The #1 stock picks for 2021

Welcome to one of Livewire's favourite times of the year, and we're not just talking about Christmas or summer, or having that well-earned after-work silly season cocktail. 

No, it's that very exciting moment when we invite some of the country's finest stock-pickers to put on their tipping caps and pitch which companies they believe will soar to fresh highs over the next 12 months. 

A quick look at the stocks our fundies have picked previously shows their choices reward attention. In 2019 they well and truly beat the benchmark, returning an average of 59% (an outperformance of 35.86%). And even during tumultuous 2020, our fundies' roared to return an average of 13.88%, beating the benchmark by 10.26%.

Here are the 10 fundies putting on their tipping caps for 2021:  

• Ben Clark, TMS Capital
• David Allingham, Eley Griffiths Group
• Vihari Ross, Magellan
• Kelli Meagher, Sage Capital
• Chris Demasi, Montaka Global Investments
• Julia Weng, Paradice Investment Management
• Matthew Booker, Spheria Asset Management
• Olivia Salmon, Lennox Capital
• Dr Bianca Ogden, Platinum Asset Management
• Matthew Kidman, Centennial Asset Management

You can watch the video by clicking the player or read an edited transcript below. Enjoy!

Access all of Livewire's Outlook Series videos:

• Ouch! 10 awful calls from 2020
• Stocks to buy in a sell-off

Edited transcript

Matthew Kidman: Here we are, it's the holy grail. Who is going to tip the best stock for 2021? Everyone wants to be standing on the podium, and everyone wants to be a gold medal winner. You're going to hear it first here.

James Marlay: Small caps have been the right place to be in Livewire's fundies tips for the past few years. What's your number one pick for 2021 and why do you like it?

Corporate Travel Management (ASX:CTD)

Olivia Salmon, Lennox Capital

Corporate Travel Management; it was our number one pick for the re-opening trade when we were getting bullish again on equities. I think that the market's fears that Zoom calls or phone calls will be the way of the future and no one will travel anymore is overblown. I think that business travel, in particular, will probably be the first to rebound and is a central part of the business; you need to go out, meet companies, kick the tyres, and press the flesh with people. And I think as soon as people feel safe enough to start flying again, that pent up demand that they've had for the last year, basically, will come through in business travel.

Primewest Group (ASX:PWG)

David Allingham, Eley Griffiths Group

Look, I'd like to put forward Primewest Group. It's a property funds management business. It's based out of Perth, a little bit off the radar; under-researched, under-covered, illiquid. It's 80% owned by its founders; very entrepreneurial guys with vast property experience. What I really like about this story is how it has built its funds under management. So this is a fund manager that invests across property in syndicates and wholesale mandates. It's built its funds under management from $2 billion up to about $5 billion in the last couple of years, so very, very strong growth.

If you look at the peer set, you've got Charter Hall, which is in the ASX 100 and at all-time highs today and you've got Centuria Capital in our small to mid-cap space, $1.5 billion market cap, with about $10 billion in funds under management. This business is at $5 billion, so you've got a low base, and I think aggressive growth in funds under management in time. 

It's got $50 million of net cash on the balance sheet, so very conservatively geared. I see very little downside risk in the stock at this price around the $1.15-$1.20 level. This stock was trading a $1.40 prior to the COVID-19 crisis. We think this company has a very long runway for growth, and with very little downside risk. We really like this stock and it is the largest position in our emerging companies fund.

Sonic Healthcare (ASX:SHL)

Kelli Meagher, Sage Capital

I think a good stock for 2021 is Sonic Healthcare. I think the market is under-appreciating how long the COVID testing is going to go on for. It's already had a good boost. As we know, Sonic Healthcare is a global pathology company, it does a lot of standard testing, but it's had a big boost from COVID testing. 

Post the vaccine, COVID testing isn't going to go away. We also don't know how long the vaccine actually lasts. So there's another leg of growth that's available to Sonic, which is antibody testing, which tests whether you are immune to it and whether the vaccine worked for you for three months, six months. 

It's got global growth, it's got an excellent management team, good cashflow generation, and with all the COVID cash that it's generating it should be able to buy... assets around the world to increase its geographical footprint. It also pays a nice little dividend yield of 4%, and it should do well in 2021.

Intercontinental Exchange (NYSE:ICE)

Vihari Ross, Magellan

ICE, Intercontinental Exchange is my pitch for you this year. It is a remarkable business. It is a play on the digitization of financial markets and the incremental financial services industry digitization as well, through mortgage origination and through bonds. It was all thanks to their visionary founder, Jeff Sprecher, who saw the opportunity to digitise previously analogue things; the things that we take for granted today. He's bringing us into the 21st century in financial markets, and it's a really exciting growth opportunity in a robust economic moat business as well.

Galaxy Resources (ASX:GXY) and Pilbara Materials (ASX:PLS)

Julia Weng, Paradice Investment Management

So our top picks are Galaxy Resources and I'll even throw in one more, Pilbara Minerals. We've been doing quite a bit of work on electric vehicles and their implications on battery materials. So at the moment, EVs are roughly at 5% penetration. 

With the raft of policy that we are seeing emerge through the pandemic, if you look at 2015 to 2017, EVs were driven by China. What we're seeing now is a whole bunch of policies such as subsidies and tax exemptions which are coming out of the US and Europe. Already Europe's producing more EVs than China. General Motors alone will come out with 30 models of EVs by 2025. So that's going to underpin the demand for battery materials. At the same time, you'd haven't seen a lot of supply due to depressed lithium prices. I think from here on, the commodity price has to increase to incentivize production.

Blackstone Group (NYSE:BX), KKR & C0 (NYSE:KKR) and Carlyle Group (NYSE:CG)

Chris Demasi , Montaka Global Investments

What we're most excited about for next year, and for actually many years to come, is the theme or the trend around large alternative asset managers. The benefit of that is it gives you three stocks; Blackstone, KKR and Carlyle.

MK: I'm going to squeeze you for one. Which one out of those three?

CD: Blackstone's the best in class there, but Carlyle has got a lot of upside.

MK: So we're down to two.

CD: We're down to two.

MK: We might let you get away with that.

CD: We like all three of them. Together, they hold over a trillion dollars in client assets. They've been growing those assets under management and their earnings at double-digit rates over the last couple of years. Their clients need them; they need them because they're the only asset managers out there where sovereign wealth funds and pension funds and insurance companies can go to allocate billions of dollars at a time. They're also trusted advisors, and they have all the systems in place to make it easy for the CIOs of these big funds to sleep at night. Even better than that, going into next year, is that all of these advantages, all of their growth, is going to be accelerated by the low-interest-rate environment.

Cytomx Therapeutics (NASDAQ:CTMX)

Dr Bianca Ogden, Platinum Asset Management

One of the great themes I'm really interested in is protein engineering and there's a couple of companies, particularly one called CytomX, which essentially trades almost at an EV of zero.

MK: Where's that listed?

BO: It's listed in the US. It's very exciting and it has lots of news coming up. It makes so-called antibodies or a chemical or warhead attached to it that basically guide it to where it should be exploding. It's very exciting, it's a new technology, and over the next 12 months, they will have quite a lot of interesting data coming out hopefully.

MK: Proteins exploding, nothing better than that.

BO: That's right.

Mortgage Choice (ASX:MOC)

Matthew Booker, Spheria Asset Management

Our favourite pick at the moment is Mortgage Choice, and I'll preface it by saying we are the largest shareholder in Mortgage Choice, but we actually think the outlook for the next five, perhaps 10 years is fantastic for the mortgage broking industry. They've been through hell and back lately with the Royal Commission. It looked like at one point mortgage broking was going to get shut down, but we think it's actually going to proliferate now. 

What you've seen in overseas markets is broker share has gone up considerably in the last, 10, 15, 20 years. The banks just can't sell a mortgage overseas, they can't sell one here. Mortgage Choice is a broker, and we think it will be a beneficiary for an expanding market share in that broker market.

Tyro Payments (ASX:TYR)

Ben Clark, TMS Capital

It's Tyro Payments for me. This is a business that I think has got a really good long-term structural growth story. But I think 2021, as we see the economy reopen, relaxation start to come back in, because of the number of hospitality merchants that it services, we should see some pretty strong growth. 

There are four catalysts I like about this business next year. Firstly, the volumes of transactions through the network are going to really start to accelerate. Between December 1 and December 11, they did 29% volume growth versus the PCP. So it's already starting to come through. Secondly, you're going to see further market share gains and potentially the entry into some new verticals. Third, there's going to be the launch of TyroConnect, which is this integration hub they built around the point of sale (POS), which I think is going to create more customer loyalty and uptake. Fourth, I think the lending part of the business, which was frozen during COVID for good reasons, will start to go again. It's quite a profitable part of the business for them. So hopefully, Tyro does it for me this year.

Downer Group (ASX:DOW)

Matthew Kidman, Centennial Asset Management

So last year was BidEnergy, and I think Bid's got a good future this year, but we always want a bit of variety. I'm going to go with the turtle, not the hare this time; something a bit slower. It's domestically based and it's Downer, which is in the middle of restructuring its business. It's selling assets, sold something this week, a mining business. It's selling its lumpy, heavy capital intensive components, and going into a much more capital-light service-based business with a lot of long-term government contracts.

It's really unloved by the market and it's trying to fix itself up. It's fixed its balance sheet, it's fixing its business mix up. I think it sits alone as a service-based business for that mid to large-cap market. As they see it unwind some of these businesses and focusing on the better-returning businesses, it will get a re-rate. So today, around $5.30, I think it can trade on a slightly higher multiple. With that multiple expansion, the earnings will go up. I think over the course of the next few months they may be able to get around $7 out of it, as long as the story unfolds the way we think it will.

JM: So a bit of infrastructure in your portfolio should be an upper, not a...

MK: Downer.

What stock do you think is set to soar in 2021? 

Livewire readers are famous for backing a winner; your top tipped large caps returned more than 53% last year, while your small caps returned just shy of 7%. So what business are you backing in 2021? Tell us in the comments below. 

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