The holiday season is upon us. Although gatherings may be untraditional this year, some usual dinner topics may still arise. To help avoid politically charged conversations or the infamous “when are you getting married?” question, wow your guests with tips regarding these three stocks.
Tesla — led by CEO Elon Musk, co-founder of PayPal and founder of SpaceX — is the world’s leading maker of electric vehicles. The company share price has surged over 500 percent during the past year and the stock was recently added to the S&P 500 index.
Why you would buy: Tesla’s long-range electronic vehicle and battery technology can store solar energy that is generated from its own products. The cost advantage of recharging over gasoline will eventually pay for itself, and it is believed that gas will not be able to keep up. Importantly, the company has experienced four consecutive quarters of profitability.
Why you would pass: Mass electronic adoption in vehicles could take longer than Tesla expects. If the projected demand does not pan out, the company may struggle to maintain profitability. Other car manufacturers have jumped on the electronic vehicle bandwagon, so competition is coming to the table. Finally, Elon Musk’s behavior can be erratic at times.
Cannabis stocks experienced recent momentum with increased U.S. legalization during the November elections. Marijuana is legal in 33 states plus D.C., and it is recreationally legal in 11 of these states. Our north-of-the-border neighbor, Canada, also fully legalized cannabis in 2018. There are several ways to invest in cannabis companies, including but not limited to Aphria, Canopy Growth, Tilray, or the ETF (exchange-traded fund) ETFMG Alternative Harvest (ticker MJ).
Why you would buy: Cannabis is one of the fastest-growing industries across the world, and some experts predict the marijuana industry to triple in the next five years. Although there has been recent momentum, the industry is still in a correction, which could make for a good buying opportunity.
Why you would pass: Despite recent legalization, the possibility of national legalization remains tenuous and federal legalization is not guaranteed. The thriving black market also puts significant pricing pressure on legal operators.
Bitcoin is the world’s most popular cryptocurrency. Its stock price surged in 2020, rising over 130 percent as many viewed the crypto as a safe-haven investment in the wake of the coronavirus recession.
Why you would buy: As the U.S. continues to increase the national debt in response to the virus, Bitcoin could be a good inflation hedge. Also, PayPal recently announced it will allow users to buy, sell, and hold cryptocurrencies, which makes buying the crypto very easy and introduces possible future merchant adoption.
Why you would pass: Even with PayPal’s announcement, there is still not a lot of tangible use for the currency. It also lacks standardization and regulation around trading. Furthermore, the currency is now only 12 percent below its highest value and therefore might not be a good entry point at this time.
The pandemic also produced many high-flyer stocks that have capitalized on mandated shutdowns. But it is unlikely the momentum will last as vaccines become readily available. Zoom Video Communications has been one of the best performing stocks in the Russell 3000, up over 487 percent on the year. Peloton Interactive, a producer of at-home workout equipment, is up over 258 percent on the year.
The pandemic has provided numerous investing opportunities across different sectors. Having a few talking points on several stock ideas will impress your guests. But the most important thing to remember is that when investing in specific companies, it is critical to always do so in a diversified manner, and not based solely on dinner table turkey talk.
Source: Morningstar. Waddell & Associates is not making a recommendation to buy or sell any of the equities mentioned in this article. Sean Gould, CPA/PFS, CFP, is a Senior Wealth Strategist with Waddell & Associates.