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The Best Stocks of 2021 in Morningstar’s Coverage List

There was no escaping the continued impact of the pandemic in 2021, even among the lists of best performing stocks for the year. 

Among 2021’s biggest winners in the list of stocks covered by Morningstar’s analysts were BioNTech (BNTX) and Moderna (MRNA). BioNTech topped the Morningstar coverage list with a year-to-date return of 237.8%, while Moderna has rallied 164.6% as our sixth-best performing stock. Investors sent both stocks rocketing this year after the release of their high-efficacy mRNA coronavirus vaccines and two rounds of COVID-19 variants that fueled the ongoing pandemic. 

Volatility in both vaccine stocks has increased significantly in recent weeks because of uncertainty around the long-term demand for vaccines and the emergence of the omicron variant. BioNTech and Moderna now sit below 40% of their 52-week highs. Nonetheless, Morningstar analyst Karen Andersen views both companies as overvalued at recent prices, with BioNTech trading at a 55% premium to its fair value and Moderna at a 74% premium.

More broadly, in a year where stocks up are some 25%, energy, technology, and economically sensitive consumer stocks dominated the list of best performers. That included oil- and gas-exploration company Antero Resources (AR), up 212.1%, and semiconductor manufacturer Synaptics (SYNA), up 171.9%.
The Best Stocks of 2021 in Morningstar’s Coverage List Image 1

Energy, Tech, and Consumer Cyclical Stocks Lead in 2021

With vaccine rollouts as the backdrop to economic reopenings around the world before the emergence of the omicron variant, 2021 extended the fastest recovery from a recession in United States’ history, paving the way for many business-cycle-sensitive sectors to grow rapidly.

Tech, energy, and consumer cyclical stocks make up more than half of the top-performing stocks in our coverage list this year (a full list of the top 25 can be found at the end of this article).

The Best Stocks of 2021 in Morningstar’s Coverage List Image 2

Energy stocks dominated our list in performance, with oil drillers taking the lion’s share of returns. The sector overall returned 48.3% thanks in part to a 41% rise in the price of oil. Antero Resources rallied 212.1% this year. Range Resources (RRC) is up 167.2%, going toe to toe with Continental Resources’ (CLR) year-to-date return of 165.1%. Devon Energy (DVN) is up 157.2%, while Marathon Oil (MRO) has risen 126%.

The Best Stocks of 2021 in Morningstar’s Coverage List Image 3

Of these top performers, Morningstar analysts see value in only two of the stocks: Range Resources, which trades at a 36% discount to its fair value, and Marathon Oil, which is at a 22% discount. The remaining stocks are viewed as fairly valued at recent prices.

The Best Stocks of 2021 in Morningstar’s Coverage List Image 4

Technology stocks continued their strong performance during the fourth quarter of 2021. Leading the pack is Synaptics (SYNA), which is up 171.9% this year. Semiconductor company Nvidia (NVDA) is returning 112.5%, while ON Semiconductor (ON) is up 86.2%. All three companies are viewed as overvalued, trading at a 27% premium or more to their fair value estimate.

As the world continues its increasing dependence on cloud-based tools and resources, companies providing these services showed strong growth in 2021. Cybersecurity firm Fortinet (FTNT) has rallied 122.5%, while networking solutions provider Arista Networks (ANET) is up 84.9%. Fortinet trades at a 16% premium to its fair value, while Arista is at a 41% premium.

The Best Stocks of 2021 in Morningstar’s Coverage List Image 5

Consumer cyclical stocks made a big comeback this year. While U.S. retail sales have petered out in recent months, they have rebounded strongly from pandemic lows and are up 16.1% from a year ago.

Bath & Body Works (BBWI) led retail stocks with a 127.8% return this year, followed by Macy’s (M), up 112.2%, and Dick’s Sporting Goods (DKS), which has risen 90.6%. Only Bath & Body Works remains undervalued of these top performers, currently trading at a 20% discount to fair value. Macy’s is currently viewed as fairly valued, with Dick’s Sporting Goods considered 47% overvalued by their Morningstar analyst. 

On the auto side of the sector, Ford Motor (F) is the best performer. Ford Motor more than doubled its stock value, with a 132.7% return this year. Shares benefited from the company increasing full-year profits twice in the last few quarters in addition to restoring its dividend. The company is considered fairly valued at recent prices.

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Morningstar Disclaimers:

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in.

The opinions, information, data, and analyses presented herein do not constitute investment advice; are provided as of the date written; and are subject to change without notice. Every effort has been made to ensure the accuracy of the information provided, but Morningstar makes no warranty, express or implied regarding such information. The information presented herein will be deemed to be superseded by any subsequent versions of this document. Except as otherwise required by law, Morningstar, Inc or its subsidiaries shall not be responsible for any trading decisions, damages or losses resulting from, or related to, the information, data, analyses or opinions or their use. Past performance is not a guide to future returns. The value of investments may go down as well as up and an investor may not get back the amount invested. Reference to any specific security is not a recommendation to buy or sell that security. It is important to note that investments in securities involve risk, including as a result of market and general economic conditions, and will not always be profitable. Indexes are unmanaged and not available for direct investment.

This commentary may contain certain forward-looking statements. We use words such as “expects”, “anticipates”, “believes”, “estimates”, “forecasts”, and similar expressions to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially and/or substantially from any future results, performance or achievements expressed or implied by those projected in the forward-looking statements for any reason.

The Report and its contents are not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Morningstar or its subsidiaries or affiliates to any registration or licensing requirements in such jurisdiction.


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