What Sectors Should Investors Be Looking at in March 2021?
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As we head into the spring, most stock markets around the world sit at dizzying all-time highs. The US benchmark S&P 500 has been trading just below 4,000, 20% higher than the beginning of 2020 and nearly double the lows of late March last year.
In a similar vein, the UK's FTSE 100 has regained most of the losses it incurred 12 months ago.
The US technology index NASDAQ is one of the strongest performers of the last year. It's currently around 40% higher than it was in January 2020 and almost double where it was in March.
Volatility in financial markets as a whole is also high. "Meme stocks" like GameStop have yoyoed almost as much as Bitcoin, while we're seeing almost all companies that list through an IPO climb rapidly on their first day.
As we've seen for several years, there are plenty of commentators predicting that investors will soon begin to lose their bullish outlooks and we could see another correction. Although the all-time highs would suggest prices could tumble at any time, we're yet to see this happen, though it is definitely a question of when and not if.
However, buying quality businesses regardless of what the rest of the market is doing, is a strategy that's advocated by value investors like Warren Buffett. His approach is to "buy a great company at a fair price", even if it may crash in the short term.
With all this in mind, what sectors should investors be considering for their portfolios in March 2021?
The gaming industry continually sets new high scores, with publishers taking it in turns to set record revenue and profit figures each quarter. Mobile gaming, microtransactions, esports, and the latest generation of consoles have all been major contributors to this.
iGaming companies, which give consumers the chance to play traditional table games like roulette and modern video slots through online casino websites and apps have also enjoyed strong growth.
Many big brands in the sector saw their share prices double in 2020, which is great for anyone who already has shared in these companies. However, if you're looking to invest now, it's unlikely we'll see the same growth in value.
That said, there's still plenty of room for gaming companies to grow. The iGaming market in the United States has a lot of potential, as it does in several African and Asian markets. Video game companies are still raking in massive profits from their existing IP. For example, Take-Two Interactive is almost certainly going to see sales explode when the next Grand Theft Auto is released.
Tesla is a company that has been a favourite of retail investors and Redditors over the last year. They've driven the share price higher and higher, surpassing the expectations of almost all professionals and even Elon Musk himself.
This has led to Tesla becoming the most shorted stock in the world, creating $52 billion of losses for those holding short positions between 2017 and 2021. That's more than investors lost shorting Apple, Alibaba, Amazon, and Microsoft combined over the same period.
A lot of the excitement for Tesla is around the potential for electric cars. Governments around the world are passing legislation that will ban the sale of cars with internal combustion engines in the next few decades. This means consumers and trade customers will need to begin making the switch to electric alternatives at some point in the future.
However, other companies in the sector, including several of the traditional car manufacturers may be more attractive opportunities for value investors at present as their share prices aren't as overinflated.
Healthcare is something that humans cannot go without and companies that offer services of this nature will find that they are always in demand. The health sector is expected to grow drastically in the coming years with ageing populations in most advanced economies being one of the biggest drivers of demand.
Biotech companies could also be attractive prospects for investors. Fitness tracking devices and tools that let consumers keep track of their own health and wellness are growing in demand. Social media is now awash with companies offering at-home blood tests and remote GP appointments.
The other benefit of holding such investments is that you know your assets are helping to contribute to the betterment of people's lives for years to come.
Of course, while these are some interesting areas that investors may want to consider for their portfolios, it's important that you get advice from a trained professional if you're not completely sure about what is right for you.
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