[jyl]

Things I am interested in for 2021, at least the start of the year:
1. Inflation hedges. I am doubtful of sustained inflation, but I think we may see a short period of inflation as economies reopen and demand responds. This could be TIPS or commodities, or certain stocks that benefit from inflation. Not gold, I think.
2. Emerging markets stocks. I’m not a believer that emerging markets always deserve a large allocation. But emerging market stocks tend to have more commodity exposure, be more cyclical, have less tech exposure, and be less influenced by the options-trading speculation that has inflated many US tech and tech-ish stocks. And a falling USD will be good from a pure FX standpoint.
3. Chinese stocks. China’s tech/internet giants are half the market cap of the US equivalents, with at least as good a growth outlook. This thesis has gotten shakier, with the Chinese government crackdown on Ma, Ant and the internet leaders, the US blacklist of Chinese semi companies, the Chinese government’s new willingness to let SOEs default on their bonds. The perennial warnings about China’s demographic, debt, and top-down control problems seem more serious every year. But China needs to boost its consumer economy and get its people to spend more, and the government still has all kinds of levers to pull and covers to sweep bad news under. Plus, weak USD.
4. Selected beat to crap cyclicals stocks in the US. I bought the stocks that were hardest hit by Covid, as long as they had the balance sheet and borrowing capacity to survive the pandemic. So, not all movie theater stocks, but one of them; not all airlines and hotels, but a few of them; not all department stores, but one of them; and so on. Most of these are +50% to +90% from then, and some still have another +30% to +50% in my view. I don’t need to think that the stocks should trade at 50X revenues or that the companies will grow to 5-10X their current size or other dreamy stuff. All I need is for the virus to be defeated, some of their competitors to go under, and for their own revenues to recover to 80% of pre-pandemic levels. Which I think is pretty likely.
5. Selected REITs. Real estate is an inflation hedge, unless local rent control is extreme. There are still some classes of REIT trading at -20% to -40% discount to pre-pandemic levels. There is tons of money looking for investment opportunities so they can resume growth when they are ready. I’m not interested in a Manhattan office building REIT (yet?) but a multifamily REIT with mostly Sunbelt exposure is a different story.
6. Green stories. Some valuations are really high but there’s a lot of money with “green” mandates and, unlike generic ESG, the number of solar, wind, hydro, etc stocks is pretty limited. Government policy favors non fossil fuel energy in many countries, and economics favors it in many other cases. Some of the green yieldcos actually have decent dividend yields, it’s not all crazy-priced Chinese dollar panel makers.
7. No-yield to Yield stories. There’s a bunch of companies that were prohibited by the government regulator from paying dividends and/or from buying back stock, but are doing fine in the pandemic, some are rolling in excess cash. If/when they resume or increase their dividends, or resume buying back stock, their stocks could benefit. These are, of course, the banks. Some banks.
8. Yield. I think that a pretty safe 4-5% will look really good in 2021. I don’t know many places to get that, but one is preferred stock from big banks that are doing fine. Preferreds from BAC, JPM, GS, etc still have yield-to-worsts of 4%+. There are some utilities worth looking at, and some dividend stocks with significant (though fast declining, as stock prices rise) yields.