Readers of mine know that I’m all about long-term stocks. Buy stock in companies projected as long-term winners and hold for the long haul, weathering near-term storms and using dips as opportunities to buy more. But what about short-term stocks? There’s a time and a place for them, too.
Short-term stocks — which are basically stocks you buy today with the intention to sell in the next 3 to 12 months — are great to give your portfolio a nice near-term boost, as they can earn solid returns in a quick time and complement your core long-term holdings.
With that mind, let’s take a look at some of my favorite short-term stocks to buy for quick returns over the next few months:
- Wells Fargo (NYSE:WFC)
- Kohl’s (NYSE:KSS)
- CVS (NYSE:CVS)
- Alteryx (NASDAQ:AYX)
- Dropbox (NASDAQ:DBX)
- Under Armour (NYSE:UAA)
- Facebook (NASDAQ:FB)
Short-Term Stocks for Quick Returns: Wells Fargo (WFC)
One of the best contrarian short-term stocks to buy for quick returns is Wells Fargo.
At present, Wells Fargo stock is dirt cheap, mostly because macro-economic fundamentals remain weak (Covid-19, weak consumer spending, record-low interest rates, etc).
But those macro-economic fundamentals should meaningfully improve over the next few months, as America gets better at the Covid-19 balancing act (doing things like moving gyms and salons into parking lots, converting curbside parking into outdoor restaurant seating and re-purposing entire streets into open air markets) and as we inch closer to a vaccine. Both of those trends lay the groundwork for consumer behavior to normalize over the next few months.
Normalization will cause a rebound in consumer spending. Banking activity will pick back up. The long-end of the yield curve will rise. And Wells Fargo’s ugly fundamentals will start to look a lot less ugly.
As all that happens, dirt-cheap WFC stock could fly higher.
Another top contrarian play and one of the best short-term stocks to buy for quick returns over the next few months is Kohl’s.
Yes, much like Wells Fargo, Kohl’s is backed by horrible fundamentals right now. Consumer spending has fallen off a cliff. Particularly on apparel items. Kohl’s has been forced to close many of its stores, and operate those that are open at reduced hours with reduced volumes.
Not a great backdrop for the off-price, off-mall retailer, who just reported 23% drop in second quarter revenues.
But the pandemic won’t last forever. A potential vaccine in 2021 will spark rapid normalization in consumer behavior and unlock pent-up apparel demand, the likes of which will translate into a huge sales rebound for Kohl’s.
At the same time, many of Kohl’s closest competitors — like J.C. Penney (OTCMKTS:JCPNQ) and Neiman Marcus — have declared bankruptcy amid the pandemic, giving Kohl’s ample opportunity to win up-for-grabs market share and further goose its rebound in 2021/22.
This sales rebound will converge on what is presently a hugely discounted valuation on KSS stock to spark a massive recovery rally over the next 6+ months.
Retail stocks have not done well in 2020. CVS stock is no exception.
But, thanks to the coming flu season, CVS stock may be one of the best short-term stocks to buy today.
Thanks to Covid-19, we are now all quasi-obsessed with staying healthy and not getting sick. Disease, vaccine, and medicine awareness has never been higher in the history of the world.
Elevated awareness on that front will inevitably transfer into elevated demand for sickness prevention methods.
Accordingly, over the next six months — in preparation for the 2020/21 flu season — consumers are going to rush to drug retail stores to stock up on flu and cold medicines, and get their flu vaccines. I don’t doubt that market sales in these verticals in the second-half of 2020 will hit record highs. By a mile.
That’s great news for CVS, the largest drug retailer in the U.S. The company commands 20%-plus drug retail market share in most major U.S. metro areas.
Thus, over the next few months, CVS’ growth trajectory will meaningfully accelerate. This acceleration will converge on what is presently a dirt-cheap valuation underlying CVS. That combination should lead to big gains in CVS stock.
Although Alteryx finds itself on this list of short-term stocks to buy, make no mistake, the data analytics and automation company is a long-term winner.
AYX stock just so happens to have a compelling short-term bull thesis, too.
Long story short, AYX stock recently fell off a cliff because management issued a horrendous second-half 2020 guide in the company’s second quarter earnings report. But management’s guide assumes “no major changes to macro conditions” in the back-half of 2020, which is an erroneous assumption.
Indeed, major changes are happening already. Of particular relevance, business confidence is rapidly recovering on the back of rebounding consumer spending, easing mobility restrictions and favorable Covid-19 vaccine news.
These trends will persist. As they do, businesses will re-up spend on data science platforms like Alteryx. Management’s third and fourth quarter guides will prove antiquated, and the actual numbers will come in way ahead of expectations.
AYX stock — which is now about as cheap as it gets for a next-gen growth enterprise tech stock of this quality — will rebound in a big way.
Dropbox stock is one of the best short-term stocks to buy for quick returns because it is the most under-appreciated and undervalued name in the work-from-home virtualization space.
The company, which provides remote digital storage solutions for individuals and businesses, is at the epicenter of the work-from-home virtualization megatrend. And the company’s numbers speak to this. Last quarter, Dropbox reported 10% user growth and 16% revenue growth. Yet, DBX stock is dramatically undervalued relative to all its work-from-home peers.
DBX stock trades at less than 5-times trailing sales. Slack (NYSE:WORK) stock trades at nearly 23-times sales. Atlassian (NASDAQ:TEAM) stock trades at 26-times sales. Zoom (NASDAQ:ZM) stock trades at 92-times sales. DocuSign (NASDAQ:DOCU) stock trades at 35-times sales.
This valuation discrepancy won’t last forever. As Dropbox continues to report strong numbers in the back-half of 2020 which corroborate the idea that this is a work-from-home winner, DBX stock will benefit from significant multiple expansion and the aforementioned valuation “gap” will get narrowed.
As all that happens, Dropbox stock will pop. Likely all the way to $30.
Under Armour (UAA)
I really like Under Armour stock over the next 6 to 12 months because the athletic apparel brand is in the first inning of a huge turnaround.
For years, Under Armour has been plagued by branding problems. The company entirely missed the boat on the athleisure trend, and in desperately trying to play catch-up, started selling a ton of product into lower-priced channels, like Kohl’s, on the idea that selling discounted product would increase brand reach. But all it did was dilute brand equity, kill brand popularity and cause the company’s growth trajectory to fall flat.
Amid the novel coronavirus pandemic, though, Under Armour is finally fixing its huge branding problem.
Throughout the second quarter conference call, management talked about re-elevating brand equity by: 1) reducing brand exposure to the off-price channel, 2) building out a more robust direct sales channel, and 3) launching more premium product at premium prices.
Those are the right moves to be making. Together, they should help boost Under Armour’s brand equity. At the same time, Under Armour is reportedly launching a new clothing brand for NBA superstar Stephen Curry, and recently debuted a new premium basketball shoe for another NBA superstar, Joel Embiid.
In other words, all the pieces are in place for the Under Armour brand to rebound in a big way over the next 6 to 12 months. As it does, beaten-up UAA stock could stage a huge comeback.
We will conclude our list of short-term stocks to buy with a name that doubles as one of the best long-term stocks to buy, too: Facebook.
We all know the long-term bull thesis on FB stock.
It’s the largest, stickiest digital ecosystem on the planet. With the best and most necessary digital advertising business. That ad business will sustain robust growth over the next several years as consumer engagement — and ad dollars — continue to flow into the digital channel. Plus, Facebook has a huge opportunity ahead of it in e-commerce.
Facebook will sustain big revenue and profit growth for a lot longer, powering continued strength in FB stock.
But the short-term bull thesis on FB stock is arguably more compelling, and it has to do one with one catalyst: Instagram Reels.
Long story short, Instagram Reels has an opportunity to be Instagram Stories 2.0, and essentially turn all the hype and momentum surrounding TikTok, into increased engagement on the Instagram platform, just as Stories did with Snap (NYSE:SNAP) a few years ago. That’s a big deal, since Stories sparked a multi-quarter growth renaissance for Facebook in 2016/17, wherein user growth and revenue growth meaningfully accelerated, and FB stock charged higher.
The same could happen because of Reels in 2020/21.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the best stock pickers in the world by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he was long KSS, UAA, FB, and SNAP.