PODCAST: James K. Glassman’s Stock Picks for 2021

photo illustrating concept of stocks rising in 2021

(Image credit: Courtesy Getty)

published 7 January 2021

Listen now:

David Muhlbaum: What’s better than talking about investing in 2021? Which stocks to invest in for 2021. Kiplinger columnist James K. Glassman joins us to discuss his annual stock picks, how last year’s fared, what he’s recommending now and what he’s learned in over 20 years of engaging in this exercise. We’ll also cover what’s in the second stimulus and get back to 2021 investing with a look at exchange-traded funds. That’s all coming up in this episode of Your Money’s Worth. Stick around.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

David Muhlbaum: Oh yeah, tell me about it. At my daughter’s suggestion, we wrote our grievances on cards and then we threw them in the fire. Be gone 2020! Well, we’ll see if it works. At least we have one bit of good news to close out the year: a second stimulus, basically some more money to prop up our faltering economy. Boy, there was a lot of drama getting that across the finish line, but well, it’s done.

Sandy Block: Right. If you’re married and file a joint return, then both you and your spouse will get $600 for a total of $1,200. If you have children who are 16 years or younger, you get an additional 600 for each child. So for example, a married couple with two kids could get up to $2,400. But, stimulus payments will be phased out for people at certain income levels. Your check will be gradually reduced to zero if you’re single with an adjusted income, AGI above $75,000. If you’re married and file a joint return, the amount of your stimulus check will drop if your AGI exceeds $150,000, and the IRS will use your 2019 tax return to determine those thresholds.

Sandy Block: It’s not dead yet, but I would not run up a big credit card balance in expectation of getting that money. There is a huge amount of drama going on as we speak, in Congress, between members who have concerns about driving up the deficit and issues of tying that stimulus to other measures that may not be as popular. So I wouldn’t count on that in the next week or so. But if you got a refund on your taxes last year and you qualify, there is a very good chance you will at least see that $600 or more depending on your family situation very soon. Those checks could be going out by the end of this week.

Sandy Block: Pretty soon. Yeah, we’re hearing hints that the people are starting to get them. Now, one other thing I might add, because this was what happened to me is, if you owed money and you were going to get a debit card, which is what happened in our situation last time around, you may not get that. One of the quirks in this is that the IRS has to stop sending out checks on January 15th. And that’s because at that point, the IRS has to start getting ready for the upcoming taxes. And that doesn’t mean you won’t get the money, but you’ll claim it when you file your 2020 tax return. And we are writing about that right now.

David Muhlbaum: Welcome back. We’re talking today with James K. Glassman, who’s been a columnist for Kiplinger’s Personal Finance since 2004, to talk about his stock picks for 2021. Calling him a columnist for Kiplinger’s is accurate, but short shrift. He’s been a newspaper and magazine publisher, and under secretary of state. He’s written a number of books, and he’s chairman of his own public affairs firm here in Washington, DC, Glassman Enterprises, LLC. Hello Jim.

David Muhlbaum: Great. So, I want to get to the stocks, absolutely. That’s the fun part, but I also want to get through a couple of disclaimers. In fact, I’m just going to go ahead and quote Jim’s most recent column, or rather, his 2021 forecast column. You write, "These 10 stocks vary by size and industry, but they are not meant to be a diversified portfolio. I expect they will beat the market in the year ahead, but I do not advise holding shares for less than five years. So consider these long-term investments. And most of all, I am just offering suggestions here. The choices are yours." So yeah, Jim, I know you appreciate the importance of diversification deeply. I mean, you’ve basically written a book about it. So can you give us a bit more context on how people should view this annual effort, your picks and what we’re going to talk about?

James K. Glassman: Yeah, absolutely. So the idea is that I’m giving you not specifically advice, but ideas. Here are some companies that you ought to take a little bit closer look at. Just don’t take my word for it. But here are some really interesting companies. And what I do is not simply write about what I personally like. What I do is go to experts. And by going to experts, sometimes that means simply looking at their holdings, the holdings of the manager, for example, of a mutual fund, and what have they been buying? And I say, well, this is an interesting one and then I write about that particular stock. But I really, and we have terrific readers at Kiplinger’s Personal Finance and they understand that just simply reading a name does not necessarily mean they ought to be putting tons of money into something just because I say so.

James K. Glassman: Well, 2020 was great. My picks did a return of 28.8% for the 12 month period that we use. And that was 12 and a half percentage points better than the Standard and Forbes 500. And my picks for 2019 were 15.7% percentage points better than the S&P 500. So I’ve now had a string of five years in a row. I’ve looked all the way back because I used to do this, before I joined Kiplinger’s, I did it for The Washington Post. So it goes all the way back to 1993. There were a few years that I missed when I was in government. But my average returns a little bit better than 1% ahead of the S&P 500, which I’m very proud of. Don’t expect me to beat the S&P by double digits every year, but it just happens to be the way it’s worked. Even though, by the way, in 2020, one of my picks, which was my own personal pick, actually went to zero, which is the first time that’s ever happened.

James K. Glassman: Yeah. So the stinker was Diamond Offshore and the idea was, this is an oil exploration and production company. And I was basically betting on oil prices to rise because they’d been depressed for quite a long time. And what happens with a lot of these E&P companies is that, even though this is a particularly good one I thought, they just don’t have the capital to survive. And that’s what happened in this case. But I think the lesson for readers and listeners here is just the importance of diversification. I had a 100% loser, but I had several big winners, and this tends to be what happens with a portfolio. And they balance the losers. If I’d only recommended or only bought Diamond Offshore, it would have been a terrible year.

David Muhlbaum: Right. Right. You brought up the fact that the, I guess we’ll call them the Glassman 10, are diversified. One of the ways they’re diversified is that you’re passing on recommendations of other analysts and firms. And you stuck by a number of those sources over, again, many, many years. Tell us a little bit about who you’re looking to for your sources, for example, more about Terry Tillman, who you’ve mentioned many times.

James K. Glassman: Yeah, David. Terry Tillman is somebody that I stumbled across when he was working for Raymond James, as an analyst, as a business software analyst. I really felt like we got to have some business software companies represented on the list. And I thought Terry had a good track record. I’ve never met him. I don’t really know him. And so I used some of his selections and they did extremely well. One of his very early selections, CRM-

James K. Glassman: Yeah, Salesforce. I forgot about Salesforce, I just remember the ticker. Which by the way I own, I now own. I only bought it a couple of years ago. But has done just unbelievably well. But he comes up with a pick or I go through his list and choose one of his picks, and his list of buy recommendations may be a dozen stocks. And I looked through them and I say, "This one looks like a good one for our readers." And last year’s, Okta, was up 115%. This year, my choice out of his list is Upland Software. It’s a business software company that helps provide tools for companies to manage their customer base, using cloud technology. And we’ll see, but he has had an amazing record. He’s beaten the S&P for nine years in a row, which is just impossible basically. So I go back to him every year.

James K. Glassman: Pretty much the way I do it is that if someone has had a lousy year with a pick, I don’t go back to them. I give them a little cooler for a few years, maybe come back later. This has been the case with Will Danoff from Fidelity Contrafund. He’s been up and down. I love that fund. That’s one of the greatest mutual funds of all time. What I look at with him is because his portfolio doesn’t change very much from year to year, which I also like, but I look at what he buys, and he’s been buying some very interesting companies lately. In this case, I’ve got PayPal holdings, which I’ve actually owned since it was spun off from eBay. And he really likes it, but he’s been buying more. So I thought this would be a good one. I look at people that I like and that have performed well in the past. And I do tend to go back to them. I may have six or seven the same every year.

James K. Glassman: So Jerome Dodson is somebody that I have written about for many years. And I’m a big, big fan of his. It’s funny, so he runs a, I guess you would call it a sustainable fund or an ESG fund. And he started the company all by himself and he plays a big role. He’s out in San Francisco and making these choices himself. And he’s a value investor and he likes Intel. Now, Intel, Intel has been a dog. But that’s what value investors do, they look at companies that have not done well and project into the future. And that’s what Dodson has done. So we’ve got Intel on the list, which has, as I said, moved in the opposite direction from Dodson’s pick of last year, which was NVIDIA, which did fantastically well. Intel’s had its problems, one of which is that Apple decided to make its own chips. And by the way, I bought the new laptop with the Apple chip, which is fantastic. Fantastic.

James K. Glassman: Yep. I think Kyle is right about that. Look, Intel is, I have this phrase, actually I’m using it in my next column as well, faith-based investing, which has nothing to do with religion. It’s just that as an investor, when you look at a company that has done really well over the long-term and is having a tough patch, it’s often a good idea to have faith that whatever the problems are, the company is going to work them out. Now that doesn’t always happen, but it certainly is a perspective that often turns up some winners. And that’s my feeling about Intel.

James K. Glassman: Yeah. And I really like that company. First of all, it’s been around for over a century. It doesn’t carry the risks of an exploration and production company like Diamond Offshore that I mentioned. It’s mainly a pipeline company and it’s heavily into natural gas. And so yes, the price of oil, the price of gas, does affect its price, but not anywhere near as much as it does an exploration company. So I really like it. And one of the things I’ve noticed about this company is that when oil prices drop, it takes almost the same kind of hit as the E&P companies. And it shouldn’t. We rarely see markets making mistakes, but I think that’s kind of a mistake that markets make. So I actually bought this stock myself, which I reveal in the column, and I like it. And this is a good example of what I think is a good long-term holding.

James K. Glassman: Well, that’s a good question, and I have kind of a complicated answer because I’ve gone back and forth on the idea of whether I should be owning any stocks that I write about. And certainly I’m completely transparent in what I do own. But there was a time there when I really only owned index funds, partly because I didn’t want there to be any kind of conflict, even if I revealed it.

James K. Glassman: No. Well, when I was in government I had to dump everything. No, this has been as I’ve been writing for Kiplinger’s. But I would say over the last six, seven, eight years, I started to own individual stocks more than I was doing before. Yeah, and I certainly do like to hold them. So some of the ones that I have written about before are among my own personal largest holdings. I own about 15 individual stocks and mutual funds, about 10 or 12 individual stocks and the rest are funds or exchange traded funds.

James K. Glassman: Yeah. And I recommended that, and that was on my list in 2018. And since then, it’s quintupled. So that was pretty nice. And then New York Times, which was my personal pick in 2019 and that has since almost doubled. And then Oneok, that I wrote about for 2021. So those are all companies that I personally own. And as I say, I don’t own that many, and I tend to hold them for a long time.

Kyle Woodley: For the idea of owning stocks that you hold, there are very ppuritan people when it comes to that. They’re just like, "Nope, I’m only going to own index funds." It seems like I have a conflict of interest, but for me, and I’ve heard plenty of people say exactly the same thing, which is they want to see people that eat their own cooking from time to time. You don’t necessarily only want to pump everything that it is that you own and nothing else, but it’s good to know that a person who is actually suggesting these stocks, puts something behind it with their own money. And in the case of something like say Amazon, like an Exxon, just larger companies like that, no one’s moving the wire.

Kyle Woodley: I’ve always been of the mind where as long as you’re open about it, as long as you’re not sitting there just pumping nothing but micro caps all day long that you’re in a pretty good place, that it’s okay to put yourself out there and say, "Hey, I actually believe in this so much that I’m writing about it." But only far as long as you’re willing to talk about a lot of other things that you don’t own, which of course you do.

Kyle Woodley: I think it is American, yeah. What I don’t know is whether it’s a mandate or whether it’s just something that is popularly done. But yeah, I want to say that it’s like capital groups, American funds people, they tend to own say $1 million, $1.5 million, whatever. They’re actually loaded up on a lot of their own picks, which again is good. That’s conviction right there. I can talk all day long, believe me I do. But there’s a huge difference between just running your mouth all day and to actually taking some of your money and your future and putting it behind the stocks. It’s just like what you see with CEOs that actually buy their own shares, things like that. You want to see conviction. That makes you believe in it a little bit more.

David Muhlbaum: Before we let you go, I’ve got to bring up Dow 36,000, because I do remember when it came out in 1999. True confession, I didn’t read it. For those who don’t remember, Dow 36,000 is the book that you and Kevin Hassett wrote that year, 1999. And I realize there’s more nuance to this than the title. Which was a cheeky one, in part because the Dow most definitely did not go to 36,000 in 1999, or the year after. So I guess it’s maybe your albatross, but here we are at Dow 30,000. We’re getting there, I guess. How are you going to feel if and when the Dow does hit 36,000?

James K. Glassman: Well, I’ll feel pretty good. And from emails I get, and on Twitter and that sort of thing, people don’t don’t seem to remember that we said it was going to happen fairly quickly, which was not a good idea. So, Dow 36,000 was a book in two parts. The second half was pretty sensible investment advice, buy and hold investment advice of the sort that I’ve been giving for 25 years or something. And the beginning was a theory. And the basic theory was that people were too scared of stocks, that is to say, they were building in too high a risk premium, to be technical about it. And that within a fairly short period of time, more and more people would discover this and they would bid up the prices of stocks to a level of about 36,000, after which returns to stocks would be a lot lower.

James K. Glassman: Well, that clearly didn’t happen. And I could go into some of the reasons why, but I think that the simple explanation is people are scared of stocks. And what happened after we wrote our book showed that maybe they should be scared of stocks. Right after we wrote our book, even though it’s called Dow 36,000, it wasn’t really about tech stocks, there was the tech crash, and then there was 9/11, and then there were lots of problems. So what I tell people is that stocks, for the long term, are terrific investments. They really return a lot. But there’s a price you have to pay, and the price is that they don’t go straight up. There are always problems. There are always scary things happening. But if you can stick with it, you’re going to do well.

David Muhlbaum: Jim, we’re going to put a link into the column that we’ve been most closely discussing here, your 2021 picks. But I would note that if you go online and read that column, it has a link to your 2020 forecasts. And that one links back to your 2019 and 2018. And I’m the editor of these, so I should know how far back those links actually work. I’ll check on it. But we’ve got a pretty good run for people who want to look at the Glassman 10 as they’ve performed over a number of years. And we’re looking forward to a strong performance from them this coming year. And now that we’ve had you on the podcast, we look forward to having you back on the podcast to talk about them next year, or maybe even sooner.

Kyle Woodley: So we’ve got the 21 best stocks feature, which we do in collaboration with the magazine. We’ve got value plays, we’ll be publishing growth soon, top dividend stocks the pros love, monthly dividend stocks and funds, which if you’re nearing or in retirement, please look more closely into monthly dividend payers. We’ve outlined top 401(k) mutual fund choices. We’re tackling all of the sectors; tech, communications, healthcare, energy and finance should be really big in 2021. For risk-takers, there’s marijuana stocks, green energy stocks, even a constantly updated look at initial public offerings.

Kyle Woodley: To keep this really quick, ETFs are just like mutual funds in that for a fee, they allow you to invest a basket of stocks. But they have a bunch of upsides, which is why I like them so much. There’s never any sort of sales charge, there’s no sales minimum other than the cost of a single share, and they tend to be more tax efficient. Plus they can just do a lot more things that mutual funds can’t. But most ETFs are index funds. There are actively managed ETFs though. In fact, a number of the most explosive ETFs this year are actively managed.

Kyle Woodley: These are all focused on 2021 specifically. So Kiplinger’s ETF 20 is chock-full of great long-term buy and hold options. But for a few years, I’ve been compiling this best ETFs list for each year that’s a little more tactical in nature. So we look at three different buckets every year. I always start out with one or two core funds that you can hold throughout the year, pretty much every year. Every investor should start with a strong base. Most of the ETFs though, there are ways to play trends that are expected to heat up in the year to come.

Kyle Woodley: And then I always have a few funds on there that are safety plays or hedges just in case things go wrong, which really panned out in 2020. All told though, I’m actually really happy with 2020’s list, though it’s kind of harder to gauge than a straight up list of stock picks. So through mid December, when this published, the 2020 list’s average performance was more than a percentage point better than the S&P 500. That doesn’t sound great, but naturally you’re not going to horse-race a bond funds against the S&P 500, nor would you have held a couple of the hedges all year long. So if you just look at the equity funds, which is probably the fairest comparison, they outperformed by almost six percentage points, which is stellar.

Kyle Woodley: Sure. We’ll start out with the core funds. I always include an S&P 500 fund. This year, like last, the Vanguard S&P 500 ETF, that’s ticker VOO. As long as paid professional active managers have a hard time beating the index, which they have for a very long time now, chances are most retail investors will too. So make the index the core of your portfolio and then try to generate alpha around it. But this year I’ve also added the iShares ESG Aware MSCI USA ETF. I’m very sorry, it’s very long. The ticker is ESGU, which is a broad index fund that factors in environmental, social and corporate governance factors, that’s where you get the ESG. I know it sounds touchy, feely. But initiatives such as green friendliness and seeking out more gender and racial equality in boardrooms is shown to deliver results. And that’s a large part of why ESG funds are raking in the assets. ESGU is actually outperforming VOO year to date by about four percentage points.

Kyle Woodley: Sure. So the one thing about setting up a list of funds for any particular calendar year is the trends don’t really care about your calendar. For instance, numerous analysts are calling for a rotation into value in 2021 and we talked about this earlier. But to be clear, that rotation has already gotten going in the final months of 2020. Don’t worry though, there’s plenty more fuel for that fire as people get vaccinated and the US starts opening up again. But here I recommend two funds. And again, there’s a core Vanguard fund and then something a little fun. The core fund is Vanguard Value ETF, ticker VTV, which holds more than 300 stocks that look attractive based on their stock prices in relation to their earnings, their sales, their book value, and a couple of other metrics. It’s dirt cheap at just four basis points, which is only $4 a year for every $10,000 you have invested.

Kyle Woodley: And in theory, that should work just fine for the rotation and the value. That having been said, the other value fund that I have in this list is one that actually got plopped on the best ETFs list well before value came back into fashion, and that is the Distillate US Fundamental Stability & Value ETF, ticker DSTL. It’s only been around for a few years. It actually went live in October, 2018, and then it went onto the best ETFs list in 2004, 2019. I had it on the list for 2019, 2020, and it’s going on there for 2021 as well. Rather than focus on earnings or other metrics that can be distorted by creative accounting, DSTL instead determines value based on free cashflow and enterprise value. Cash doesn’t lie. I know it sounds wonky, but it works. Again, from the numbers that I had in mid December when I posted this piece, DSTL had outperformed the major value funds by about 30 percentage points in just more than two years. And it’s also beaten the S&P 500 in that time, which is outrageous for a value fund.

Kyle Woodley: I don’t want to give away all of these, but a couple of themed funds to look out for are the Roundhill Sports Betting & iGaming ETF, that’s ticker BETZ. And that can do well in 2021, thanks to both betting stocks enjoying what should be a more normal sports schedule, not to mention a growing number of states that are voting in gambling measures. And then there’s also the AdvisorShares Pure US Cannabis ETF. That’s ticker, MSOS. And that’s actually the first U.S.-specific marijuana industry exchange traded fund.

Kyle Woodley: Absolutely. And I want to be clear. This is definitely for the more tactical, actively managing type of investor. If you just want to sit on a fund and let it roll for 10 years, this isn’t for you. This is if you like to be involved in the day-to-day. I’m also going to be a little bit of a tease and tell you that my favorite hedge, which helped me to fade a lot of the downside during the February to March downturn is on the full list, which you can view if you go to kiplinger.com/investing/etfs, that’s plural, and you can go ahead and check out other ETF content there. We’ve got to pay the bills. But one hedge I’ll mention here is the BlackRock Ultra Short-Term Bond ETF. That’s ticker ICSH. This ETF is effectively a way of going to cash and earning a little bit of yield on the side, a very little.

Kyle Woodley: But it’s a portfolio of investment grade bonds that mature in less than a year. And it doesn’t move. There’s no interest rate risk. At its absolute lowest point in 2020, it was off by only 3.5%. That’s nothing compared to most stocks and actually a lot of bonds. So if at any point you read the tea leaves and you think that we’re headed over a cliff, ICSH is one way of protecting your money until we come out on the other side. Lastly, I want to point newer investors to a quick guide with some really basic information to look out for, and you’ll find that at kiplinger.com/links, again that’s plural, /ETF guide, as in, it’s a guide to ETFs.

David Muhlbaum: And that will just about do it for this episode of Your Money’s Worth. If you like what you heard, please sign up for more at Apple Podcasts or wherever you get your content. When you do, please give us a rating and a review. If you’re already a subscriber, I hope you’ll consider adding a rating too. To see the links we’ve mentioned on our show, along with more great Kiplinger content on the topics we’ve discussed, visit kiplinger.com/podcast. The episodes, transcripts and links are all in there by date. And if you’re still here because you want to give us a piece of your mind, you can stay connected with us on Twitter, Facebook, Instagram, or by emailing us directly at podcast@kiplinger.com. Thanks for listening.

Topics

Podcast Kiplinger's Investing Outlook

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.