It’s been an awfully good year for Wall Street — and the millions of retail investors who’ve ridden its gains. But 2017 isn’t over yet, and it’s time to examine some of the best stocks to buy for December.
Sure, the Standard & Poor’s 500 index is up 17 percent to date, but there’s still a month left to boost your portfolio’s returns. With all the money people spend in the fourth quarter, it doesn’t hurt to have a little coming back in.
[See: 7 of the Best Tech Stocks to Buy for 2018.]
Readers who followed last month’s best stocks to buy list did well for themselves, as the five-stock portfolio recommended by U.S. News doubled the S&P’s performance, gaining 3.8 percent to the benchmark’s 1.9 percent November return.
Hopefully this month’s picks will carry on that tradition. Here are five of the best stocks to buy for December:
Microsoft Corp. (Nasdaq: MSFT). Of the largest-cap tech names, Microsoft is the only company that trades below a price-earnings multiple of 30, isn’t being ostracized by Capitol Hill and the media, and isn’t a boring legacy company coming off an overhyped and under-delivered product launch. (Fill in those blanks as you will.)
Impressive momentum — MSFT is up 35 percent year-to-date and is riding high off a late October earnings beat — makes Microsoft one of the best stocks to buy for December, while solid fundamentals, a 2 percent dividend and its thriving cloud business make it a buy-and-hold for long-term investors, too. Oh, and it doesn’t hurt that Satya Nadella is the company’s best CEO since Bill Gates.
Gogo (GOGO). The beautiful thing about the stock market is that companies of all shapes and sizes can make money for investors. Microsoft is worth more than 700 times what Gogo, an in-flight wireless provider, is, yet both are among the best stocks to buy for December. GOGO stock has been gaining momentum since bottoming in early November, gaining more than 6 percent in the year’s penultimate month.
Recently named to the Fortune “Future 50” list of companies best poised for future growth, revenue has grown at a compound rate of 30 percent over the last five years. Gogo, which has turned to Asia for growth, recently inked a deal with Hong Kong-based carrier Cathay Pacific to install its 2Ku next-gen satellite technology on about 150 airliners.
Also, insiders have been buying the stock in swarms, which is rarely a bad sign.
[Read: The Best Bitcoin Wallet of 2018.]
Cummins (CMI). Shares of the 98-year-old engine manufacturer took it on the chin in early November, despite a blowout quarter that nonetheless failed to flatter the market. The resultant fallout appears largely over now, and CMI stock looks primed for a modest rally into year-end.
Even after a 20 percent rally in 2017, shares of this steady Eddie remain conservatively valued at 14 times forward earnings. With a sustainable, 2.6 percent dividend to boot, the $27 billion machinery heavyweight won’t double your money overnight, but it’s a sound, cheaply valued income stock with solid earnings and revenue growth, which is awfully tough to find in this melt-up market.
BofI Holding (BOFI). BofI is a good old fashioned, small-cap, traditional commercial bank. It takes deposits, makes loans, and profits on the spread between what it pays and what it earns in interest. It also offers prepaid cards, portfolio management and other products.
The only difference between BOFI and other savings and loans? Branches. BOFI, which is an acronym for Bank of Internet, doesn’t do those. That gives BofI a huge competitive edge and makes for a low efficiency ratio (lower is better) of 31.7 percent. For comparison, Bank of America’s was 59.5 percent last quarter.
In a rising rate environment and trading at less than 10 times forward earnings, bank stocks are poised to thrive and BOFI has earned its spot among the best stocks to buy for December. It’s also the only one of December’s picks that made the buy list last month as well.
RCI Hospitality Holdings (RICK). Last and least by market cap is RCI Hospitality Holdings, a company few individual investors will recognize — at least by that name. In RCI’s case, its hospitality business is almost entirely composed of adult nightclubs.
Investors this year have been richly rewarded, with shares up more than 90 percent in 2017. Still, RICK is worth just $315 million.
These characteristics check a few boxes that make RICK one of the best stocks to buy for December: Some funds will buy the year’s hottest stocks before the new year so they can show their clients that they own some big winners at year-end. Also, the well-documented “January Effect” states that small-cap stocks outperform the market in January, and front-running that trade in December could be profitable.
[See: 7 Dividend Stocks to Benefit From Trump Tax Changes.]
At the end of the day, though, RICK is a potential steal — as signaled by its 0.7 PEG ratio — in a recession-proof business with natural barriers to entry in the form of nightclub licenses.
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5 of the Best Stocks to Buy for December originally appeared on usnews.com
