Before we get to the stocks you're here for, let's acknowledge two caveats:
- Choosing the best stocks to buy today depends heavily on your personal financial situation. To get a feel for where you stand, read our guide on how to invest in stocks. It walks you through topics like establishing an emergency fund, allocating assets, and when it makes sense to buy stocks.
- While I ensured some variety, the list below isn't meant to be a fully diversified portfolio. Instead, they're my highest-conviction stocks to outperform in 2021 and beyond. The best one-step way to diversify your holdings is to build the core of your portfolio around something like the Vanguard Total World Stock Index Fund ETF (NYSEMKT:VT). That's the ultimate "stock" if you're going to buy just one investment and don't want to mess with picking among individual stocks. You can just set it and forget it, knowing that you've got literally thousands of stocks from around the world working for you.
Now let's get to my list of the best 21 stocks to buy for 2021, from smallest market cap coming into 2021 to largest, followed by the summary buy thesis for each one.
The top 21 stocks for 2021 (smallest to largest)
- iRobot (NASDAQ:IRBT) - $2 billion
- Upwork (NASDAQ:UPWK) - $4 billion
- Fiverr (NYSE:FVRR) - $7 billion
- Redfin (NASDAQ:RDFN) - $7 billion
- Beyond Meat (NASDAQ:BYND) - $8 billion
- Etsy (NASDAQ:ETSY) - $22 billion
- Teladoc Health (NYSE:TDOC) - $29 billion
- Zillow Group (NASDAQ:Z) (NASDAQ:ZG) - $31 billion
- Pinterest (NYSE:PINS) - $41 billion
- Roku (NASDAQ:ROKU) - $42 billion
- Altria Group (NYSE:MO) - $76 billion
- MercadoLibre (NASDAQ:MELI) - $84 billion
- Intuitive Surgical (NASDAQ:ISRG) - $96 billion
- Square (NYSE:SQ) - $98 billion
- Sea Limited (NYSE:SE) - $102 billion
- Philip Morris International (NYSE:PM) - $129 billion
- salesforce.com (NYSE:CRM) - $204 billion
- Walt Disney (NYSE:DIS) - $328 billion
- Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) - $544 billion
- bitcoin - $597 billion
- Amazon (NASDAQ:AMZN) - $1.6 trillion
2 bonus baskets
- ARK Genomic Revolution ETF (NYSEMKT:ARKG)
- The Chamath Palihapitiya alphabet SPACs: Virgin Galactic Holdings (NYSE:SPCE), Opendoor Technologies (NASDAQ:OPEN), Clover Health Investments (NASDAQ:CLOV), Social Capital Hedosophia Holdings Corp. IV (NYSE:IPOD), Social Capital Hedosophia Holdings Corp. V (NYSE:IPOE) -- soon to be SoFi -- and Social Capital Hedosophia Holdings Corp. VI (NYSE:IPOF)
Elevator pitches for each stock and basket
iRobot is one of my favorite stocks because it checks so many of the boxes I like to see in a company.
Proven results? Check
Strong balance sheet? Check
Visionary founder? Check
Premium brand? Check
Big upside? Check
Known primarily for its Roomba robot vacuums and Braava robot mops, its core business is already impressively profitable.
But iRobot has the potential to be so much more than its current business or past growth indicates. Its competencies in robotics and artificial intelligence allow for tremendous optionality around home appliances and beyond.
Upwork and Fiverr
This is the dynamic duo of gig economy online marketplaces, standing ready to link businesses and individuals with just about any freelance skill you can think of: development, writing, graphic design -- even video game tutoring or celebrity impersonation.
As work becomes more remote, more global, more freelance, and more flexible, these are platform plays positioned to profit.
Upwork has more sales, but Fiverr has more recent growth, so it makes sense to bet on the overall trend as a two-pack.
Redfin and Zillow
These two home-buying/selling platforms are disrupting traditional real estate agents.
They differ in their business models. Redfin is best described as a brokerage, Zillow as a marketplace; Redfin is arguably more conservative, while Zillow could be seen as more aggressive.
But each has the optionality to extract value in all aspects of the home buying/selling process as trillions of dollars change hands each year.
Beyond Meat's plant-based meat offerings are riding two rising trends: health consciousness and environmental sustainability.
Founder and CEO Ethan Brown knows Beyond is in a race against the competition (both traditional and upstart) to establish itself as a name brand in the space. The business has been running at hyperspeed to establish distribution across supermarkets and restaurants, as well as directly to consumers.
We could say much the same about Impossible Foods and its founder Patrick Brown (no relation), but it's a private company.
There are few markets larger than the global meat market, and Beyond Meat is going after a bite of it.
Connecting crafty makers with customers looking for something a bit more out of the ordinary than mainstream e-commerce fare, Etsy was growing nicely before the pandemic.
During the pandemic, all e-commerce was given a huge boost, but Etsy absolutely skyrocketed, growing at more than twice the rate of overall e-commerce.
Before the pandemic, management thought it had a 5% share of a $100 billion niche market. Now, based on its success, increased online adoption, and an expansion of what it believes people will buy from it, Etsy believes its total addressable market is measured in trillions, rather than billions.
As you may notice throughout this list, powerful platforms get my attention. Make no mistake: Etsy is one.
Because of this platform and brand strength, Etsy's growth opportunity appears to be much larger than its current market value.
Already a growing force, telehealth got a big boost during the coronavirus pandemic. After all, the barrier to doing a remote doctor's visit is much higher than buying your first roll of toilet paper on Amazon.
Teladoc is a leader in digital health and its merger with chronic condition specialist Livongo signals its intention to expand deep into the medical ecosystem.
Pinterest is an oasis of positivity in a social media landscape that's grown increasingly depressing and divisive.
That partially flows from what Pinterest is about: projects. Whether it's building a dream deck, baking a kid's birthday cake, or updating your wardrobe, Pinterest gives people visual inspiration for the things they want to get done.
The knock against Pinterest, despite its solid community and sales growth, has been a lack of Facebook-level monetization.
But that's what I love about Pinterest: It's got the platform and audience, and it's really easy to envision how seamless advertising, lead generation, and product placement could be when people are already there for suggestions.
As streaming service companies (Netflix, Amazon Prime, Disney+, HBO Max, Peacock, The Roku Channel, etc.) push connected TV to new heights at the expense of traditional cable packages, Roku has set itself up as a winning platform. One with the size and leverage to pit each service against the others.
It's gone beyond the boxes and dongles it became known for to now integrating its software into TVs. And it's ensuring that its own Roku Channel is growing its content heft.
What drives Roku's relentless innovation is founder/CEO Anthony Wood's experience. In a prior generation, he invented the DVR. Yet his company at the time (ReplayTV) still lost out to TiVo. Beyond the lessons learned, that's a chip on your shoulder that doesn't go away easily.
Altria and Philip Morris
Admittedly, these two aren't for everyone. Skip these if you aren't interested in cannabis or tobacco stocks.
Altria and Philip Morris, which share the Marlboro brand globally, have track records of navigating a declining industry with price hikes and issuing large dividends (Philip Morris currently above 5%, Altria above 8%). That's the high floor.
Then there are additional possibilities. They were once a single company, and they've flirted with re-merging in the past. Doing so would have logical cost synergies that make a heck of a lot more sense than most mergers since they've already avoided a lot of competitive overlap by geographically splitting their businesses.
And then there's the potential to transfer their premium tobacco branding to cannabis -- particularly Altria in the U.S.
Amazon, MercadoLibre, Sea Limited, and Square
I believe strongly in the megatrends of e-commerce adoption and digital financial disruption. Each of these four has a foot firmly in e-commerce, digital payments, or both in various geographies.
Who wants to compete against Jeff Bezos and Amazon? If you'd be terrified to compete with them, it makes sense to consider investing in them. Meanwhile, MercadoLibre and Sea Limited are often described as the "Amazon of Latin America" and the "Amazon of Southeast Asia," respectively.
Drilling in closer reveals that close comparison to be a gross simplification (consider Amazon Web Services and Sea Limited's video games), but the important through line is each is a market leader in e-commerce.
Square isn't an e-commerce marketplace, but its products and services enable digital commerce and its Cash App is competing well against both PayPal's namesake platform and PayPal's Venmo peer-to-peer payments network.
Robot-assisted surgery beats the shaky hands of humans. That general thesis hasn't changed much from when I first bought Intuitive Surgical stock in 2005.
Intuitive Surgical is dominant in its space, and it has lots of room to grow as its surgical systems increase in adoption and as the number of its supported procedures increases over time.
Saying Salesforce has been a serial acquirer is like saying the Cookie Monster has been a baked goods enthusiast. Over the past decade and a half, Salesforce has averaged about four acquisitions a year!
Normally, I'm not a fan of businesses that rely heavily on buying up other businesses. However, Salesforce's ongoing success in the software as a service (SaaS) market shows it's integrated these add-ons well.
The company is right to move quickly, too. A key bull case for paying sky-high price-to-sales multiples for so many smaller SaaS companies is that Salesforce can expand and deepen its current offerings. Standing still makes Salesforce's business an easier target. Note that Salesforce trades for “only” 10 times sales.
With its acquisition of Slack, Salesforce is likely to be slinging more arrows than the competition. I was a shareholder in Slack before the purchase was announced, and a big reason is that I happily use Slack every day to message with my co-workers. It's a very well-designed product. Slack (and its integrations with all kinds of software) allows Salesforce to reach everyone in an organization, not just the sales or tech teams.
Done right, that's a game changer for Salesforce.
The House of Mouse is the all-weather tires of a portfolio.
The pandemic hurt its theme park and movie businesses but helped the Disney+ streaming service. The former will resolve itself, the latter had a "Wow!" first year, and Disney is rightly focusing on growing it.
Its amazing intellectual property (Marvel/Star Wars/ESPN/Pixar/Disney) makes it the stock I'm probably the most comfortable holding over decades.
Bitcoin, of course, isn't technically a stock.
And, frankly, I have no idea where it goes from here. Massive volatility is to be expected.
But I still think it's worth a look for your portfolio, in small doses. (I allocated 1% when I bought in 2020.)
It provides asset diversification beyond the stock market, bonds, gold, or real estate. And, while you get currency diversification by buying global stocks, bitcoin gives you one more to fill out the basket.
At this point, it's by far the largest cryptocurrency, and it's gaining scale and network effects as both disruptive (e.g. Square, PayPal) and traditional (big banks) finance players increase their bitcoin offerings.
While most of this list is made up of growth stocks, this is the relatively boring value pick of the bunch.
The Warren Buffett bears will say he's lost his fastball, but that happens every growth cycle. What is true is that it's harder to beat the market as your portfolio size grows. If Berkshire were a mutual fund, it would be the largest actively managed one in the world.
That said, Berkshire is Buffett's legacy, and he's been stress-proofing it for years to make sure it's in solid shape well after he's no longer running things.
Showing his faith, he and partner Charlie Munger have been buying back shares at a historic clip. That's a good signal for the rest of us.
ARK Genomic Revolution ETF
Cathie Wood and her team have risen to investing world prominence with bold calls (e.g., Tesla) and strong returns.
For those who aren't well-versed in the genomics investing space (CRISPR, targeted therapeutics, bioinformatics, molecular diagnostics, stem cells, agricultural biology, etc.), the 0.75% expense ratio is well worth it.
Whether you pick the stocks yourself or go with this ETF, genomics is an innovative growth industry you'll want exposure to.
A basket of the Chamath Palihapitiya-sponsored “alphabet” SPACs
Palihapitiya was an early executive at Facebook who helped it reach scale. Since then, he's been a successful venture capitalist known for his bold straight talk, no matter the subject. Some are turned off by it, but I'm a fan because he has the intelligence to cut straight to the heart of matters.
While critics question Palihapitiya's incentives and intentions with his SPACs (special purpose acquisition companies), he claims to be tired of making money for wealthy people and wants to enrich regular retail investors in addition to himself.
Figuring out whether you believe him is key because the most important thing when investing in a SPAC -- which is basically a bunch of cash used to buy into a private company in order to take it public -- is trust in management. Bad or misaligned management is probably the biggest SPAC risk, but there are many.
As part of a diversified portfolio, the upside in Palihapitiya's ventures is worth their risks.
And he's planning a lot of them, from IPOA to IPOZ. So far, he's up to six letters of the alphabet.
- IPOA – Now Virgin Galactic
- IPOB – Now Opendoor
- IPOC – Now Clover Health
- IPOD – Social Capital Hedosophia Holdings Corp. IV: Still a blank check.
- IPOE – Social Capital Hedosophia Holdings Corp. V: Bringing SoFi public (announced Jan. 7, 2021.)
- IPOF – Social Capital Hedosophia Holdings Corp. VI: Still a blank check.
Final takeaways for using this stock list
If you're starting on your investing journey (or if you want a sanity check), please read through our how to invest in stocks guide. It walks through all the basics, from how to get started to how to determine your personal investing strategy to how much of your money to invest in stocks.
While I'm bullish on each of these stocks and have given you a little info on each, use this list or if you're just getting started, you'll want to see the 15 best stocks for beginners.
Start with the stocks that speak to you, and feel free to ignore the ones that don't.
Good luck and Fool on!