In this article we will take a look at the 10 best US stocks to buy now.
It has been an eventful year for the stock market in the United States marked by financial volatility, the COVID-19 vaccine rollout that has achieved better than expected results, new economic policies spurred by stimulus packages and rising inflation fears, as well as the stock volatility resulting from increased retail investor interest in the post pandemic economy. The DOW Jones Industrial, NASDAQ Composite, and S&P 500 have all offered returns of close to 10% year-to-date and are averaging close to 40% year-on-year.
This boost is partly the result of the massive growth in technology stocks. Amazon.com, Inc. (NASDAQ: AMZN), one of the largest tech firms in the world, has reached over $1.6 trillion in market capitalization and most analysts are still bullish on the company stock which looks set to break the $2 trillion barrier soon. Amazon.com, Inc. (NASDAQ: AMZN) recently hired more than 70,000 logistics workers in North America and is exploring the acquisition of a medical diagnostics firm for a foray into the health industry.
Another big story for the year has been the stock volatility of Tesla, Inc. (NASDAQ: TSLA), the electric vehicle manufacturing company owned by billionaire Elon Musk. After rising close to 700% in twelve months, Tesla, Inc. (NASDAQ: TSLA) stock has been on a downward trajectory despite the company reporting record vehicle delivery numbers for the first quarter of 2021. Some of this drop in value is due to concerns surrounding Tesla, Inc. deliveries for the rest of the year due to a shortage of auto chips and falling demand for new EVs in the Chinese market.
In the manufacturing sector, Caterpillar Inc. (NYSE: CAT) seems the standout choice for one of the best US stocks this year. The company is uniquely placed to benefit from a plan by US President Biden, dubbed the American Jobs Plan, that envisions the spending of hundreds of billions in government money to overhaul American infrastructure. Caterpillar Inc. (NYSE: CAT) stock has also soared in recent weeks as labor demands pick up and industries reopen after being shuttered for large parts of 2020 due to the coronavirus crisis.
A fall in the national unemployment rate, new stimulus payments, and possible growth in the manufacturing sector look set to drive further market highs this year. However, amid worries surrounding the tech industry in general, value stocks have also gained in popularity in recent days. The stocks outlined below have strong fundamentals, chances of a great profit return, are included on top indexes, and also have solid innovative prospects. Amid changing market dynamics, a lot of research is needed before companies with upside potential can be identified.
The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, here is our list of the 10 best US stocks to buy now.
Best US Stocks to Buy
10. Adobe Inc. (NASDAQ: ADBE)
Number of Hedge Fund Holders: 107
Adobe Inc. (NASDAQ: ADBE) is a California-based computer software company founded in 1982. It is placed tenth on our list of 10 best US stocks to buy now. Adobe stock has returned more than 26% to investors over the past year. The software solutions marketed by the company are used by content creators, experience designers, app developers, students, and creative professionals, among others. Some of the famous brands the firm owns Adobe Photoshop and Adobe Reader, among others.
On March 23, Adobe Inc. reported earnings for the first fiscal quarter in 2021, reporting a revenue of more than $3.9 billion and earnings per share of $3.14. The earnings per share were up 38% year-on-year.
Just like Amazon.com, Inc., Tesla, Inc., and Caterpillar Inc., Adobe Inc. is one of the best US stocks to buy now.
In its Q1 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Adobe Inc. (NASDAQ: ADBE) was one of them. Here is what the fund said:
“Adobe and Autodesk are both prime examples of the rotation that occurred during the quarter. Both are dominant businesses in their respective markets, which are experiencing structural tailwinds. Despite each business’s position of strength, the stocks of cyclicals and businesses with higher leverage and lower profitability were more favored this past quarter. In stark contrast, Adobe and Autodesk both have low leverage, high levels of profitability, high recurring revenues that mitigate cyclicality, and are both capital-light business models—all attributes we appreciate as investors. Adobe and Autodesk were also two of the top three performers within the Portfolio during 2020.”
9. The Walt Disney Company (NYSE: DIS)
Number of Hedge Fund Holders: 134
The Walt Disney Company (NYSE: DIS) is a California-based multinational media and entertainment company. It was founded in 1923 and is ranked ninth on our list of 10 best US stocks to buy now. Disney stock has returned more than 46% to investors over the course of the past twelve months. The company owns many famous film studios, broadcast channels, and entertainment parks, among a host of other businesses. It also has stakes in the internet streaming platform business.
The Walt Disney Company stock took a battering in 2020 as the coronavirus pandemic forced the theme parks the company owns to remain shut for most of the year. However, the firm recently announced the reopening of its European theme parks in June as the vaccine rollout allows for the resumption of business.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in The Walt Disney Company with 10 million shares worth more than $1.9 billion.
Just like Amazon.com, Inc., Tesla, Inc., and Caterpillar Inc., The Walt Disney Company is one of the best US stocks to buy now.
8. Bank of America Corporation (NYSE: BAC)
Number of Hedge Fund Holders: 97
Bank of America Corporation (NYSE: BAC) is a North Carolina-based investment bank and financial services company founded in 1784. It is placed eighth on our list of 10 best US stocks to buy now. Bank of America stock has offered investors returns exceeding 87% in the past twelve months. The bank is one of the largest ones in the United States and has served more than 66 million consumer and small business clients. It has more than 4,300 branches and almost 17,000 ATMs across the country. The bank has 40 million active users.
On May 18, Bank of America Corporation announced that it would be raising its minimum hourly wage to $25 within the next four years. Last year, the company had raised its minimum hourly wage to $20 per hour.
Just like Amazon.com, Inc., Tesla, Inc., and Caterpillar Inc., Bank of America Corporation is one of the best US stocks to buy now.
7. Brown-Forman Corporation (NYSE: BF-B)
Number of Hedge Fund Holders: 35
Brown-Forman Corporation (NYSE: BF-B) is a Kentucky-based company that makes and sells alcoholic drinks. It was founded in 1870 and is ranked seventh on our list of 10 best US stocks to buy now. Brown-Forman stock has returned more than 23% to investors in the past year. The company is one of the largest beverage firms in the US with a market cap of over $37 billion and has operations in more than 170 countries. Some of the famous drinks marketed by the firm include Jack Daniel’s, Woodford Reserve, Canadian Mist, and GlenDronach, among others.
Brown-Forman Corporation announced earnings results for the third fiscal quarter on May 3, reporting earnings per share of $0.45, beating market predictions by $0.02. It also posted a revenue of more than $911 million.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in Brown-Forman Corporation with 11 million shares worth more than $774 million.
Just like Amazon.com, Inc., Tesla, Inc., and Caterpillar Inc., Brown-Forman Corporation is one of the best US stocks to buy now.
6. General Electric Company (NYSE: GE)
Number of Hedge Fund Holders: 68
General Electric Company (NYSE: GE) is a Boston-based company that has interests in several businesses, including consumer electronics, aviation, and healthcare. It is placed sixth on our list of 10 best US stocks to buy now and was founded in 1892. General Electric stock has offered investors returns exceeding 106% in the past twelve months. The company has stepped up investments in renewable energy in recent years, pouring money into the onshore and offshore wind, blades, hydro, storage, solar, and grid solutions businesses.
On May 14, investment advisory Citi reinstated coverage on General Electric Company stock with a Buy rating and a price target of $17 on the back of strong progress made by the Boston firm as it seeks a rebuild after the pandemic.
Just like Amazon.com, Inc., Tesla, Inc., and Caterpillar Inc., General Electric Company is one of the best US stocks to buy now.
In its Q1 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and General Electric Company (NYSE: GE) was one of them. Here is what the fund said:
“General Electric is outperforming our expectations for 2021 as the economic recovery is occurring faster than expected. We are particularly pleased with its free cash flow generation. We are happy to own it in our portfolio.”
5. Uber Technologies, Inc. (NYSE: UBER)
Number of Hedge Fund Holders: 130
Uber Technologies, Inc. (NYSE: UBER) is a California-based technology firm founded in 2009. It is ranked fifth on our list of 10 best US stocks to buy now. Uber stock has returned more than 40% to investors in the past year. Uber has stakes in a wide array of businesses, including ride-hailing, food delivery, autonomous driving vehicles, and others. The firm operates in tens of countries around the world. The ride hailing segment of the firm registered a huge slump in revenue in 2020 because of the COVID-19 pandemic.
In earnings results for the first quarter of 2021, posted earlier in May, Uber Technologies, Inc. reported earnings per share of -$0.06, beating market predictions by $0.49. The revenue for the period was $2.9 billion.
4. Costco Wholesale Corporation (NASDAQ: COST)
Number of Hedge Fund Holders: 56
Costco Wholesale Corporation (NASDAQ: COST) is a Washington-based firm that operates membership-only retail stores around the world. It was founded in 1983 and is placed fourth on our list of 10 best US stocks to buy now. Costco stock has returned more than 25% to investors over the course of the past twelve months. The firm is one of the largest retail companies in the world with a market cap of over $168 billion. Costco is also one of the largest retailers of beef, organic foods, and rotisserie chicken.
On May 13, investment advisory Argus increased its price target of Costco Wholesale Corporation stock to $420 ahead of the announcement of the earnings results of the retailer. Costco shares jumped over 2% following the update.
Just like Amazon.com, Inc., Tesla, Inc., and Caterpillar Inc., Costco Wholesale Corporation is one of the best US stocks to buy now.
In its Q1 2021 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and Costco Wholesale Corporation (NASDAQ: COST) was one of them. Here is what the fund said:
“We saw these dynamics at play in the Fund. Some of the worst-performing stocks this quarter were among our best performers in Q1 2020. Another example was the market’s reaction to Costco Wholesale (1.5% weight in the Fund) during the quarter. From December 31, 2020 to March 8th, Costco shares declined 17% and dropped below their pre-pandemic high. The common rationale offered by sell-side analysts was that Costco would face difficult one-year “comps” (i.e. same-store sales, which compare sales from stores open for at least a year). Because so many consumers rushed to Costco ahead of shelter-in-place and subsequent quarantines, it will be harder for Costco to meaningfully beat those results when compared year-over-year. That may indeed be true, but we struggle to understand how Costco could be “less valuable” than it was a year earlier when it concurrently increased its membership base by over 7%, or 3.9 million members. With membership renewal rates around 90%, the vast majority of the new customers Costco brought in last year will be around for years to come.
Analysts also complained about Costco raising its already industry-leading minimum wage to $16/hour, with an average “effective” pay of $23-$24/hour when you include overtime and bonuses. Costco paying its employees “too much” has been a common gripe of Wall Street analysts for at least two decades. While the extra pay does indeed impact short-term profit margins, it also serves to make Costco more durable, as its flywheel (i.e. a virtuous value cycle) starts with happy employees. A 20-year chart of Costco stock price is evidence that this strategy works and we’re confident that it will continue to work.”
3. Caterpillar Inc. (NYSE: CAT)
Number of Hedge Fund Holders: 53
Caterpillar Inc. is an Illinois-based firm that markets machinery, engines, financial products, and insurance. It was founded in 1925 and is ranked third on our list of 10 best US stocks to buy now. The firm is one of the world’s largest industrial equipment makers and posted more than $41 billion in annual revenue in 2020. Some of the equipment the company makes and sells include asphalt pavers, compactors, cold planers, motor graders, pipelayers, road reclaimers, telehandlers, and utility vehicles, among others.
On April 29, Caterpillar Inc. posted earnings results for the first quarter of 2021, reporting earnings per share of $2.87, beating market estimates by $0.93. The revenue over the period was over $11 billion, up close to 12% year-on-year.
Out of the hedge funds being tracked by Insider Monkey, Washington-based firm Bill & Melinda Gates Foundation Trust is a leading shareholder in Caterpillar Inc. with 10 million shares worth more than $2.3 billion.
Just like Amazon.com, Inc. and Tesla, Inc., Caterpillar Inc. is one of the best US stocks to buy now.
2. Tesla, Inc. (NASDAQ: TSLA)
Number of Hedge Fund Holders: 62
Tesla, Inc. is a California-based firm in the electric vehicle and clean energy businesses. It is placed second on our list of 10 best US stocks to buy now and was founded in 2003. Tesla stock has registered a remarkable rally in the past twelve months, rising over 700% in value before falling amid supply worries and demand shortages. Tesla is owned by billionaire Elon Musk. The company stock has returned more than 255% to investors over the course of the past twelve months. The firm is the largest EV manufacturer in the world in terms of delivery numbers and market capitalization.
On May 21, media reports indicated that Tesla, Inc. had won approval from the German authorities for setting up a factory in Berlin. Tesla already has manufacturing facilities in the United States and China.
Here is what Baron Partners Fund has to say about Tesla, Inc. in its Q1 2021 investor letter:
“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, energy storage solutions, and battery cells. The stock fell during the quarter as a result of general market dynamics and a potential production slowdown due to parts shortages. A refreshed S/X and China Model Y ramp could also have a negative impact on margins in early 2021. We anticipate strong growth and improved margins driven by new production capacity, manufacturing efficiencies, localization of its manufacturing and supply chain, and maturation of Tesla’s full self-driving technology.”
1. Amazon.com, Inc. (NASDAQ: AMZN)
Number of Hedge Fund Holders: 243
Amazon.com, Inc. is a Washington-based technology company founded in 1994. It is ranked first on our list of 10 best US stocks to buy now. Amazon stock has returned more than 31% to investors over the past year. The company has stakes in several businesses, including e-commerce, cloud computing, digital streaming, and artificial intelligence, among others. It is one of the largest technology firms in the world and has plans to expand in the food delivery and medical segments, with reports indicating that the company is set to purchase promising companies in this regard soon.
On May 21, Amazon.com, Inc. announced that it would be retiring its ultrafast-shipping brand Prime Now, absorbing the app and website into the company. A statement by the firm outlined that the Prime Now app and site would be retired by year-end.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ: AMZN) was one of them. Here is what the fund said:
“Amazon (AMZN): We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment: 1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon, we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is in a much different place than when we initially invested. Back in 2014, investors were starting to question whether Amazon’s promise of future earnings potential would actually come to fruition.
Operating income had declined from ~$1.4BN in 2010, to ~$676M in 2012, to just ~$178M by the end of 2014. Expenses were outpacing revenue growth, and investors were questioning whether Amazon’s expenses were truly “investments” as they claimed, or whether it was a structural necessity of the business and thus would never flow to investor’s bottom line.
The critical question was ‘what portion of expenses are truly growth investments vs. structural expenses, and as a result, will Amazon ever be capable of generating significant profits?’
Our analysis indicated that these expenditures truly were the former, and led to the belief that the business’ structural margins would inevitably increase over time. This was our differentiated insight / investment edge.
Fast-forward to today, and our thesis proved correct with operating margins having increased from ~0.2% to ~6%. However due to this success and proving this facet out to investors, Amazon investors have much higher confidence and a better understanding of the company today. I’m not sure we have the same level of differentiated insights, as we did back then.
In addition, I believe the departure of Jeff Bezos and his long-time lieutenants signal a regime change. Perhaps it’s now “Day 1.5” instead of the Day 1 mentality that made Amazon so successful (LINK)… The departures within the past couple years include:
- Jeff Bezos – Founder, CEO, Visionary. Started Amazon in 1994.
- Jeff Blackburn – Joined Amazon in 1998. Oversaw Amazon Marketplace, Advertising, Amazon Studios, Prime Video, Prime Music, M&A.
- Jeff Wilke – Joined Amazon in 1999. Oversaw Amazon Consumer (ecommerce) business.
- Steve Kessel – Joined Amazon in 1999. Oversaw Physical Stores, Kindle, and Whole Foods.
Blackburn, Wilke, and Kessel have each arguably created hundreds of billions of shareholder value. On top of this, Bezos is the visionary and culture-setter behind Amazon. When he and his long-time lieutenants take their hands off the wheel, it is probably time for us to as well.
We sold our remaining shares at an average price of ~$3,240. Based on our initial investment, we made a ~10x return in a little over six years, for a ~45% IRR7. We reinvested the proceeds into our existing portfolio, taking advantage of the prices offered by this latest market draw-down.”
You can also take a peek at Billionaire Izzy Englander’s Top 10 Stock Picks and Billionaire David Abrams’ Top Stock Picks.
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This article is originally published at Insider Monkey.
