3 Warren Buffett stocks that should be big winners in 2021

Poor Warren Buffett. I mean this figuratively and not literally, of course. His beloved Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) did not perform well in 2020. When a stock only made a 2% gain while the S&P 500 index jumped 16%, it was not a very good year.

However, I think several of Berkshire’s holdings will bring a smile to the face of the legendary investor this year. Here are three Warren Buffett stocks that should mostly be big winners in 2021.

Image source: The Motley Fool.

1. Apple

Apple (NASDAQ: AAPL) is arguably Warren Buffett’s favorite action, behind Berkshire himself. Unlike Berkshire, the tech giant was very hot last year with its shares rising nearly 81%. Don’t think for a second that Apple’s momentum is going to wane this year.

Wedbush analyst Daniel Ives even thinks Apple could climb to $ 200 a share. This is a premium of more than 50% compared to its current price. I don’t know if the stock will reach this level in 2021, but there are several reasons to be optimistic about Apple.

Perhaps most important is the outlook for iPhone sales. Newsmagazine Nikkei Asia reported in December that Apple plans to increase iPhone production by nearly 30% in the first half of 2021. That could mean Apple’s quarterly sales in the second half of the year will be particularly strong.

At the same time, Apple’s services and other products continue to benefit from strong sales momentum. The company has released new high-end AirPods Max headphones that look set to become another commercial hit.

Of course, Apple’s valuation looks steep, with stocks trading at over 30 times expected earnings. However, I don’t think that will hamper the outlook for tech action this year.

2. Bristol Myers Squibb

Buffett and Berkshire had their fill of pharmaceutical stocks in Q3 2020. I think several of them could perform well this year. I am particularly optimistic Bristol Myers Squibb (NYSE: BMY).

Unlike Apple, BMS is very cheap right now. Its shares are trading at a very low eight times expected earnings. This discounted valuation does not reflect the drugmaker’s growth prospects at all, in my opinion.

BMS should be on track to secure approvals for new indications for the successful Opdivo cancer immunotherapy. Zeposia, which has already obtained US and EU regulatory approval for the treatment of multiple sclerosis, has an excellent chance of securing further approvals for ulcerative colitis. Inrebic appears to be in the process of obtaining European approval for the treatment of myelofibrosis. The company is also expected to get US approvals for ide-cel and liso-cel cancer cell therapy this year.

While BMS awaits good news on these fronts, its current product line continues to grow with increasing sales of blood cancer drugs Revlimid and Pomalyst, an anticoagulant Eliquis, and cancer immunotherapy Yervoy. I think BMS has several catalysts that could inspire investors this year.

3. Mastercard

MasterCard (NYSE: MA) outperformed the main stock market indices in 2020 with a gain of almost 20%. I fully expect another booming year in the market in 2021 for the payment processing giant.

The COVID-19 pandemic has wreaked havoc across many industries, with the travel industry particularly affected. It was bad news for Mastercard. And it showed up in the company’s third quarter results, with analysts’ estimates missing both revenue and profits.

However, I see Mastercard as a great comeback game on the coronavirus. As COVID-19 vaccines become more widely available, the world may finally turn the corner towards a pandemic. That should trigger an economic rebound and provide a boost (pun intended) for Mastercard’s business.

There is another reason why I am optimistic about Mastercard. The company’s board of directors approved a $ 6 billion share buyback program in December. I expect Mastercard to be busy repurchasing its shares this year, a move that should help boost its stock price. Warren Buffett has loved Mastercard for a while. He might like her in 2021.