Top stocks for Q3 2021

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The second quarter of 2021 has generally been a very good period for stock market investors with major indexes such as the S&P 500, the STOXX Europe 600, and the FTSE 100 delivering solid gains. While some areas of the market, such as high-growth technology stocks, have underperformed on the back of inflation concerns, stocks in cyclical sectors such as financials, industrials, and energy have performed well, pushing some equity indexes to new all-time highs.

Stocks to watch in Q3 2021

In Q3, cyclical and inflation-linked assets could continue to outperform. Across the world, coronavirus vaccines are being rolled out swiftly and economic activity is picking up rapidly. Consumers are unleashing pent-up demand. This should continue to favour industries that are economically sensitive. Crucially, the US Federal Reserve has said that it won’t taper its asset purchases or increase interest rates in the short term. This backdrop should support stock prices in the near term, and help equity markets deliver further gains. But what are the best stocks to invest in?

Top stocks for Q3 2021

5 top stocks to consider now

In this guide, we are going to look at five top stocks for investors to consider for the third quarter of 2021.

The stocks are:

  • Ford
  • Chevron
  • Glencore
  • GlaxoSmithKline
  • Live Nation Entertainment

All of these companies have strong fundamentals at present. And all look set to benefit as the pandemic continues to subside, economic activity picks up, and the world returns to normal.

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Ford (F)

Ford stock chart

  • Ford is an American automotive company. Last year, the company was the fourth-largest automaker globally by revenue.
  • At Ford’s recent Capital Markets Day, the company made it clear that it’s going ‘all-in’ on electric vehicles (EVs).
  • Under its new ‘Ford+’ strategy, the automaker plans to invest over $30 billion in EVs and battery technology through 2025. “This is our biggest opportunity for growth and value creation since Henry Ford started to scale the Model T, and we’re grabbing it with both hands,” said Ford CEO Jim Farley. By 2030, the group expects that electric vehicles will make up 40% of sales.
  • Ford is already having success in the EV space. Last year, it began delivering its ‘Mustang Mach-E’ SUV. This received a strong reception from customers, quickly racking up thousands of reservations. In 2021, this electric vehicle has captured market share from Tesla.
  • More recently, in May, Ford launched its ‘F-150 Lightning’ electric pick-up truck. This received nearly 50,000 orders in the first 48 hours after launch. It expects to begin deliveries of this model next spring. This could be a transformative vehicle for the company – its F-Series pick-up trucks have been America’s best-selling vehicles for nearly 40 years.
  • Ford’s Q1 results were strong. Net income was $3.3 billion – the best since 2011 – while adjusted operating profit was a record $4.8 billion.
  • Ford’s share price has strong upward momentum at present. Recently, the stock hit a six-year high of $16.
  • 5-year share price return: 11.9% (as of 21 June 2021)

Chevron (CVX)

Chevron stock chart

  • Chevron is a multinational energy company that has both upstream and downstream operations. It is one of the six big oil ‘supermajor’ companies.
  • Chevron should benefit from higher oil prices as economic activity picks up post Covid-19. Higher oil prices translate to higher profits for oil companies. Recently, oil has risen to its highest level since late 2018 amid improving economic conditions.
  • Oil could have further upside in 2021. According to the International Energy Agency (IEA), oil consumption is set to increase significantly in the second half of the year as the economy strengthens. “As vaccination rates rise and mobility restrictions ease, global oil demand is set to soar from 93.1 millions of barrels per day in 1Q21 to 99.6 millions of barrels per day by year-end,” it wrote in a report recently.
  • Chevron continues to invest in renewable energy technologies. It is investing in renewable fuels, products, and power to reduce the carbon intensity of its operations and make energy more sustainable. This hedges the company’s dependence on oil in the long term.
  • Chevron has a good dividend track record. While other oil supermajors cut their dividends last year, Chevron increased its payout. And in April, it increased its quarterly dividend by five cents to $1.34 per share. Currently, the stock offers a dividend yield of around 5%.
  • 5-year share price return: 5.9% (as of 21 June 2021)

Glencore (GLEN.L)

Glencore stock chart

  • Glencore is a multinational commodity trading and mining company. It is one of the largest producers of copper in the world.
  • Demand for copper is rising. Recently, the commodity hit its highest level in a decade on the back of the accelerating global economy and supply shortages.
  • Going forward, demand for copper looks set to be boosted by the shift to renewable energy and the growth of the electric vehicle market. Currently, demand from renewable power generation, battery storage, electric vehicles, charging stations, and related grid infrastructure accounts for about one fifth of copper consumption. It’s worth noting that an electric vehicle requires around 80kg of copper compared to 23kg for an internal combustion engine vehicle.
  • Glencore’s CEO Ivan Glasenberg has said that the mining industry will need to produce an extra 1mt of copper every year to meet governments’ goals of reaching carbon neutrality by 2050.
  • Recently, Goldman Sachs published a note declaring that copper is ‘the new oil.’ It believes the price of the commodity could hit $15,000 per tonne by 2025 as the world transitions to renewable energy.
  • In the short term, demand for copper should also be underpinned by US President Joe Biden’s $2 trillion Infrastructure Plan and the rollout of 5G telecommunication network infrastructure.
  • Analysts have been upgrading their earnings forecasts for Glencore recently. This upgrade activity should support the share price.
  • 5-year share price return: 111.7% (as of 21 June 2021)

GlaxoSmithKline (GSK.L)

GSK stock chart

  • GlaxoSmithKline is a global healthcare company that operates in three main areas: pharmaceuticals, vaccines, and consumer healthcare. The company is the world’s largest vaccine maker.
  • GSK has faced challenges throughout Covid-19. It has experienced a decline in revenue in its vaccine division due to the fact that governments have prioritised Covid-19 vaccination programmes and routine vaccination programmes have been abandoned. Covid-19 has also impacted demand for some traditionally more reliable pharmaceutical products such as antibiotics.
  • The outlook now appears to be improving, however. In GSK’s Q1 results, it stated that it expects a “significant improvement” in performance over the remainder of 2021. It also said that it expects “meaningful improvements” in revenue growth and margins in 2022.
  • In April, GSK’s share price jumped after the Financial Times reported that activist hedge fund Elliott Management had taken a multi-billion pound stake in the company. Elliott Management is renowned for taking large stakes in major companies that are not achieving their full potential, and forcing changes to improve performance.
  • Next year, GlaxoSmithKline plans to break itself up into two companies. One entity will focus on pharmaceuticals and drug development, while the other will focus on consumer healthcare. The company believes the split will support future growth and unlock value for investors.
  • GlaxoSmithKline shares currently offer a prospective dividend yield of around 6%, however, the company has said that a new dividend policy will be introduced next year to support growth and investment.
  • 5-year share price return: 2.6% (as of 21 June 2021)

Live Nation Entertainment (LYV)

LYV stock chart

  • Live Nation Entertainment is a leading live entertainment business. The company manages ticket sales for live entertainment globally, owns and operates entertainment venues, and manages the careers of music artists.
  • Live Nation is a classic ‘reopening stock’. Throughout Covid-19, the company has faced huge challenges due to the fact that live events have been cancelled. However, as vaccines are rolled out and the global economy reopens, its revenues should recover.
  • Across the world, there is significant pent-up demand to attend concerts and other live entertainment. In its Q1 results, Live Nation said that events are selling out faster than ever before. The company predicts that demand for concerts will continue to be high in the next few years. Its concert pipeline for 2022 is already up double-digits on 2019 levels.
  • Live Nation is branching out into live streaming and non-fungible tokens (NFTs). In January, the group acquired a majority stake in Veeps, a live-streaming platform. This will give the company a new revenue stream.
  • In 2020, Live Nation reduced its costs by $950 million. This year, it is aiming to reduce its costs by a further $750 million. This means it should emerge from the pandemic as a much leaner, more efficient company.
  • 5-year share price return: 270.1% (as of 21 June 2021)

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