The stock market is ending a remarkable year, with the
S&P 500 index
returning 17%, as investors see an end to the pandemic in 2021 and corporate earnings rapidly improving.
This year also featured one of the biggest disparities ever between growth and value strategies: Growth stocks in the S&P 500 have returned 31% including dividends, while value stocks are down 1%.
Barron’s has been publishing a list of 10 favorite stocks for the past 11 years, and the performance for the 2020 group was disappointing, reflecting a tilt toward value. The 10 have returned, on average, 9.9% since the list came out on Dec. 13, 2019, nine percentage points behind the S&P 500. In contrast, our 2019 roster topped the benchmark index.
(ticker: DELL) and
(GOOGL) were notable winners in 2020, but the group was dragged down by a 34% negative return for energy giant
Royal Dutch Shell
(RDS.B) and declines in ViacomCBS (VIAC) and
(RTX) after two spinoffs and a merger.
The list for 2021 again has a value bent and includes two returning companies,
(BRK.B) and Alphabet. It has eight new ones, including
Goldman Sachs Group
Many of these stocks have lagged behind the market this year and look inexpensive, based on earnings, dividends, and asset value.
The group offers good appreciation potential, while providing some downside protection if the stock market, now at a near-record valuation relative to earnings, falters in 2021.
Here are Barron’s 10 stock picks for next year:
Alphabet is recovering nicely from a pandemic-related hit to advertising earlier this year. Revenue was up 15% in the third quarter, and it stands to benefit in 2021 as ad categories like travel improve. The stock looks appealing even after a 31% rise in the stock so far this year, to $1,757 a share.
Alphabet is a technology conglomerate. It has a powerhouse group of businesses, including its lucrative core search operation, YouTube, cloud…