Could these areas see more gains ahead?
The stock market was narrowly mixed on Wednesday but generally remained close to record levels. Mixed economic news created some volatility, but moves were relatively modest. The S&P 500 and Dow Jones Industrial Average are both within 1% of their highs, while the Nasdaq Composite has pulled back a bit further but is still sharply higher over the past year.
Investors looking for successful plays in 2021 have had to be a bit choosier than they were in 2020. Yet while big gainers aren’t as plentiful as they were in 2020, there are still a couple of areas that feature some huge winners. Below, we’ll look at two industries that have powered ahead this year and have plenty of momentum for further gains throughout 2021 and beyond.
1. Marijuana stocks
Marijuana has been a popular investing area for several years, but it got a big shot in the arm recently with the 2020 U.S. elections. A change in political party control of both the White House and the Senate has created a much more receptive environment for considering marijuana reform, including decriminalizing pot at the federal level. That’s helped lift shares of the entire industry, with the ETFMG Alternative Harvest ETF (NYSEMKT:MJ) seeing gains of more than 50% so far in 2021.
Industry consolidation and other strategic moves have lifted some individual stocks even further. For instance, both Tilray (NASDAQ:TLRY) and Aphria (NASDAQ:APHA) have more than doubled since the beginning of the year, as they prepare to move forward with a merger that would create the largest cannabis company by revenue in the industry. Similarly, cannabinoid drug specialist GW Pharmaceuticals (NASDAQ:GWPH) is up almost 90% year to date after getting a buyout bid from industry peer Jazz Pharmaceuticals (NASDAQ:JAZZ), and OrganiGram Holdings (NASDAQ:OGI) has climbed nearly 150% on news of a massive investment from tobacco giant British American Tobacco (NYSE:BTI).
A lot now rides on whether marijuana actually gets fully legalized in the U.S. market. Yet with fundamentals in the business improving, there could be considerable upside for marijuana stocks in the months to come.
2. Shipping stocks
In contrast to marijuana stocks, most investors don’t pay much attention to the companies that ensure goods get to where they’re going. The global economy relies on getting products to market, however. So whether you’re looking at crude oil and other energy products that move by tanker ship or dry bulk goods that cargo ships carry, the companies that handle shipping play a vital role for the global economy.
The recent blockage of the Suez Canal only highlighted the importance of shipping worldwide. That’s ignited interest in some stocks that rely on high shipping rates, as the industry is seeing a favorable environment for pricing.
As a result, big shipping stocks have posted sizable gains. Star Bulk Carriers (NASDAQ:SBLK) is up 67% so far this year, while Safe Bulkers has risen 82%. Navios Maritime Holdings has left its peers in the dust, posting gains of more than 350%.
On the tanker side of the business, returns have been more subdued but are still impressive. Frontline (NYSE:FRO)has risen 23% year to date, while Nordic American Tankers (NYSE:NAT) gained 17% and Teekay Tankers (NYSE:TNK) has seen a 31% jump.
As the global economy recovers, shipping demand will likely increase. That could help support shipping rates that would in turn boost profits for these companies, potentially continuing the upswing in stock prices.
Investors have plenty of choices of where to put their money. Right now, though, the interest in shipping and marijuana stocks seems justified, and it’ll be interesting to see just how far these groups of companies can climb.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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