6 Stocks to Watch for a Return to Normalcy in 2021

The COVID-19 crisis has been hard on many sectors, but as the tide starts to turn on the pandemic, these six companies appear ready for takeoff.

A collage of four images of the COVID virus, a stock chart, and people wearing masks.
(Image credit: Getty Images)

2020 was plagued by crisis after crisis, which took an enormous toll on our economy. The COVID-19 pandemic pushed more than 88 million Americans (opens in new tab) further below the poverty line, and small businesses were shut down.

However, as people begin to get vaccinated, 2021 is the best time to take advantage of the market's lowest prices on some domestic assets. Here’s a look at six stocks to watch, as they're well-positioned for a full return to normalcy.

1. Ulta Beauty

After several months of social distancing, people are excited to get out of the house and attend social events. The beauty industry will benefit from this alteration of 2020 through the sale of cosmetic products.

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Ulta has fared well during the pandemic (opens in new tab), and despite losing a majority of its store and salon business in March 2020, the company continued making sales through its e-commerce division. In its third-quarter earnings report for December 2020, the company recorded a 90% increase (opens in new tab) in e-commerce sales and a slight 8.9% decrease in overall sales.

Ulta Beauty (ULTA (opens in new tab), $299.92) is among the stocks to watch for a good year in 2021. The Illinois-based cosmetic giant has started expanding into Target stores to provide exclusive in-store offerings to customers, making this a huge stock to watch.

2. US Foods Holdings

The pandemic severely hit the hospitality sector, but as normalcy resumes, people will begin to get back to their favorite restaurants. As a result, US Foods Holdings (USFD (opens in new tab), $34.77) will benefit from the high demand for food by restaurants and hotels countrywide.

In March 2020, (opens in new tab) USFD stock prices had plummeted by nearly 50%, (opens in new tab) making it a suitable low-budget stock. However, I expect US Foods to have a strong 2021. Prices have been significantly rising, from $19.88 on July 15 to $35.59 on Jan. 14. The biggest drop was back in March when the pandemic hit. Additionally, USFD supplies food outlets such as restaurants, hospitals, clubs, military organizations and schools, all set for a full-swing reopening as we return to normalcy.

3. Alphabet

Alphabet/Google is one of the most diversified stocks. However, due to COVID-19, it saw a profound reduction in the number of online advertisements. The good news is that, with a return to normalcy, Google parent Alphabet (GOOGL (opens in new tab), $1,892.56) has already bounced back. The low back in March was around $1,070, and currently the stock is around $1,700.

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Experts expect a rebound in online advertisements as the hospitality and travel sectors enter a recovery period. Furthermore, as digital marketing techniques are quickly replacing traditional marketing, Google is expected to see a significant recovery in travel-related ads. (opens in new tab)

4. American Express

American Express (AXP (opens in new tab), $126.14) had a tumultuous year as credit card revenue dwindled due to less spending and limited traveling in 2020. This saw a 20% decrease in revenue to $8.75 million and (opens in new tab) net income dropping by 39% to $1.07 billion in the third quarter.

Despite the decrease in consumer spending in 2020, I predict that AXP will make significant gains in 2021 with more people continuing to go out and businesses beginning to resume as normal. At the end of the third quarter of 2020, AXP had 48 fund investors, which is only 10 positions shy from its all-time highs.

The company has launched a “shop small (opens in new tab)” campaign to support small merchants in 18 countries to drive customer spending and loyalty. Additionally, AXP has expanded its services to China for the first time.

5. Diageo

With the reopening of recreational joints, including clubs and bars, the sales from alcoholic products will soar. Therefore, it is a very attractive time to pick stock positions in Diageo (DEO (opens in new tab), $158.61).

U.K. liquor giant Diageo fared well through the pandemic, thanks to its highly diversified marketing options and business layout. According to revenue reports, DEO has over 150 production sites globally, with nine in North America. Therefore, its supply chain was marginally disrupted by the pandemic.

Furthermore, only 20% of the company's sales come from on-premises sales, and with drinking establishments closed, its attention shifted to the 80% off-premises channels, which sustained it through the pandemic.

As we return to normalcy, 18 hedge funds have already invested in DEO (opens in new tab), which is an excellent sign of expected positive growth.

6. Walt Disney

Walt Disney (DIS (opens in new tab), $172.78) is set for a 2021 roller coaster. The company has a market cap of over $300 billion and is set to grow as more people get vaccinated and feel free to travel.

Disney World already has some enticing offers to lure more visitors even after its holiday season ended. The possibility of an upcoming ease in social distancing regulations would enable the reopening of movie theaters, a market boost for Disney’s movie division.

As the company struggled through the COVID-19 murk, its Disney+ streaming services became a lifeline, garnering a record of 86.8 million new paid subscribers globally (opens in new tab). The company expects to have more than 260 million paid subscribers by 2024 despite raising its subscription fee by $1 to $7.99 per month starting in March 2021.

The new year presents a gleam of hope after the introduction of various COVID-19 vaccines. However, your investment choices will significantly determine your success in 2021. Sectors that were worst hit by the pandemic present excellent market entry opportunities with a reassurance of a turnaround when normalcy returns.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Josh Sailar, CFP®, CPFA
Partner, Blue Zone Wealth Advisors

Josh Sailar is an investment adviser and partner at Blue Zone Wealth Advisors (opens in new tab), an independent registered investment adviser in Los Angeles. He specializes in constructing and managing customized advanced plans for business owners, executives and high net worth individuals. He holds the designations of Certified Financial Planner (CFP®) and Certified Plan Fiduciary Advisor (CPFA), the FINRA Series 7, 63, 65 licenses, as well as tax preparer license.