What are the Best Sectors for 2018?
And the best stocks in them?
2017 was an amazing year for technology stocks, with Apple up around 45% for the year, and the NASDAQ as a whole up 38%. We can expect to see even more growth in 2018, as markets tend to increase in the year following large gains. However, technology may not be the best option for 2018.
There was a lot of reasoning behind the tech drive in 2017. Bitcoin and other cryptocurrencies exploded in popularity, creating a need for fast processors and specialty chips from Nvidia, AMD, and Intel. Apple announced their new iPhone X, with revolutionary face technology. And Amazon made big gains across the entire market, buying Whole Foods along the way. But can we expect the same from them this year? Probably not, but another sector may provide as much growth as technology did in 2017.
While Congress is in a stalemate at the moment, there is hope for an upcoming infrastructure bill. If the bill passes, lots of construction, engineering, and manufacturing stocks could benefit. That brings us to our 3 top sector picks for 2018: Industrials, Materials, and Utilities.
The industrials sector contains companies that manufacture and distribute goods, including machinery and electrical equipment. The sector also contains companies that engineer and construct projects, and that contribute to defense. With an infrastructure or defense bill, this sector would see large gains and bring lots of profits. However, even if we didn’t get an infrastructure bill in 2018, this industry is still safe and does not have a large amount of risk. The best stocks in this sector, in our opinion, are 3M Co (MMM), Lockheed Martin Corporation (LMT), and Caterpillar Inc. (CAT).
The materials sector contains companies that are involved in the developing and distribution of raw materials. The sector includes services such as mining, forestry, and chemical production. Again, with an infrastructure bill passing in 2018, new construction and development projects would require raw materials to work with, especially lumber, metals, and concrete. Think of this sector as the fuel for the Industrials sector. This sector does not have a large amount of risk and would stay steady without a bill. We think that the best stocks in this sector are: Dow Chemical (DWDP), Vulcan Materials (VMC), and Martin Marietta Materials (MLM).
The utilities sector contains companies that provide utilities such as gas, water, and electricity. For the same reasons as the materials and industrials sectors, this sector would see large gains if an infrastructure bill were to pass Congress. A whole slew of new buildings and projects would now need electricity, water, and gas. Even without a bill, this sector can stand the test of time, and most stocks pay above-average dividends to shareholders. In our opinion, the best stocks in this sector are Southern Co (SO), NextEra Energy (NEE), and PPL Corp (PPL).
If you don’t like the companies mentioned above, or simply don’t want to buy so many different stocks, you could always go with an ETF, which encompasses multiple stocks into one security. We’d have to recommend the Vanguard Materials ETF, or VAW.
Note: Recommendation does not guarantee a profit. Our recommendations are based on our personal beliefs, and one should do their own research based on their financial situation before buying.