25 Best Stocks of 2021: Morningstar

Related: 33 Undervalued Stock Picks for 2021: Morningstar

The pandemic, now entering its third year and sporting a new variant, continued to rock the world in 2021. It also made itself felt among the year’s best-performing stocks, according to a blog post written this week by Jakir Hossain, an associate markets data journalist at Morningstar.

More broadly, energy, technology and economically sensitive consumer stocks dominated the list of best performers on Morningstar’s coverage list, in a year when stocks are up some 25%, according to Hossain.

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

Energy, tech and consumer cyclical stocks make up more than half of the top-performing stocks in Morningstar’s coverage list this year. Energy stocks dominated; the sector overall returned 48.3%, thanks in part to a 41% rise in the price of oil.

Consumer cyclical stocks rebounded sharply this year from pandemic lows and are up 16.1% year over year. Technology stocks continued their strong performance in the fourth quarter of 2021.

Morningstar’s list of the year’s top performers includes year-to-date performance and each stock’s economic moat and star rating.

A moat rating represents a company’s sustainable competitive advantage. A company with an economic moat can fend off competition and earn high returns on capital for years to come. A company without a moat has no sustainable competitive advantage.

Morningstar calculates its stock star rating by comparing a stock’s current market price with the firm’s estimate of the stock’s fair value. The further the market price is below the fair value, the higher the star rating. A 5-star rating means the stock is trading meaningfully below fair value.

See the gallery for the 25 best stocks of 2021 on Morningstar’s coverage list.

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