December is usually an easy month for investors. Historically, it’s one of the top two best performing months for the stock market, and the S&P 500 has gained ground in December 74% of the time. It is also more likely to post a December gain on the heels of a strong year of returns. So far this year, the S&P 500 has notched new highs every month, and if it were to do the same in December, it would mark the second year in history, after 2014, when new highs were seen in all 12 months.
There’s a big “but” this year after a one-two punch of bad news rattled investors. News of a new coronavirus variant spreading rapidly in South Africa, dubbed omicron, gained traction on Thanksgiving, prompting travel restrictions and a broad market sell-off on Black Friday. After a recovery Monday, Federal Reserve Chairman Jerome Powell testified the next day that he no longer considers inflation “transitory” and that the Fed would likely discuss speeding up the tapering of monthly bond purchases, putting upward pressure on interest rates.
“What a difference a week makes. A week ago stocks were at all-time highs and the economy was strong. Now all we have are uncertainties and questions,” LPL Financial Chief Market Strategist Ryan Detrick wrote in a blog post on Dec. 1. “As of now we’re optimistic that stocks will sidestep the new variant worries, but we recommend investors buckle up their seatbelts, as the end of 2021 could be a bumpy one.”
It might be a bumpy month, but here are five stocks to buy that have been propelled by tail winds going into the final stretch of the year, making them better bets than most:
— Pfizer Inc. (ticker: PFE)
— Cushman & Wakefield PLC (CWK)
— Allbirds Inc. (BIRD)
— Bath & Body Works Inc. (BBWI)
— Etsy Inc. (ETSY)
[Sign up for stock news with our Invested newsletter.]
Pfizer Inc. (PFE)
The first part of the one-two punch as November came to a close was the new omicron coronavirus variant rearing its ugly head. Though the stock of rival Moderna Inc. (MRNA) was the first to jump on news of the variant, Pfizer might have the more sustained boost. Both Moderna and Pfizer, through its partner BioNTech SE (BNTX), produce mRNA vaccines, which are more flexible and easier to adapt to new variants, as well as quicker to market. It’s unclear how effective vaccines will be against the new, highly mutated omicron variant, but the Food and Drug Administration’s recent authorization of booster shots for all adults and the European Union’s plans to roll out Pfizer vaccines for children between the ages of 5 and 11 starting Dec. 13 will boost PFE. MRNA dropped while PFE climbed on news that Moderna lost its patent battle with Arbutus Biopharma Corp. (ABUS) for the lipid nanoparticles technology it uses in its COVID-19 vaccine to deliver messenger RNA to cells. With Pfizer’s record over the past three-quarters of earnings beats on climbing earnings-per-share growth and its healthy dividend yield of 2.9%, Pfizer is the stock to pick for December.
Cushman & Wakefield PLC (CWK)
Analysts are bullish on this commercial real estate services firm, which manages about 4.1 billion square feet. Cushman & Wakefield is one of the top three commercial real estate companies, along with CBRE Group Inc. (CBRE) and Jones Lang LaSalle Inc. (JLL), but is the most undervalued of the three. Cushman & Wakefield has strong momentum, with significantly surprising earnings beats in the past three-quarters, and posted $2.3 billion in revenue for the third quarter, a 21% gain over the third quarter of 2020. The company has acquired a 40% stake in and entered into a strategic partnership with Greystone, a multifamily lender, and announced an exclusive partnership with shared workspace provider WeWork Inc. (WE). The consensus price target for CWK has increased from $21.70 to $26.10 in the past 90 days, and the stock was upgraded to outperform by Raymond James on Nov. 22 with a price target of $31.
Allbirds Inc. (BIRD)
Shares of the eco-friendly footwear and apparel company rose 90% on the first day of its IPO in early November and have since dropped back near the IPO price of $15. Allbirds started in New Zealand — which has no native land mammals, hence “all birds” — manufacturing a wool running shoe, and after six years has expanded to sustainable clothing and activewear; partnered with Adidas AG (ADDYY); collaborated with Nordstrom Inc. (JWN); and developed innovative products using sugarcane, eucalyptus and plant-based leather. Analysts favor Allbirds for its strong alignment with environmental, social and governance, or ESG, principles and high customer affinity. Meanwhile, Allbirds’ low brand awareness provides a long runway for growth as an early leader in sustainable fashion. Allbirds has stuck with direct-to-customer sales and ended the third quarter with 31 locations, a 33% increase in net revenue and a 35% increase in gross profit compared to the third quarter of 2020. However, the stock tanked on an earnings loss of 25 cents per share, nearly double the consensus estimate for a loss of 11 cents per share. This could be a good time to buy the dip.
Bath & Body Works Inc. (BBWI)
As the key retail destination for soaps, candles and scents, Bath & Body Works has risen with the wave of hand-sanitizer consumption, then the wave of self-care spending. Bath & Body Works was previously under L Brands along with Victoria’s Secret & Co. (VSCO), but VSCO was spun off in August and L Brands was renamed Bath & Body Works. Distancing itself from the controversies surrounding L Brands founder Leslie Wexner and Victoria’s Secret turned out to be a good decision, as BBWI showed strong growth since then, surpassing VSCO in revenue and closing in on both companies’ combined 2020 revenue. After a record second quarter, sales jumped 53% in the third quarter compared with the same point in 2020, and adjusted earnings per share from continuing operations increased 360% over the third quarter of 2019. Even when accounting for inflation, BBWI has significantly increased profit margins over 2019 through limited promotions. The company is ready for the holidays, owing to its majority domestic supply chain, and is forecasting a strong fourth quarter.
Etsy Inc. (ETSY)
The handcrafted and vintage marketplace operator rose 54% for the year through November before a dip at the beginning of December, and CEO Josh Silverman is looking forward to a strong holiday season. In early November, six analysts reiterated ETSY as a buy or outperform, and both Citigroup and Wedbush adjusted ETSY’s price target to the low $300 range from the mid-$200s in the last week of November. The company has beaten earnings estimates for the past four quarters and is well positioned to continue its robust growth, picking up 7 million new buyers in the third quarter alone, according to Silverman. The e-commerce giant has been boosted by the “Great Resignation” and the surge in self-employment: There are 500,000 more unincorporated, self-employed workers than there were at the start of the pandemic, according to data from the Labor Department. Etsy went from 2.6 million active sellers in September 2019 to 7.5 million in September 2021. Surging numbers in both the buyer and seller departments spell good news for the marketplace.
More from U.S. News
10 Best Cheap Dividend Stocks to Buy Under $10
9 Best Retail Stocks to Buy This Holiday Season
7 of the Best ETFs to Buy for Long-Term Investors
5 of the Best Stocks to Buy for December originally appeared on usnews.com
