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My investing game plan for 2021

2020 will go down in the record books. 

While none of us could have predicted the path this year took, I’m sure we’ve all learned a thing or two. As terrible as it’s been to witness the effects of a halted economy, coordinated Fed action buoyed the markets. 

What really stuck out to me from a market standpoint was the intensity of its moves… Thanks to COVID, we’ve witnessed some of the most volatile market action in recent memory. 

I feel like I had a front-row seat in Supply and Demand 101. It was mind-boggling how quickly sentiment shifted from one extreme to the other.

Right now, stocks are quite extended… and I’m expecting a pullback in the coming weeks. That’ll be a great opportunity to pick up stocks that have run away from buy levels.


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So here’s my plan of attack for 2021: Focus on high-quality technology companies and industry leaders that will bounce back hard as the economy reopens. 

Technology winners will keep climbing

Some of the top tech trends of the past few years have accelerated since the pandemic, with stay-at-home orders shortening their adoption timeline. 

Trends in ecommerce and digital media are only climbing. The best-in-class names are where I see the most opportunity. 

If you’re looking for a simple way to play upside in this space, look at the iShares Evolved U.S. Media and Entertainment ETF (IEME)

It follows high-quality stocks in this sector, like Disney (DIS) & Dolby Labs (DLB). 

Another technology with ever-increasing demand is semiconductors. They power everything these days: cell phones, computers, vehicles… you name it. Many in this sector have made tremendous moves in 2020. With a reopening economy, this group can keep accelerating. 

To play upside in this space, have a look at the VanEck Semiconductor ETF (SMH).

It holds high-quality companies like Taiwan Semiconductors (TSM) & Nvidia (NVDA). 

High-quality reopen winners

Let’s face it, just about every stock out there is climbing. I believe most of that is due to the mega rotation we’re witnessing. Capital has surged into formerly unloved value stocks.

When the tide rises, most stocks benefit. But when the tide goes out, only the highest quality names will stay afloat… And that’s where the opportunity is. 

As we head into the new year, I’m isolating companies that were healthy pre-pandemic—the ones that were racing higher on improving sales and earnings. Many of these names were punished with the stay-at-home economy. But their growth will accelerate as more and more people get vaccinated. 

Where will people spend their money once it’s ok to go outside? Most likely, travel and leisure. I know I will be!

To play upside in this space, look at the iShares Evolved U.S. Discretionary Spending ETF (IEDI).

It holds high-quality companies like Nike (NKE) & Starbucks (SBUX). 

The bottom line is this: Be choosy with stocks in 2021. Markets are heavily overbought and will likely take a pause early next year. If the tide goes out, it could be a great time to go shopping for stocks you missed out on since the vaccine rally.

And if the extreme volatility continues, holding high-quality names will soften it.

Happy Holidays everyone!

Luke Downey is the co-founder of Mapsignals, which focuses on finding outlier stocks by following the big money. Luke is also an options instructor with Investopedia Academy. Prior to Mapsignals, he spent many years on institutional derivatives desks at Cantor Fitzgerald & Jefferies, LLC.

Editor’s note: Warren Buffett and his billionaire friends have recently moved more than $1 billion into a small group of high-quality income assets…

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