Despite the doom and gloom on the news, a look at the figures and fundamentals illustrates that a global economic recovery is underway. At the same time, due to the pandemic, many stocks are now trading at attractive valuations and will likely yield handsome returns in the future. In this article, we will look at the best sectors to invest in and some things you should probably avoid.
Please note that none of what is contained within this article should be construed to be investment advice and or recommendations. You alone are responsible for your investment decisions. We recommend that you investigate the fundamentals of the stocks you may purchase to ensure that you are buying into financially sound and sustainable businesses.
Entertainment & Retail
It may seem counterintuitive, as these are some of the sectors that have been impacted the most. But that is also why they will be trading at the biggest discounts. Also, once pandemic restrictions ease, these businesses will likely see a huge boom and corresponding appreciation of stock price. Many retail brands are also pivoting to e-commerce models, which can set them up for significant growth.
Energy
Due to its essential nature, the energy sector is likely to provide relatively handsome returns across market conditions. However, keep in mind that the sector is changing rapidly. Renewables are setting themselves up for massive future growth, while returns from fossil fuels may or may not be sustainable over the long term.
Healthcare
Like energy, it is essential, now more than ever. However, stay away from the more popular stocks as they are likely overvalued. Instead, look at undervalued stocks that may benefit as the pandemic eases, such as those to do with elective procedures.
Technology
This sector is booming right now. The pandemic has thrust us all firmly and permanently into the digital future. Within this sector, e-commerce is great, as is entertainment. However, gems are to be found in AI, robotics, cybersecurity, and blockchain.
Industrial
Manufacturing is seeing a healthy recovery all over the world. Due to the shocks of the previous year, many are trading undervalue. In this sector, even some airlines, as counter-intuitive as it may seem, are good bets. As long as their finances are viable, they will potentially see massive growth as air travel reopens.
What to Avoid
Avoid having all your eggs in one basket. Do not invest too heavily in a single sector. Also, avoid stocks that have benefited heavily from the pandemic as, once things ease off, these will likely see sharp declines. Avoid buying any stocks without a sound understanding of the fundamentals, unless of course, pure price speculation is your chosen strategy!
