The Top Up-And-Coming Stocks for 2021
Finding up-and-coming stocks across the market isn’t what it used to be! After all, the ‘upstarts” from a decade ago (Amazon, Facebook, Google…) are now large-caps that are some of the market’s biggest companies!
Simply put, the disruptors of old are quickly becoming the market’s new blue bloods. Both Apple and Microsoft have joined the Dow Jones Industrial Average and sport market caps that exceed a trillion dollars.
Yet, if you look beyond the most popular names in investing, you’ll discover 2021 may be a golden era for the next wave of innovative companies set to change the world. Trends like cloud computing, advanced genomics, artificial intelligence, and e-commerce are all creating a wave of companies that could dominate the coming decade!
So, if you’re looking for what’s next, a group of growth stocks with some of the highest potential in 2021 and beyond, then you’ve come to the right place! Below, we’ve selected 7 of our favorite up-and-coming stock ideas that could ride incredible tailwinds across the next decade.
How to Spot Up-and-Coming Stocks
But, before we begin, we need to answer an important question: how do you narrow down to the right up-and-coming stocks?
The kinds that could see continuing growth year-after-year and become some of the market’s best stocks? To identify our top up-and-coming stocks, we pinpointed three qualities:
- Momentum: Has the stock seen accelerating sales and has the potential to sustain double-digit sales growth for a decade or more to come?
- Upside: Let’s face it, gigantic companies like Apple simply don’t have the same upside potential as small companies in fast-growing industries. We’re looking for stocks that are a fraction of the size of today’s largest companies. While not all the stocks below are small-caps, they’re also a fraction the size of many of the market’s leading stocks.
- Growing Market: Look, you’d rather be selling software than opening a bookstore right now! We scoured companies that are in growing markets that provide powerful tailwinds.
While finding the right stock can sometimes feel like finding a needle in a haystack, using the qualities above can help you filter down to only the most promising opportunities.
We used these qualities to identify seven of our top up-and-coming stocks for 2021. But, before we begin, a brief disclaimer: We’ve only included what we consider to be high-quality companies on this list (you won’t find any penny stocks, for example), yet stock investing does carry risks.
Make sure to do your research, and never invest an amount in any one stock that makes you uncomfortable. Also, if you need a brokerage for buying shares or want to purchase fractional shares across any of these companies, make sure to stop by our page that ranks the best online brokers.
The Top 7 Up and Coming Stocks for 2021
Here’s our list of the top up-and-coming stocks for 2021. They’re all at the forefront of trends in industries ranging from advanced healthcare to video games, to cloud software and real estate.
- Five Below
Zendesk (NYSE: ZEN)
Stock Price (1/6): $137.72
- Momentum: Projected to see sales grow by 24% in 2021
- Upside: Market cap of $16 billion. Less than 1/10th the size of cloud computing peers like Salesforce.
- Growing market: The customer service market Zendesk serves is large and expanding. Zendesk estimates its opportunity at more than $25 billion.
Zendesk IPO’d in 2014 as an emerging cloud solution for customer support. In the years since the company first hit the stock market, it has solidified its position as an up-and-coming technology stock by expanding its product suite and customer base.
For example, today Zendesk Chat offers real-time communication while Zendesk Sell Suite helps companies organize their sales teams. The bottom line is that Zendesk grew sales by an incredible 45% compounded rate between 2014 and 2019, and has continued their momentum into 2020.
Zendesk is just crossing a billion in annual sales but believes its total market opportunity could surpass $25 billion.
Pinterest (NYSE: PINS)
Stock Price (1/6): $67.11
- Momentum: Wall Street sees sales growing by 44% in 2021
- Upside: With a market cap of $42 billion, Pinterest is still a small fraction of advertising peers such as Facebook or Alphabet
- Growing market: Digital media ad spending is expected to hit $136 billion in 2021, which is growing at a 10% rate.
Pinterest has become the “visual discovery engine” that millions of users engage with every day to discover recipes, travel tips, life advice, and much more.
So, why is Pinterest still up and coming? For starters, the company is producing less than 1/50th of the revenue of Facebook. Yet, it still has the potential for incredible growth ahead. For example, Pinterest saw international users grow 46% year-over-year in its most recent quarter!
Add it all up and Pinterest could still be in the early innings of its growth story. With 442 million users (and counting), we’re confident Pinterest will continue capturing a larger slice of the growing social media advertising market in the decade to come.
Redfin (Nasdaq: RDFN)
Stock Price (1/6): $68.24
- Momentum: Wall Street has 2021 projected at 37% sales growth
- Upside: Market cap of $7.5 billion
- Growing market: In 2019 there were $82 billion in U.S. real estate commissions, yet Redfin’s market share of home sales is only about 1% of existing home sales by value!
When the coronavirus pandemic began in early 2020, the last thing on people’s minds was it causing a massive real estate boom. Yet, here we are! Since March lows, the iShares U.S. home construction ETF is up more than 150% and real estate is now running red-hot in cities across America.
What’s causing the boom? For one, the emergence of Covid has led many employers to shift to remote work models. With employees no longer needing to live within a reasonable commute to work, people are simply packing up and creating real estate booms in once-unthinkable places like Bozeman, Montana.
Second, with 30-year mortgage rates now averaging less than 3%, consumers are taking advantage of the decreased monthly payments record-low rates provide.
So, why is Redfin a top up-and-coming stock in this market? First of all, the company has seen incredible growth in recent years. Between 2015 and 2019, sales grew from $187 million to $780 million. That growth also shows few signs of slowing, Wall Street predicts sales could more than triple from today’s levels by mid-decade.
Second, the company has a huge technology lead over rivals. its website has 4X higher traffic than the second-large broker (which means it doesn’t need to spend as much on marketing). In addition, thanks to its technology focus, the company is able to charge much lower commissions than traditional real estate brokers.
Simply put, Redfin has structural advantages over rivals that appear to be accelerating as it grows. Whether today’s real estate boom fades, we believe Redfin has the right strategy to continue stealing market share and growing at high rates across the next decade.
Five Below (Nasdaq: FIVE)
Stock Price (1/6): $182.38
- Momentum: Revenue growth of 15-fold across the last decade
- Upside: Market cap of $9 billion. About 1/10th the size of Target.
- Growing market: Discount retailers are expected to grow at roughly twice the rate of superstores like Walmart through 2024.
Here’s a name on this list you probably didn’t expect! After all, more than 14,000 brick and mortar retail stores closed in 2020 as e-commerce’s growth accelerated.
Yet, Five Below, a brick and mortar store found in strip malls across America, could turn out to be an extremely lucrative investment. Consider for a moment that while Sears, K-Mart, Pier 1, and any number of retail brands went bankrupt last decade…
Companies that specialize in discount goods often provided incredible returns. For example, since the beginning of 2010, Ross has returned more than 1,000%! Across that same time, Dollar General returned 842%!
The key idea, if you can sell goods e-commerce companies have a hard time economically selling (try shipping a $3 basketball at a profit) or create a unique ‘treasure hunt’ atmosphere, brick and mortar stores can still be quite successful! That’s exactly the niche Five Below has leaned into, and it’s worked tremendously.
While sales growth took a step back in 2020 due to the coronavirus pandemic and lockdowns that have kept consumers out of stores and shopping online, Wall Street predicts revenue will once again double by 2024.
Especially if your portfolio has become overloaded with high-flying technology stocks, it could be time to give Five Below a look as a way to discover high growth in a market many investors are ignoring!
Fiverr (Nasdaq: FVRR)
Stock Price (1/6): $210.61
- Momentum: Sales grew by 88% in its most recent quarter after growing 41.8% in 2019.
- Upside: Market cap of $7 billion.
- Growing market: Freelance income in the U.S. is an $815 billion market, but only a small fraction has moved online.
The future of work is changing fast. Today’s workers increasingly value flexibility, work digitally, and remotely away from offices. While these shifts are rapidly changing companies that are adopting work-at-home policies, they’re also changing the nature of work. For example, the “gig economy” of freelance workers has absolutely gone bananas during 2020.
That’s where Fiverr comes in. The company built a freelance marketplace where you can get a song produced, a logo designed, find a developer to build your website, and much more!
Prior to the pandemic, Fiverr was already a fast-growing business. In 2019, sales jumped by 41.8%. However, with the pandemic accelerating digital transformation, its platform experienced incredible growth across 2020. Fiverr’s third quarter saw sales soar 87.8% from the prior year.
Fiverr is expensive today, but it also has the potential to become the leading marketplace in an industry that could grow rapidly for decades to come. There’s no more enviable business model in the 21st century than creating platforms that take a cut of all transactions (just look at how Apple’s done with its App Store!). If you’re looking to get invested in an up-and-coming platform, Fiverr should be at the top of your list!
Take-Two Interactive (Nasdaq: TTWO)
Stock Price (1/6): $201.53
- Momentum: Sales have grown at an annualized rate of 18% across the past five years
- Upside: Market cap of $22 billion.
- Growing market: The video game industry is projected to grow at about five times the rate of the overall economy through 2025.
I imagine everyone reading this article has heard of Grant Theft Auto 5. Whether or not you play it, the game has become a mainstay of pop culture. It not only took just three days to break a billion dollars in sales but has now sold more than 135 million copies!
Those are incredible numbers, but the truth is video games continue to increase their impacts across society. The leading maker of video game graphics processors – NVIDIA – is now worth more than $300 billion! Leading video game streaming platform Twitch has seen viewership roughly double to more than 1.6 billion hours per month across the past year!
Those numbers are incredible and demonstrate how video games are rapidly becoming the most influential (and profitable) entertainment platform in the world.
This brings us to Take-Two, the company behind the wildly popular Grand Theft Auto (GTA) series. The release of new consoles like the Playstation 5 should be a boon for video game sales. That’s important because Take-Two plans to release 93 new games within the next five years!
Included among those should be the newest entry in the Grand Theft Auto franchise. While that game will likely shatter sales records, it should also continue pushing the series from a one-time purchase into a franchise that persistently lives online and generates revenue month-after-month.
Editas (Nasdaq: EDIT)
Stock Price (1/6): $80.54
- Momentum: Sales grew by 1,533% in the third quarter
- Upside: Market cap of $5 billion
- Growing market: Editas has built a genome editing platform based on CRISPR, one of the most promising healthcare technologies.
The healthcare investing story of 2020 was the race for a coronavirus vaccine. While you may know that multiple companies were successful in creating a vaccine, what’s less commonly known is that the vaccines from Moderna and Pfizer were made possible from an unproven technology named mRNA.
Prior to a vaccine for Covid-19, no mRNA vaccine or drug had ever won approval. So while mRNA is a breakthrough that could literally save the lives of millions of people across the world, it could be just the beginning of a brand-new era in genomic medicine.
Editas is a genome editing company that’s at the forefront of CRISPR technology. While CRISPR is a different technology than mRNA, it has been hailed by MIT Technology Review as “the biggest biotech discovery of the century.” Simply put, it allows for precise editing of DNA from a genome.
What’s less simple is its impacts. While CRISPR has the potential to be transformative, it faces challenges such as editing enough cells to be effective. On that front, Editas recently release positive news, stating its gene-editing candidate EDIT-301 had overcome many obstacles holding its therapies back.
At the end of the day, Editas is risky and its shares will likely experience volatility in the interim. However, studying advancements in genomics could put you at the forefront of one of investing’s most up-and-coming spaces across the next decade.
Adding Up and Coming Tech Stocks to a Portfolio
Now that you’ve seen the list of our top up-and-coming stocks for 2021, the next step is building a portfolio that balances upside potential while also managing your risk.
So, where do you start?
First of all, while stocks like Apple (Nasdaq: AAPL), Amazon (Nasdaq: AMZN), and Microsoft (Nasdaq: MSFT) may now be among the market’s largest stocks, they also offer stability. Each stock has high profitability – something often not found in up-and-coming stocks – and a long track record of success.
You may want to begin by establishing what percent of your portfolio you want in larger, more stable companies. You can also invest in ETFs that offer broader market exposure.
Once you’ve determined what percent of your portfolio should be allocated across either ETF or larger and more stable stocks, the next step is to decide which up-and-coming stocks are best. We recommend beginning by thinking about what trends are most important across the next decade.
- Compare the best online brokers
- See our list of the best stocks to buy for beginners
- Check out our top five 5G stocks
In the seven stocks above, we’ve provided ideas across social media, cloud computing, the “gig economy,” and genomics. However, that’s just a sample of the world-changing trends that could reshape the world in the decade ahead. In addition to the stocks we’ve discussed, here are some trends worth additional research.
Tesla (Nasdaq: TSLA) became the stock story of 2020, yet the emergence of electric cars is still in its infancy. Beyond carmakers like Tesla, opportunities arise in areas like lithium mining (used in electric batteries), self-driving car technology, and renewable energy.
Work from home policies have put cybersecurity back at the forefront of technology spending. After all, if entire workforces are now working remotely and outside closely controlled company networks, you can imagine how the value of security software has rapidly increased across 2020!
So, what cybersecurity companies are worth a look at? Stocks like Crowdstrike, Zscalar, and Cloudflare all have exposure to cybersecurity spending and are among our favorite ideas. More risk-averse investors could also look at Splunk, a stock that’s seen recent sell-offs but has significant upside if cybersecurity spending continues taking off.
AI can be difficult to invest in, but many semiconductor companies offer “pure-play” exposure. We recommend looking into both NVIDIA (Nasdaq: NVDA) and AMD (Nasdaq: AMD) as stocks that can benefit from its continuing rise.
Many stocks are benefiting from changing consumer demand trends. For example, Peloton saw sales increase by 232% in the third quarter of 2020. While the pandemic is fueling much of these gains, it’s important to remember that companies like Peloton are also seeing the growth of their subscribers grow like wildfire. This recurring revenue should fuel growth for years to come, even if a coronavirus vaccine leads millions back to gyms across the country.