Unsplash

Barring any last minute catastrophic events, US stock markets will end 2020 on high, green notes with many investors holding full hands. COVID-19 vaccines are in,Trump is on the way out and both 2021 and President-elect Biden will soon be with us. With those thoughts in mind and President Trump's signing of the stimulus bill on Sunday, Monday's post-Christmas holiday trading session ended higher with the S&P closing at 3,735, up 32 points, the Nasdaq closing at 12,899, up 95 points and the Dow closing at 30,404, up 204 points. On the year the S&P is up 530 points, the Nasdaq is up 4,012 points and the Dow is up 1,535 points, with 3 trading sessions to go. This morning, futures for all three indices are trading green.

Technology has been the major sector leading the markets out of their Q1 lows. Rishab Dugar in his article 3 Tech Stocks To Buy And Hold In 2021: Taiwan Semiconductor, Match Group, And Zendesk sets readers up for next year with three rising stars.

Dugar makes the following observations and then continues with detailed notes on his three 2021 picks. "The COVID-19 pandemic has revealed the extent to which society relies on technology and how it has become integrated with many, many aspects of our economies and lives. While coronavirus vaccine deployment in several countries led to a tech sell off earlier this month, the industry is poised to make a strong recovery we believe given the increasing dependence of people on technology for a plethora of reasons. Also, the renewed lockdown imposition across Europe and other countries has rekindled investor confidence in this industry."

Taiwan Semiconductor Manufacturing Company Limited (TSM)

TSM is engaged in the manufacturing and sale of integrated circuits and semiconductor products. It also provides computer-aided design (CAD) services. The company serves customers in computer, communications, consumer, and industrial and standard segments in North America, Europe, and Asia.

TSM’s revenues have increased 21.6% year-over-year in the third quarter ended September 30, 2020. Its operating Income has increased 39.1% from the year-ago value, while EPS rose 35.9% from the same period last year.

Analysts expect TSM’s revenues to rise 22.6% to $12.75 billion for the current quarter ending December 31, 2020. The company has an impressive earnings surprise history; it beat the Street EPS estimates in the trailing four quarters. The consensus EPS estimate of $0.93 for the current quarter represents a 27.4% improvement from the year-ago value. TSM has gained 83.5% over the past year.

Match Group, Inc. (MTCH)

MTCH provides dating products worldwide through its portfolio companies. Its portfolio of brands includes Tinder, Match, Meetic, OkCupid, Hinge, Pairs, PlentyOfFish, and OurTime, which enables users to connect across the spectrum of age, gender and dating demographics.

MTCH’s revenues have increased 18.1% year-over-year to $639.77 million in the third quarter ended September 30, 2020. Its non-GAAP EBITDA has increased 21.4% from the year-ago value to $249.18 million while Operating Income has risen 14.2% from the same period last year to $200.17 million. Its free cash flow has increased 11.1% year-over-year to $486.47 million for the nine months ended September 30, 2020.

Analysts expect MTCH’s revenues to rise 19% year-over-year to $651.22 million for the current quarter ending December 31, 2020. The company has an impressive earnings surprise history; it beat the Street EPS estimates in three of the trailing four quarters. The consensus EPS estimate of $0.49 for the current quarter represents an 8.9% improvement from the year-ago value. The stock has gained 43.8% over the past three months.

Zendesk, Inc. (ZEN)

ZEN is a customer service software technology solutions company that develops products to help organizations understand and manage customer relationships.

ZEN’s revenues have increased 2.4% year-over-year to $261.93 million in the third quarter ended September 30, 2020. Its non-GAAP Operating profit has increased 135.7% from the year-ago value to $24.93 million, while non-GAAP EPS rose 41.7% from the same period last year to $0.17. Its free cash flow has increased 270.4% to $24.85 million over the same period owing to reduced capital expenditure.

Analysts expect ZEN’s revenues to rise 20.9% to $277.92 million for the current quarter ending December 31, 2020. The company has an impressive earnings surprise history; it beat the Street EPS estimates in three of the trailing four quarters. The consensus EPS estimate of $0.14 for the current quarter represents a 40% increase from the year-ago value. ZEN has gained 86.1% over the past year.

Pixabay

TalkMarkets contributor Andrew Hecht also looks to Tech in 2021 and chimes in with two blue chip picks in the sector. Writing in, The Prospects For IBM And Dell In 2021, Hecht has this to say about these value companies: 

"IBM and DELL are not expensive stocks. As we move into 2021, these two companies could be the best bet as technology will continue to provide cutting edge solutions. At their share prices at the end of 2020, IBM and DELL offer something lacking in the technology sector, value."

On (IBM): "IBM was trading at just below the $125 level on December 24. A survey of sixteen analysts on Yahoo Finance has an average price target of $137.13 for IBM, with forecasts ranging from $115 to $165. Many Wall Street companies rate the shares buy or outperform.

Meanwhile, of the group of AAPL, AMZN, GOOG, and FB, only Apple pays its shareholders a dividend. As of December 24, AAPL’s yield was around the 0.62% level. IBM pays its shareholders $6.52 per share, translating to a 5.2% on December 24. IBM’s market cap was just over $111 billion, putting the company off the regulatory and political radar. The stock is trading at a price to earnings ratio of under fifteen times earnings, which is a sign of value."

On Dell (DELL): "Revenues have grown from 2017 through 2019 and have been consistent in 2020. DELL is a profitable company with a market cap just above $54.5 billion. DELL shares closed 2019 at $51.39 and were trading at the $72.99 level on December 24, a rise of 42%. The earnings growth and market cap could lead to more share appreciation in 2021."

In his article which includes charts and statistical data, Hecht also reviews the position and potential of the FANG gang and concludes that: "Technology will continue to change our lives over the coming years. When looking for value in the sector, IBM and DELL could offer investors more stability and growth as we move into the new year."

In a TalkMarkets Editor's Choice column, Lance Roberts in Shades Of 1999 As “Market Mania” Returns In 2020, takes a cautious and retrospective look at the markets and warns that investors should be wary of the "siren's song".  As usual, Roberts goes into the details and covers the subject in depth. Below are a few of his insights:

"There are certainly many similarities between today and 1999. From exceedingly high valuations to a rush by private equity investors to IPO overly priced companies as quickly as possible, prices are high. Of course, such is not possible without an underlying “Fear Of Missing Out, or F.O.M.O.” by retail investors."

"We have written extensively about the extreme extension we see in the markets. Such is due to the Fed’s ongoing “repo” operations in 2019, and current QE directly fueling a sharp rise in asset prices. The problem is prices are surging at a time when both corporate profits and earnings growth remain weak...(for example) if you had bought Cisco (CSCO) at the turn of the century, you would still be down by 10% on your position 20-years later."

"Today, we see the same chase in companies that exhibit similar characteristics to what we saw in 1999:

• Flawed business models with little, or no, “protective moat.” 
• Little or no earnings
• Excessively high or negative valuations
• Prices are rising on “hope” these companies will mature into their valuations in the future."

With additional examples like Tesla (TSLA) and Apple (AAPL) examined, Robert's article is worth a closer look. He concludes with the following:

"Historically, the environment we are living in currently has not worked out well for investors. However, in the short-term, the “irrationality” will last long enough to convince you “this time is different.” 

Unsplash

Be Careful When Riding A Hot Trend is the advice to be found in the article of the same name by TalkMarkets contributor Bob Lang. Lang says it plain and simple:

"While plenty of traders have made big money recently, consider this your warning. A hot trend is a stock that is only riding momentum. In most cases, you’ll get severely punished...momentum tends to fade quickly. If you’re not watching closely, you’ll end up holding the bag."

Specifically he notes, "The EV, bitcoin, and biotech sectors are all in a bubble. As we’ve seen in the past, when bubbles pop, everyone around gets hurt.", and he concludes as follows, "It’s okay to ride a hot trend. Just know that most of the names are not game-changers. You likely won’t find the next Amazon (AMZN) or Apple. Tesla won’t be a white knight for your portfolio. Don’t get married to anyone name. Watch the technicals, and get out before the bubble bursts."

Well, I've given you some insight into where two TalkMarkets contributors would put their money in 2021 and two who are wary of the way ahead. There's lots more where those came from. So have a great New Year's Eve and New Year's holiday. TalkMarkets will be here next year, as always, helping you navigate the market seas.

Pexels