10 of the Best Stocks to Buy for 2021

The 10 best stocks to buy for 2021

At the end of each year, U.S. News selects 10 stocks to buy for the year ahead. After a tumultuous 2020, there was ample uncertainty to go around when 2021 began, but the first quarter of the new year has been good to markets. The early part of the year has been eventful, defined by a presidential transition, an aggressive vaccine rollout that has surpassed expectations, rising interest rates that rattled markets and, somehow, the improbable rise of GameStop Corp. (ticker: GME). With further rounds of stimulus payments, a slide in the unemployment rate to 6% and record-high growth in the services sector in March, things are looking up for the economy. Here’s a look at how each of U.S. News’ 10 best stocks to buy for 2021 fared in the first quarter. As a portfolio, the picks outperformed the S&P 500, returning 7.5% versus a 5.8% gain for the S&P 500 index.

Adobe (ADBE)

Arguably one of the most promising and stable businesses on the list, shares of software giant Adobe nonetheless fell 4.9% in the first quarter. One culprit was rising rates, as the rate on the 10-year Treasury nearly doubled from 0.92% to 1.74%, driven by the improving economic outlook. Higher rates decrease the value of faraway future earnings, where tech stocks tend to disproportionately derive much of their value. When it comes to factors Adobe actually has control over, the company continues to excel, posting fiscal first-quarter earnings and sales numbers that beat expectations in the quarter ended March 5. Revenue rose 26% year over year, and earnings per share surged 38% as the company set record highs for Q1 revenue and raised full-year guidance on the strength of its Creative Cloud, Document Cloud and Experience Cloud businesses.

Spotify Technology (SPOT)

Another victim of the rising rate environment was Spotify, which finished as the worst first-quarter performer among the 10 stocks to buy, shedding 14.8%. As the only name on the list not yet consistently profitable, SPOT is naturally one of the riskier names in this bunch. Fourth-quarter results for the Swedish company, reported in February, were negatively impacted by foreign exchange fluctuations. But the underlying business is still going strong, with monthly active users rising 27% year over year to 345 million. Longer term, the company’s dominance in the low-margin music streaming industry is less promising than its growing presence in podcasts, where licensing costs are far less onerous. Spotify is also wisely entering the live audio business with the recent $50 million acquisition of Clubhouse rival Locker Room…Read more>>