It’s a new year, and for many readers, that means it’s a new you (at least for a few months). It can also mean a fresh-looking portfolio, so with that in mind, it’s about time to examine some of the best stocks to buy for January.
Here’s a quick look at five names, what they’ve got going for them, and why both short- and long-term investors should consider buying these stocks in January.
[See: 7 of the Best Blue-Chip Stocks to Buy for 2018.]
Discovery Communications Inc. (Nasdaq: DISCA). What’s the best buy signal on Wall Street? Is it a low price-earnings ratio? Better yet, how about a low P/E-growth ratio (PEG), which gives context to the P/E ratio by dividing it by the expected earnings growth rate? And consensus price targets — surely those must count for something!
Actually, more often than textbooks would care to admit, insider buying is an elite indicator for future stock performance. After all, employees at the company know firsthand how it’s doing, and greed is a powerful emotion.
Insiders at cable and television powerhouse Discovery Communications have fiercely snapped up DISCA stock in recent months, from the director level all the way up to Chief Financial Officer Gunnar Wiedenfels.
On top of that, John Malone, the media titan and billionaire famous for his stock market successes, bought $8.5 million worth of DISCA in mid-December. In the past, it’s paid handsomely to act as Malone does.
Bullish insider buying indicators aside, DISCA could be considered one of the best stocks to buy for January on its own merits, too. Shares trade at 17 times earnings and just 9.8 times forward earnings, and could benefit from further consolidation in the wake of the $52 billion merger between Walt Disney Co. ( DIS) and Twenty-First Century Fox ( FOX, FOXA).
BofI Holding, Inc. (BOFI). This is BOFI’s third straight month on U.S. News & World Report’s monthly buy list, a first for any stock. Shares of the branchless bank haven’t disappointed; outperforming the Standard & Poor’s 500 index by 3.3 percentage points, 7.4 percent to 4.1 percent, between Nov. 1 and Dec. 19.
Despite the recent rally, shares remain undervalued at 13.7 times earnings, and when zooming out a bit, the stock has barely moved from where it was a year ago.
Rumors that BOFI had taken excessive risks that weren’t disclosed to investors are partially to blame for this longer-term underperformance; short-sellers piled in, and at times upwards of 45 percent of shares were on loan to short-sellers.
Those rumors have turned out to be just rumors, and with momentum, negligible debt, rising interest rates, and 37 percent of the float still shorted, Wall Street is setting up BOFI for a short squeeze-fueled rally.
Customers Bancorp Inc (CUBI). Yes, it just so happens that two of the five best stocks to buy for January are bank stocks. If you’re looking for a complete, all-in-one portfolio-in-a-box, look up the holdings of a target-date fund.
While BOFI’s one-year returns are nothing to write home about, CUBI’s are actually miserable. Keep that in mind, because in some ways, you could consider CUBI higher-risk: It’s a smaller company ($820 million to BOFI’s $1.8 billion), price momentum isn’t in its favor, and few analysts cover it.
Those factors can also work to the patient shareholder’s benefit, however.
CUBI will spin off its money-losing BankMobile division in the first half of 2018, resulting in a tax-free equity payout of about $3.57 per share.
More immediately, CUBI has said its earnings per share could enjoy a boost somewhere between 18 percent and 24 percent if tax reform is passed; while many stocks rallied ahead of expected tax cuts, CUBI didn’t, and shares are overdue for a boost.
With shares trading at just 11 times forward earnings, there are plenty of reasons to like Customers Bancorp, and if the “January effect” ends up holding any water, that’s just another catalyst for shares.
[See: 7 of the Best Bank Stocks to Buy for 2018.]
Nexstar Media Group Inc (NXST). Like Discovery, Nexstar is in the cable TV business. But when a stock’s attractive, it’s attractive, and it’d be wrong to leave NXST off the best stocks to buy for January list just because it’s also in cable.
Plus, there are a few things that set NXST apart from your average stock, or even DISCA, for that matter.
Nexstar, at $3.5 billion, is much smaller than Discovery Communications ($8.4 billion), but still manages to pay a 1.5 percent dividend. Its smaller footprint allows NXST to focus on local markets and leverage that focus with local advertisers.
From owning and operating a station to simply providing sales for it, Nexstar’s operations span 170 TV stations in 100 markets, reaching nearly 40 percent of American households with a television.
Not to be left behind by the shift to digital and mobile media consumption, NXST recently spent $90 million on LKQD Technologies, a digital video advertising infrastructure platform.
Due to its local focus and acquisition-heavy nature, NXST is growing by leaps and bounds, though that will cool off next year as M&A-fueled growth disappears. Revenue growth is expected to go from 119 percent in 2017 to a far more reasonable 14.8 percent in 2018.
With a red-hot rally from September lows driving shares up more than 30 percent, both its momentum and valuation — NXST trades at 10.7 times forward earnings — are working in shareholders’ favor.
Store Capital Corp (STOR). The last of the best stocks to buy for January is STOR, a real estate investment trust with a diversified portfolio of commercial properties. Store Capital is very particular about the type of tenant it wants, preferring to lease to very large, established proprietors with businesses that tend to not be under immediate threat from e-commerce or Amazon.com ( AMZN).
Early childhood education centers, health clubs and pet care facilities, for instance, are a long ways off from being displaced by Amazon. Other STOR tenants like aerospace equipment and medical device manufacturers, are also immune to e-commerce.
Chosen as one of the best stocks to buy for 2018, STOR is a stellar dividend stock as well, yielding 4.8 percent. It’s also nice to know that Warren Buffett is bullish on STOR, having snapped up shares through Berkshire Hathaway ( BRK.A, BRK.B) as recently as the third quarter.
[See: 7 of the Best Tech Stocks to Buy for 2018.]
There’s no reason STOR should soar in January in particular, but it’s a good low-volatility option to have in your portfolio, that, due to its steady business and hefty dividend, should serve as a solid portfolio anchor if there’s a market sell-off.
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5 of the Best Stocks to Buy for January originally appeared on usnews.com
