The final month of the year is almost here. For investors, that can be a good thing assuming the S&P 500 lives up to its historical December billing. In the 12th month of the year, the benchmark domestic equity gauge averaged a gain of 0.70% over the past two decades.
Other months are kinder to stocks on a historical basis, but December is a decent month, usually, and it resides firmly in the best six-month period in which to own stocks. Bolstering the case of equity allocations in December are stocks entering the month near record-highs and the increased chances that the initial phase of trade deal with China will finally be ratified.
Of course, trade is a thorny issue, but with 2020 right around the corner, President Donald Trump likely realizes that geopolitical headwinds aren’t beneficial to his reelection efforts.
There’s also the consumer to consider, a situation that has been mostly strong in the U.S., and one that will be put to the test come December. Indeed, there are a lot of moving parts to consider in the month ahead, but there are also some good stocks to buy.
Advanced Micro Devices (AMD)
The semiconductor space is loaded with stout performers this year, but few are on par with Advanced Micro Devices (NASDAQ:AMD). AMD has more than doubled year-to-date and tacked on more than 30% in November. With momentum in the stock’s corner and plenty of favorable fundamental factors to consider, AMD firmly resides in the stocks to buy camp.
Patience could be rewarded with AMD stock. The stock closed lower during the last two days of last week, confirming that it’s short-term overbought, which could be an indication that a little more near-term retrenchment is in store.
It’s hard betting on AMD doubling again in 2020, but it’s not difficult to forecast more upside for the semiconductor name next year, particularly with a potentially significant video game console upgrade cycle looming. That should be a major demand driver for AMD chips in the year ahead.
Las Vegas Sands (LVS)
Las Vegas Sands (NYSE:LVS) as a stock to buy in December isn’t so much about recognizing large, immediate profits as it is about positioning for that scenario over the course of 2020. Shares of the Palazzo owner are up nearly 21% year-to-date, a performance that lags the broader market. That lethargy is attributable to weakness in Macau, a market that accounts for roughly two-thirds of Sands’ revenue from quarter-to-quarter.
The trade war with the U.S., some slowdown in the Chinese economy, and the ongoing protests in Hong Kong have weighed on gaming revenue in Macau this year, but analysts see that trend abating next year. Plus, Sands is the dominant operator in Asia, has the strongest balance sheet in a capital-intensive industry, and is committed to boosting its dividend (current yield of 5.02%).
Fitch Ratings is bullish on LVS and the company’s ability to pick up the tab for an expensive new project in Japan.
Also driving the outlook is Fitch’s increased confidence that LVS can absorb a large-scale development, such as a Japan integrated resort (IR), without material long-term deterioration in the leverage credit metrics or liquidity strain,” according to the ratings agency.
UnitedHealth Group (UNH)
Managed care provider UnitedHealth (NYSE:UNH) and its rivals have been getting plenty of attention this year, much of it negative due to the inverse reactions of stocks in this corner of the healthcare sector from Medicare For All chatter.
As noted above, 2020 is a presidential election, so there’s a very realistic chance we will hear more about Medicare For All as the year moves along. Fortunately for this stock to buy and its brethren, Sen. Elizabeth Warren (D-MA), the democratic frontrunner that appears most in favor of Medicare for All, has said she wouldn’t push universal healthcare in this form until the third year of her administration, assuming she wins the presidency.
Recently, UNH and other healthcare stocks have been reflecting the value proposition offered by the once lagging sector. As for Dow component UNH, the shares are up more than 13% just this month, and if it breaks through $280 over the near-term, it will almost definitely be a stock to buy in December.
Netflix (NFLX)
Netflix (NASDAQ:NFLX) as a stock to buy in December may come as a surprise to some investors. After all, November brought the debuts of competing streaming services from Disney (NYSE:DIS) and Apple (NASDAQ:AAPL), two companies with the financial resources to make a significant impact the streaming arena.
As has been widely noted, Disney+ lured 10 million subscribers on the first day that services was available. In theory, November could have been a dismal month for Netflix stock. In reality, the shares are up more than 14% with three trading days left in the month. Additionally, some data points, albeit of the internal variety, indicate Netflix isn’t bleeding subscribers to AppleTV+ and Disney+.
“Netflix Inc.’s internal data suggests the streaming giant hasn’t been hurt yet by the launch of rival services from Walt Disney Co. and Apple Inc., according to a person briefed on its subscriber information,” reports Bloomberg.
Other external data points confirm that Netflix isn’t yet seeing massive subscriber churn due to the debuts of competing services.
Kraft Heinz (KHC)
Consider this an adventurous stock to buy in the consumer staples space. Broadly speaking, that sector has performed well this year, but Kraft Heinz (NASDAQ:KHC) is one of the outliers in a very, very bad way. The shares have shown some momentum in recent months, gaining almost 23% off the 52-week low, but the stock is still 41.11% below its 52-week high.
Typically, consumer staples stocks are low volatility, steady dividend growers. Currently, those aren’t accurate descriptions of Kraft Heinz. The company slashed its dividend by 36% earlier this year and now yields over 5% as a result. In other words, KHC shares are more for trading than a long-term investment, but if bad news is avoided next month, the stock could deliver some December upside.
“Although new CEO Miguel Patricio seems to be holding his cards close to his chest for now (reasonable given he’s only been at the helm since June), we believe his dissatisfaction with its performance and seeming determination to steady the firm’s footing may prove to be the ingredients necessary to ultimately buoy longer-term gains,” said Morningstar in a recent note.
Roku (ROKU)
Roku (NASDAQ:ROKU) is another streaming play. Its position on the hardware side of the market, not the more competitive, cost-intensive cost development side, makes it a stock to buy for investors looking to steer clear of content wars. Plus, the holiday shopping season is prime time for would-be Santas to scoop up Roku devices as gifts for friends and family.
November has been a wild month for this often volatile stock. Initial reaction to the company’s third-quarter earnings report was glum and the stock tanked, but Roku has since recouped all those losses and then some, extending its year-to-date gain to north of 420%.
“We believe connected TV (CTV) device usage and advertising growth will continue to rise exponentially, and Roku is in prime position to both drive and harness this,” said Macquarie analyst Tim Nollen in a recent note.
Perhaps the biggest hurdle to Roku’s status as a December stock to buy is a valuation that continues stretching to the high side. Then again, expensive stocks can remain that way and it’s tricky betting on valuation-based near-term downside in names like Roku.
Industrial Select Sector SPDR (XLI)
One exchange traded fund (ETF) for consideration among stocks to buy in December is the Industrial Select Sector SPDR (NYSEARCA:XLI). XLI, the largest ETF dedicated to the industrial sector, makes the list of December ideas for a couple of reasons, not the least of which is a 4.56% November gain that has the fund flirting with all-time highs.
Additionally, there is seasonality on the side of investors considering the industrial sector in December because the group usually performs well in the last month of the year.
Boeing (NYSE:BA) is the XLI’s largest holding and that stock remains beholden to the fate of regulators’ looming decisions on the 737 MAX passenger jet. The other near-term issue to be aware of with XLI is trade. XLI components such as 3M (NYSE:MMM) and Caterpillar (NYSE:CAT) have been sensitive to trade news all year. All that said, if XLI can get the benefit of positive or neutral news flow, the ETF is poised to rally into year end.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
