salesforce to continue its winning ways in 2021.
Kirkland Lake Gold
For you value investors out there, gold stocks are looking more lustrous than ever -- especially Kirkland Lake Gold (KL).
On one hand, the macroeconomic outlook for gold has just about never been better. Global bond yields have plummeted, the Fed has pledged to keep its federal funds rate at or near record lows through 2023, and the central bank continues to use quantitative easing measures (i.e., $120 billion in monthly Treasury bond buying) to keep Treasury yields low. Without avenues to secure inflation-topping returns, investors are more likely to turn to gold as a store of value.
What's more, gold typically outperforms during the first 12 to 18 months of an economic recovery as demand pushes the price of the lustrous yellow metal higher.
Kirkland Lake Gold is going to benefit from these higher spot prices and much more. It has some of the most efficient mining operations of any gold stock and the industry's best balance sheet, hands down. Kirkland Lake ended September with $848 million in cash and no debt. Meanwhile, it tripled its quarterly dividend payment last year and repurchased $526.6 million worth of its own stock. Expect Wall Street and investors to wise up about this large-cap value stock in 2021.
Following two decades of being stuck in neutral, Big Pharma AstraZeneca (AZN 1.02%) is back and very much worthy of your investment dollars.
The company went through a rough patch where increased competition and the loss of exclusivity on its blockbuster asthma drug Symbicort weighed on its operating results. But the new and soon-to-be even more improved AstraZeneca is growing quickly for a pharmaceutical stock and looks relatively inexpensive respective to its growth potential.
What's noteworthy about AstraZeneca is the consistent double-digit growth from its oncology segment. The company's oncology portfolio contains three blockbusters ($1 billion-plus in annual sales) -- Tagrisso, Imfinzi, and Lynparza -- all of which grew sales between 39% and 53% through the first nine months of 2020. With 172 current projects in the company's pipeline, many of which revolve around monotherapy or combination treatments involving these three blockbusters, the company's growth from oncology products looks secure.
Investors will also be intrigued by AstraZeneca's pending purchase of Alexion Pharmaceuticals (ALXN). Alexion focuses on ultra-rare disease indications, which means it faces virtually no competition and deals with little pushback from insurers concerning its high list prices. Most important, Alexion developed a next-generation version of its blockbuster drug Soliris, known as Ultomiris, that lasts longer and will secure the company's operating cash flow for another decade.
Palo Alto Networks
Finally, cybersecurity stocks like Palo Alto Networks (PANW 1.79%) have the potential to make patient investors richer in 2021.
The beauty of cybersecurity is that it's become just as much a basic-need service as water and electricity. Because hackers and robots don't take days off and don't care how well or poorly the economy is performing, businesses of all sizes need network and/or cloud-based protection. That creates a steady stream of demand for companies like Palo Alto Networks.
Interestingly, Palo Alto is in the midst of an operational transformation. It's de-emphasizing physical firewall products, which lead to lower margins and lumpier revenue recognition, in favor of subscription-based cloud protection and support services. In the fiscal first quarter ended Oct. 31, 75% of Palo Alto's sales were generated from higher-margin subscriptions, up from 70% in the prior-year period.
The company is also not being shy about making regular bolt-on acquisitions. These purchases serve the purpose of broadening its product portfolio, as well as appealing to more small- and medium-sized businesses.
Don't be surprised if Palo Alto Networks crushes Wall Street's growth expectations in the current year.