5 Best-Performing Stocks to Buy in October 2021

While some investors like to buy the dip in beaten-down stocks, others try to chase the momentum in best-performing stocks. There is nothing wrong with either of the approaches as long as you buy good quality companies at a reasonable price.

The S&P 500 is trading near record highs after recouping the September losses. Here are the five best-performing stocks that you can buy in October 2021.

1. Alphabet (NYSE: GOOG)

Alphabet is the best-performing stock in the FAANG universe this year. The FAANG pack has generally looked weak in 2021 but Alphabet’s performance stands out. The stock is up almost 60% for the year which is over twice of Netflix, the second-best performing FAANG stock of 2021. Meanwhile, GOOG stock has come off its 52-week highs which looks like a good buying opportunity.

GOOG is the best performing FAANG stock of 2021

Despite outperforming the FAANG peers and broader markets by a wide margin in 2021, Wall Street analysts see further upside in GOOG stock. Its median target price of $3,200 is a premium of nearly 16% over current prices.

Earlier this month, JPMorgan reiterated GOOG as overweight ahead of its upcoming earnings release. “After delivering ~$670B of market cap gains this year, we see GOOGL as clearly the most liked, best owned, and least discussed of the mega-cap Internet names,” it said in its note.

GOOG stock has seen a major rerating this year and its valuation multiples are expanding. The company is benefiting from the secular growth in digital advertising and cloud business. Overall, while GOOG is among the best performing S&P 500 stock this year, it still looks like a good name to have in the portfolio.

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2. Fortinet (NYSE: FTNT)

Cybersecurity company Fortinet is among the best-performing stocks of 2021 and hit another 52-week high in today’s trade. The stock still looks like a good buy looking at the positive outlook for the cybersecurity industry. Wall Street analysts meanwhile don’t see much upside in the stock and its median target price of $330 is 4% below the current prices. The street high target price of $385 is a 12% upside. Of the 30 analysts polled by CNN Business, 15 rate the stock as a buy while 13 have a hold rating. The remaining two analysts have a hold rating on the stock.

Fortinet is among the best-performing S&P 500 stocks

Fortinet is among the best-performing S&P 500 stocks and has more than doubled this year. Meanwhile, the stock could deliver strong long-term returns looking at the high cash flow generation capacity and the expected increase in cybersecurity spending. The global cybersecurity market is expected to more than double by 2026 and reach $354 billion which makes Fortinet an attractive bet.

That said, Fortinet stock now trades at an NTM (next-12 months) PE multiple of 81.5x which is way above the ten-year average of 45.2x. The stock has seen a rerating as the digital transformation also means more demand for cybersecurity companies.

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3. Steel Dynamics (NYSE: STLD)

With a year-to-date gain of almost 80%, Steel Dynamics is among the best performing steel stock. The stock has come off its 52-week highs, like other steel names, amid concerns over the sustainability of higher steel prices. That said, the short to medium-term forecast for US steel demand looks positive. If Biden’s infrastructure plans are fructified, it would further enhance US steel demand.

STLD is among the best-performing stocks but the best still lies ahead

Steel Dynamics is also investing in new plants which would help it gain more market share in the US. The company is also pivoting towards high margin value add steel products which would be another long-term driver for the stock.

All said, while STLD is among the best performing steel stock of 2021, the best is yet to come for the stock and we could see more upside looking at the strong steel markets in the US. The stock is looking bullish on the charts also after crossing its 50-day SMA (simple moving average).

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4. Ford (NYSE: F)

Ford is among the best-performing auto stock in 2021. However, despite the surge, the stock still looks like a good buy for the medium to long term. Wall Street analysts are also turning bullish on F stock ahead of its earnings.

Last week, Credit Suisse upgraded the stock from neutral to outperform and raised the target price by $5 to $20. In its note, Credit Suisse said that “in the past year +, we’ve seen a significant turnaround underway at Ford – it has ended its cycle of quarterly earnings disappointments, and its transition to an EV/digital world has sharply accelerated.”

Ford is among the best-performing auto stocks of 2021

Notably, under the leadership of Jim Farley, Ford has been transforming its business to focus on profitable markets and models. It has also made an aggressive pivot towards electric vehicles. Ford is among the best-performing stocks of 2021 as markets have re-rated it amid the turnaround. The stock still looks a good buy considering the tepid valuations and the pivot towards electric cars.

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5. Simon Property Group (NYSE: SPG)

Simon Property Group stock is among the best performing S&P 500 stocks in 2021 with a YTD gain of over 75%. The company is the largest mall operator in the US and is benefiting from the reopening. Last week, Bank of America issued a bullish note on the stock and said that it sees several catalysts which can take SPG stock even higher.

Bank of America is bullish on SPG stock

Bank of America sees upwards revisions in SPG’s 2022 and 2023 earnings estimates after a strong second half 2021 performance. It also believes that the uptick in international tourism would benefit assets that SPG holds in tourist destinations. The brokerage also sees strong performance at Taubman, which SPG acquired last year.

All said Simon Property Group stock looks a good way to play the reopening story. The company is structured as a REIT and at current prices, its dividend yield is 4.1%, which is almost thrice the S&P 500’s dividend yield. If you are looking at a best-performing REIT stock to add to the portfolio, SPG should definitely be on your radar.

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