The stock market in 2020 is coming to an end. Every year there are winners and losers. Obviously, companies that benefit from the acceleration of the “digitalization” megatrend are the big winners.
In my opinion, this trend will continue in the new year. Therefore, the following two companies are my favorite because of their further strong price increases in the 2021 stock market year.
Serve immediately
The cloud company ServiceNow’s share price rose by 73.84% in 2020, which can arouse the enthusiasm of shareholders (as of December 30, 2020; decisive for all key figures).
Facts have proved that this business model has relative anti-crisis capabilities. Because the company is thriving in the automation and digitization of manual business processes, and it also provides customer support for IT issues. Due to the acceleration of the digitalization process, the company should also experience an influx of active customers in the new year.
But digitalization is not the only driving force. After all, increased pressure on profit margins and cost savings may mean that many companies have to lay off employees. Many manual activities have been replaced by the automation of business processes. Companies such as ServiceNow are clearly the beneficiaries of this development.
The only frustrating thing about ServiceNow is the current company valuation. The 2021 price-to-earnings ratio (P/E) is very ambitious at 392.79. Therefore, future growth prospects have been priced by the market. Nevertheless, we already know similar comments from companies such as Amazon, which have also made outstanding developments in the next few years. In my opinion, ServiceNow’s business model absolutely proves that this assessment is reasonable at this time.
Microsoft
In the following trading years, my second favorite is a well-known company that should ensure the stability of the portfolio. This year has shown that established companies like Microsoft have not ignored price increases. The market value of Microsoft’s stock has risen by 28.70% in 2020.
Because you don’t have to buy IPOs (initial public offerings) or unknown companies from the second row to make a lot of money in the stock market. Companies such as Apple, Amazon, or Microsoft have shown that even if the world already knows about this company, it is not too late. For example, if you bought Apple stock in early 2019, your current price will increase by approximately 280%. Great returns in a two-year investment period.
Microsoft’s valuation is by no means cheap, with a P/E ratio of 33.14 for the 2020/2021 fiscal year. However, in the long run, the impact of the coronavirus outbreak may accelerate. More and more companies are using cloud services from Microsoft Azure platform. This development should continue even after the coronavirus has subsided and overcome.
In addition, Microsoft pays dividends every quarter, with an annual rate of return of about 1%. Although this may not seem very high, for long-term investors, the dividend may be worth it. Because this is only a 10% increase recently.
in conclusion
In my opinion, ServiceNow and Microsoft are good technology stocks, and they can also benefit from the digital megatrend in 2021. Especially the combination of dynamic growth stocks like ServiceNow and mature IT giants like Microsoft sounds interesting.
In other words, your investment portfolio should not consist entirely of technology stocks. Because the current valuation level needs to be cautious. Therefore, setbacks may be imminent at any time. However, for long-term investors, these are irrelevant, but an opportunity to enter the market. One thing is clear: In the new year, there are no substitutes for long-term asset accumulation other than stocks.
These are my 2 favorite stocks of 2021! First appeared on The Motley Fool Germany.
Our highest share in 2021
There is now a company whose name is very popular among analysts at The Motley Fool. For us, this is the biggest investment in 2021.
You can also benefit from it. To do this, you must first understand everything about this unique company. This is why we have now compiled a free special report detailing this company.
Click here to download this report now for free.
Michael owns shares in ServiceNow, Amazon, Microsoft and Apple. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten works at LinkedIn and is a member of the board of directors of The Motley Fool. LinkedIn is part of Microsoft. The Motley Fool holds and recommends shares of Apple, Amazon, Microsoft, and ServiceNow, and recommends the following options: January 2022 $1,940 short-term Amazon call and January 2022 Amazon $1920 $1920 call option, January 2021 $85 call option and January short-term call option 2021 Microsoft phone of 115 US dollars.
Motley fool Germany 2021
Photo: Getty Images
#favorite #stocks
More from Source