It has been an absolutely wild year on Wall Street, and we are finally in the homestretch. Unfortunately, the final quarter of 2020 doesn’t promise to be much different than the first three quarters, in that there is a lot we as investors need to monitor. Over the next three months, the best stocks to buy are those that will finish this volatile year with a profitable bang.
We have an election coming up. A coronavirus pandemic to worry about. A potential vaccine to keep a close watch on. Renewed tensions with China to monitor. A much-needed stimulus bill that’s hanging in the balance.
A lot is going to happen in the fourth quarter of 2020, and stocks are going to move.
So, with that in mind, let’s talk about seven stocks that are going to move higher in the fourth quarter, and potentially end this wild year on a high note.
These top stocks to buy now include:
- Chegg (NASDAQ:CHGG)
- Gores Metropoulos (NASDAQ:GMHI)
- Sirius XM (NASDAQ:SIRI)
- Else Nutrition (OTCMKTS:BABYF)
- GrowGeneration (NASDAQ:GRWG)
- Zuora (NASDAQ:ZUO)
- Shopify (NYSE:SHOP)
Best Stocks to Buy in Q4: Chegg (CHGG)
Chegg has a created an all-in-one, end-to-end connected learning platform that has transformed into a virtualized student resource center, complete with online homework, e-textbooks, on-demand tutoring, a virtual math solver and much, much more.
Amid a broad pivot toward online education during the Covid-19 pandemic, more students are turning toward Chegg to guide their academic journey. Chegg’s growth rates have meaningfully accelerated, and CHGG stock has taken off like a rocket ship. However, these rocket-ship gains have cooled off recently, mostly because investors are worried that students (specifically, college students) won’t go back to school in the fall — and therefore won’t need a Chegg subscription.
But students are going back to school. And the school they are going back to is a hybridized one, with as much virtual learning as physical learning.
In the hybrid education world, Chegg’s connected learning platform becomes infinitely valuable as a companion academic resource for students. Thus, I fully expect Chegg’s red-hot growth trajectory from the spring and summer, to stay hot into the end of the year.
As it does, CHGG stock will likely rebound back to ~$90 levels.
Gores Metropoulos (GMHI)
Gores Metropoulos is a special purpose acquisition company (SPAC) that is set to acquire Luminar Technologies — a leading lidar company — in the fourth quarter of 2020.
According to my sources in the self-driving space, Luminar makes the industry’s best independent long-range and interference-free lidar sensors, which means that of all the lidar makers out there, Luminar is the most likely to be broadly adopted in self-driving and assisted-driving applications at scale.
Gores’ acquisition of Luminar will officially close in the fourth quarter of 2020. Once it does, the market will get really excited about Luminar, its sensors, and its upside potential in self-driving end markets. Couple this excitement with the fact that GMHI stock has been very weak over the past three weeks, and it’s easy to see how this stock could end the year on an exceptionally positive note.
Indeed, I think that the closing of the Luminar acquisition in the fourth quarter will push GMHI stock — which will eventually turn into LAZR stock — all the way back to $15+ prices.
Stocks to Buy: Sirius XM (SIRI)
Sirius XM provides an in-vehicle entertainment platform that mostly centers around premium radio stations.
This business has naturally been hit hard amid the Covid-19 pandemic, because consumers are working from home, traveling less and overall spending less time in their cars. That’s why — for the first time in several years — Sirius XM has seen its subscriber base shrink in 2020.
This won’t last.
Work-from-home is a permanent shift. Reduced consumer mobility is not. Once the pandemic clears up, work-from-home employees will run more daytime errands, go out to dinners on Friday nights, embark on more road-trips, so on and so forth. Humans’ thirst for travel and experiences is simply too great to be reduced in any meaningful capacity for an extended period of time.
Thus, over the next quarters, consumer mobility will rebound. Time in car will rebound. Sirius XM’s subscriber base will get back into growth mode. Revenue growth and profit growth trends will re-accelerate.
And, as all that happens, SIRI stock could rebound to around $8 by the end of 2021. I suspect this huge 60% rally will start in the fourth quarter of 2020.
Else Nutrition (BABYF)
Else Nutrition is a maker of the market’s first plant-based infant milk formula.
The company just launched this novel plant-based infant milk formula in North America late in the third quarter, and coordinated a bunch of influencers in the parenting and healthy eating categories to promote the new product through social media.
These promotion efforts are clearly working. My wife and I just had our first baby, and our social media feeds are swamped with Else Nutrition advertisements and promoted posts — to the point where we are well aware of the product and its benefits.
My gut tells me we aren’t alone. Many new parents across America are seeing these ads and promoted posts in their social media feeds. Many of these new parents are also Millennials that already abide by plant-forward diets. Thus, these ads should resonate pretty well with their target demographic, and Else Nutrition could sell a lot of plant-based infant milk formula to health-conscious Millennial parents in the fourth quarter of 2020.
As they do, Else Nutrition will report blowout quarterly numbers, which should really get this company’s long-term growth narrative started and send BABYF stock to the moon.
Stocks to Buy: GrowGeneration (GRWG)
GrowGeneration is a hydroponics retailer in North America that is trying to turn into the go-to supplies store for cannabis growers.
Given the company’s “picks-and-shovels” nature and exclusive exposure to the U.S. cannabis retail market, I see GRWG stock as an explosive pure-play on the U.S. Presidential Election.
That is, if Joe Biden wins the election and we get a Blue Wave across Washington, that will lay the foundation for national legalization of cannabis in the U.S. All pot stocks will jump on the catalyst. None more so that GRWG stock, because of its exclusive hyper-focus on supplying the U.S. cannabis market with necessary growing materials.
To be sure, Biden has to win in order for this stock’s Q4 bull thesis to play out as expected. I’m not saying that will happen. But the current data suggests that it is increasingly likely — and if it does happen, GRWG stock will soar.
Zuora is an enterprise software platform that provides cloud-hosted solutions enabling companies to pivot to subscription business models.
The bull thesis on Zuora stock is simple. Zuora is a long-term winner (thanks to secular growth trends promoting more ubiquitous adoption of subscription business models) going through a near-term rough patch (thanks to depressed enterprise spending amid the Covid-19 pandemic).
Those long-term tailwinds will persist. This near-term rough patch will not. Once it passes, beaten-up ZUO stock will rebound in a big way on the back of enduring tailwinds.
This is not too dissimilar from what has already happened at Alteryx (NASDAQ:AYX). The data analytics platform is a long-term winner that got knocked down by depressed enterprise spending at the hands of Covid-19, but which has rebounded in a big way in October as those depressed spending trends have reversed course.
Same thing will happen with Zuora.
Zuora will — over the next 2-3 months — report far-above-consensus numbers which underscore that the company’s current rough patch is coming to a close. On the back of those numbers, ZUO stock will soar like AYX stock has soared in early October.
Stocks to Buy: Shopify (SHOP)
Shopify, an e-commerce solutions provider that helps merchants and retailers of all shapes and sizes establish and maintain strong omni-channel operations, will have a weird holiday shopping season to contend with … and that’s a good thing.
People are going to spend money, because the labor market is rebounding, consumers have been saving forever and borrowing costs are at all-time lows. Plus, the economic outlook is only improving and consumer confidence is rising.
But, people aren’t going to spend money in stores, partly because they don’t want to be in crowds, and partly because many of these stores will be closed during the season’s traditionally busiest days.
Instead, consumers are going to shop a lot online this holiday season. Of course, that’s a good thing for all e-retailers. But it’s an especially good thing for Shopify, because its core customer base (small- and medium-sized merchants) usually sell a lot of product in-store during the holiday season, so the shift to online for these sellers will be particularly large.
Shopify’s holiday numbers will blow estimates out of the water. As they do, SHOP stock will soar.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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