We are now into the fourth quarter of the year.

With the election, the battle over the Supreme Court, and the continued struggle against the coronavirus pandemic, we should see an interesting end to 2020.

It is also the time of year when we begin to hear talk and predictions about which stocks we want to own to get the best results in 2021.

If this year is like every other year, we will hear all sorts of guesses involving turnarounds, emerging technologies, and wild guesses about how the markets will play out in 2021.

I love turnarounds and emerging technologies as much as the next guy.

If I can find those opportunities throughout the year, I’ll bring them to you right away.

However, for the core of our 2021 portfolio, we want to own the stocks with the very best fundamentals and powerful tailwinds from existing long-term demographic, economic, and social trends.

These are the stocks that should deliver substantial gains no matter what new brand of madness the world brings us in 2021.

Let’s get started…

Best Stocks for 2021 No. 3

One of the strongest trends that has developed is the idea of remote working and learning.

The economic shutdown poured gas on a slowly developing trend as millions of Americans were forced to work and take classes from home.

Even as states begin to attempt to open back up, it is clear that this trend will not reverse.

Many companies are encouraging work from home. Many school systems are still using remote learning exclusively.

The ultimate remote work and learn stock is Cisco Systems Inc. (NASDAQ: CSCO).

Cisco makes all the networking switches, routers, and complementary products that make all of this possible.

It is also one of the biggest providers of cybersecurity products that will become increasingly important as the world becomes more digital and remote.

Cisco Systems is in outstanding fundamental condition as 2020 nears a close.

The company has enormous profit margins, and its return on equity is over 30%.

As of the end of the second quarter, Cisco had almost $30 billion of cash on hand.

The company is very unlikely to run out of cash anytime soon, as it’s generating more than $10 billion of free cash flow a year.

Cisco shares yield 3.7%, and Cisco has been raising the payout by about 12% a year.

Best Stocks for 2021 No. 2

No matter who wins the White House, 2021 we will see an increased demand for infrastructure spending.

I also expect to see infrastructure programs used to provide jobs to get the economy back on track.

As an aggregate and cement supplier, Martin Marietta Materials (NYSE: MLM) is well-positioned to be a significant beneficiary of these tailwinds.

It helps even more that it has a strong presence in states like Texas, Colorado, North Carolina, Iowa, and Georgia that have a big need for infrastructure spending. I expect the company will get a boost from new residential construction in 2021 from these states.

MLM also has decent state economies and budgets that make cash available to get started as we enter 2021.

The company is in fantastic fundamental condition as we move toward 2021. It has high gross margins that I expect to expand over the next year.

Best of all, the firm increased its dividend last year while continuing to buy back its own stock. And I expect both will increase again in 2021.

Martin Marietta Materials has been remarkably disciplined about its finances. I would not be shocked to see that prudence produces an additional dividend increase in the next year.

Best Stocks for 2021 No. 1

The same increase in new residential construction that will benefit Martin Marietta Materials will drive Pulte Group Inc. (NYSE: PHM) to new highs in 2021.

New home sales and starts are exploding higher as the pandemic has many urbanites reconsidering their living arrangements.

In August, new home sales passed the 1 million mark for the first time since 2006.

Pulte Group has operations in 44 markets in 24 states across the United States. The company mostly sells single-family homes in the entry-level, move-up, and active-adult segments of the housing market.

After a slow start in the second quarter, Pulte saw a material acceleration in demand for new homes across most of its markets.

CEO Ryan Marshall attributed the demand surge to a combination of low-interest rates, a restricted supply of existing-home inventory, pent-up demand following the economic shutdown, the appeal of single-family living in a new home, and a desire among some buyers to exit more densely populated urban centers.

Those conditions will last well into 2021 and beyond.

Pulte has the highest gross margins in the industry and is well-positioned for a fantastic 2021.

— Garrett Baldwin

Source: Money Morning