As 2018 winds to a close, December will prove to be a vital month for market historians looking back on Wall Street’s performance. The year began euphorically in January, with the S&P 500 rising over 5 percent on the heels of 2017’s last-minute tax cut bill. As U.S. News outlines the best stocks to buy for December, markets are in a slightly more uncertain mood.
Going into the final month of the year, the S&P is now up just 2 percent year-to-date. A fourth-quarter tech sell-off combined with trade war fears and looming Federal Reserve tightening to cause extreme volatility; the Dow saw a number of 500- to 800-point single-day losses in October and November.
At the end of November, Fed Chairman Jay Powell hinted the central bank’s December meeting may not necessarily portend a rate hike, while President Donald Trump teased a potential trade deal with China. As a sense of normalcy returns to the air, here are five of the best stocks to buy for December.
Applied Materials (Nasdaq: AMAT)
This has been a wild year for Applied Materials shareholders, who saw AMAT shares hit all-time highs in early 2018, only to be nearly cut in half as fears over tech valuations, the trade war and demand for memory chips hit the stock hard.
It’s always dangerous when one tries to catch a falling knife, but AMAT looks to have found support above the $30 level. Trading at less than 9 times trailing and forward earnings, and a price-earnings-growth ratio of just 0.51 (indicating extreme value), it looks like overly bearish sentiment has made this leading semiconductor equipment manufacturer a steal.
For investors willing to be a bit contrarian, AMAT at these levels looks like one of the best stocks to buy for December.
North Chicago, Illinois-based drugmaker AbbVie is attractive for quite a different reason than AMAT. The $134 billion health care powerhouse is simply a strong company with growing revenue trading more cheaply than it should.
Driven by its blockbuster drug, Humira, which increased sales 9 percent in the third quarter, AbbVie is the envy of many peers in its industry. Humira, which is FDA-approved to treat a wide variety of indications ranging from rheumatoid arthritis to Crohn’s disease and plaque psoriasis, is the best-selling prescription drug on earth.
While ABBV might not be the most socially responsible company — two pens of Humira cost nearly $5,000 without insurance — a patented drug and a captive patient population make for big profits for ABBV, moral issues aside.
Stitch Fix (SFIX)
On a lighter note, Stitch Fix, the custom styling subscription service, is also one of December’s best stocks to buy.
The growth of the stay-at-home economy, and the booming demand for convenience, personalization and delivery to your front door dovetail nicely to make Stitch Fix shares an excellent way to bet on these megatrends.
After a fair degree of volatility in its first year of trading, SFIX stock seems to have calmed down. As the company expands its offering of clothes to the big and tall market, notices popular styles it can mimic with in-house brands, and grows its subscriber rolls, analysts’ expected 19.7 percent growth rate in 2019 may end up being on the conservative side.
CVS Health Corp. (CVS)
Having just officially completed its acquisition of health insurer Aetna on Nov. 28, fund managers and savvy individual investors alike may begin snapping up CVS shares in anticipation of the combined companies’ revamped strategy for 2019 and beyond.
The biggest pharmacy chain in the U.S. is expected to use its new integration to push the millions insured by Aetna to CVS’s MinuteClinic locations, which not only encourages using far lower-cost health care services, but drives foot traffic to CVS stores and materially differentiates it from Walgreens Boots Alliance ( WBA).
With the stock paying a 2.5 percent dividend, trading at 11 times forward earnings, and primed to benefit from vertical integration, CVS is one of the best stocks to buy for December.
Last but certainly not least, Amazon rounds out the list of the best stocks to buy now. It doesn’t get much more December-y than Amazon, the leading e-commerce player in the U.S.
About a third of Amazon’s 2018 sales are expected to come in the fourth quarter, as Americans swarm the e-tailer’s website to shop for themselves and their loved ones.
Although shares have pulled back amid the late-2018 tech sell-off, that simply provides a better entry point for long-term AMZN shareholders. Amazon’s recent decision to open a second corporate headquarters — split between New York City and Northern Virginia in order to avoid talent dilution — shows it’s serious in investing in growth, and also gives it some insulation from Washington regulation with 25,000 jobs expected to come to the area.
On top of that, Amazon’s decision to raise its minimum wage to $15 is not only the right thing to do, but a savvy business strategy, putting upward pressure on labor costs for competitors, most of whom don’t have quite so much money to throw around.
More from U.S. News