2020 was a year of tough losses in my personal life, to a point where the pandemic felt like an afterthought. Volunteer programs were halted — including a new one I was excited to write about — but rarely did I feel capable of giving my best self to others. Like many of you I took time to pause, heal, and consider the future.
While my personal life brought plenty of losses, my investments continued to generate gains:
Due to the way interest compounds on itself my stock holdings are on pace to generate millions annually, possibly reaching the one billion mark before I turn 70. Of course circumstances may curb future returns, but even the fractions that would result from worst-case scenarios would still be too much for me to steward wisely.
Bernie Sanders I am not, but I’ve been thinking about how much wealth is morally acceptable for a person to possess during a lifetime. Someday God will ask what I did with the opportunities He gave me, and I hope to say I did things to improve the lives of many.
One of the challenges I’m weighing is how much to give immediately versus continuing to invest, which could enable me to impact more people in the future. My favorite pastor J.D. Greear speaks about how some individuals set a wealth cap — a pledge to never let their net worth exceed a certain amount — by giving away 100% of gains. I’m still praying about this idea but it’s something I find inspirational and logical. For now my goal is to be able to donate one million annually, and $50 million during the course of my lifetime.
But when it comes to philanthropy I’m pretty much a beginner. I have little idea of what decisions would be best or potential mistakes to look out for. The one person I knew with experience in this area passed away, so if you know someone who could mentor or simply offer advice please contact me.
On the Market
Before recommending stocks for 2021, let’s review the picks from last year. The market as defined by the S&P 500 grew 15% in 2020. Visa and Mastercard edged that benchmark (16% and 20%), while Amazon blasted it by growing 76%. Alibaba was beating the market by double digits all year long until Christmas Eve, when a government intervention cratered its growth rate to 10%. (Sigh, they say Christmas is just another day in China). Despite that if you invested in these stocks you gained 30% last year.
Note: I put an asterisk for 2020 in the table above because that 30% number doesn’t include 3 other recommended stocks. AirBnB didn’t become available to investors until mid-December, so it’s too early to judge. I also recommended Zoom in July of 2019 — long before it became a verb, but because it wasn’t emphasized like my January selections I can only hope some of you benefited from its 391% growth. The same July blog post included Slack, which agreed to be bought by Salesforce at an 85% premium to the January stock price. So including these 3 in the final analysis would net a gain of 86% for 2020.
As for 2021, here are my thoughts:
AirBnB: This IPO felt more “rigged” than any election. Technically the stock grew 113% its first day, but retail investors (that’s us) weren’t able to buy until after the stock had instantly doubled. I think it’ll be a long time before we can evaluate AirBnB’s stock, due to the IPO spectacle and because post-pandemic travel will be like nothing the world has ever seen. However, this company has a rock-solid competitive advantage and that tends to generate outperformance.
Visa & Mastercard: To borrow from Charles Dickens, “best of times, worst of times” applies here. The pandemic created a massive slowdown in spending; as a result these historically stellar stocks look cheaper to me than they’ve been in a decade. I am starting to see the tiniest of signals that peak days of the Visa-Mastercard duopoly are behind us (and will write a separate blog post if things develop further). But for now I expect both firms to enjoy a big rebound in ‘21, and outperform the market even if their dominance begins to fade.
Cloudflare (+345% in 2020), Shopify (+185%), & MongoDB (+167%): I wanted to recommend these stocks last year, but candidly was too lazy to make a clear case for their business models, which are relatively technical. Each deserves a separate “Why Buy” post, but since this one is already longer than most you’ll have to trust me when I say it’s still early enough to buy each of these stocks, even after big gains in 2020.
Amazon: I continue to bet that Amazon will continue its thing, and never regret it.
Stripe: This could become a repeat of the Zoom situation above. I want to put Stripe on everyone’s radar now, in case they decide to IPO before next January. Many companies have enjoyed successful stock market debuts in recent memory. Long term I think Stripe will be the biggest investment opportunity of them all.
Last but not least my mother requested this. Thanks for reading and good luck to you all. Hoping for speedy vaccines and better days in ‘21.
— Jan. 2, 2021