With the holiday season approaching, I would not mind having some extra dollars in my pocket. I’m sure you feel the same. But how can we make that happen? A good idea is to allocate some funds toward short-term trading. That’s because the returns in short-term stocks can be really surprising.
I also believe that broad market sentiments are likely to remain positive through the end of the year. Why? Positive developments related to the Covid-19 vaccine. Recently, Pfizer (NYSE:PFE) announced it had developed a candidate that was 95% effective against the novel coronavirus. What’s more, one of the picks on this list has made a similar efficacy announcement, resulting in bullish sentiment.
As such, this article will discuss five short-term stocks that can reward investors in time for December. These stocks have potential upside triggers and are also equally good long-term investments.
Short-Term Stocks to Buy: Alibaba Group Holding (BABA)
First on my list of short-term stocks is China-based Alibaba. Not long ago, BABA stock touched a 52-week high of $319 and some change. However, China’s decision to pause Ant Group’s initial public offering (IPO) triggered a stock correction. After declining to $255 in mid-November, BABA has started moving higher again. Because of that, I believe now is a good time to trade the stock for short-term gains.
The upcoming holiday season is one of the key reasons to be bullish on Alibaba. Last year, the company reported better-than-expected results for the fourth quarter. And with the novel coronavirus pandemic accelerating the adoption of e-commerce, it’s likely that the current quarter results will surpass expectations.
In addition to the core e-commerce segment, the company’s cloud business has also been delivering strong numbers. For Q2 of 2020, the company reported a negative adjusted EBITDA margin of 1% for the cloud business (Page 7). Given the growth, it’s very likely that the segment will turn EBITDA level positive in the current quarter. This will also trigger stock upside.
But I would also add that BABA stock is an investing idea. The holidays will likely bring some trading gains. Yet current levels are attractive for long-term exposure, too. For the next five years, the company’s earnings are expected to grow at an annual rate of 20.2%. Therefore, the stock is attractive at its forward price-to-earnings-ratio of 26.24.
Currently, MRNA stock is among the top short-term stocks to buy. In the next few months, the company will likely roll out vaccines in the United States. Officials are planning to release 6.4 million doses in the first distribution stage.
Moderna is already seeking emergency use authorization (EUA) for its vaccine from the U.S. Food & Drug Administration (FDA). And given the results of the trial phase effectiveness of the vaccine, the drugmaker is likely to get it.
As far as the stock goes, MRNA was sitting in the range of $60 to $70 before moving higher recently. Now, it has already hit a 52-week high of $178.50 and the EUA will ensure that this positive momentum sustains. Outside of the States, the European Union has also secured an advance purchase agreement for 80 million doses of the vaccine, with an overall agreement for 160 million doses.
So, through the next year (after regulatory approvals), the pharmaceutical company will be delivering vaccines to the United States, the European Union and other parts of the world. As the revenue and cash flow visibility grows, MRNA stock is likely to discount this factor.
CMG stock has been in a consolidation zone in the last few months. As such, I believe that now is a good opportunity to accumulate shares for a potential breakout.
A key reason to consider CMG among other short-term stocks is this: the company reported strong results for Q3 2020. Digital sales increased by 202.5% and made up almost 49% of the total quarterly sales. With the upcoming holiday season, I expect another strong quarter.
The novel coronavirus pandemic has also shifted even more focus to healthy eating and lifestyle. This is good news for Chipotle, as the company focuses on quality food ingredients.
Further, the potential rollout of a Covid-19 vaccine in the United States is another stock upside trigger. This past quarter, the company opened 44 new restaurants despite the pandemic. This is likely to translate into incremental growth in the coming year.
Additionally, Piper Sandler recently increased its price target for CMG stock to $1,745. This would imply a potential upside of 34% from current levels.
Besides being an attractive name among short-term stocks, I am also bullish on CMG for the next 12 to 24 months. It’s a strong name for both now and after the pandemic.
CVX stock is one of the more attractive short-term stocks in the energy sector. Just this past month, the stock has already moved higher by nearly 28%. I believe that this momentum will continue through the end of the year.
Like with other names, vaccine optimism is one of the main reasons for the stock’s recent performance. The International Monetary Fund believes that GDP will expand at 5.4% for the coming year (Page 33). On top of that, the U.S. Energy Information Administration also has a relatively higher outlook for oil prices.
Given this outlook, I believe that the energy sector can continue to recover from oversold levels. And when it comes to the company itself, CVX has strong fundamentals. As of Q3 2020, Chevron reported a net-debt-ratio of 17.5%. In addition, it reported a robust cash buffer of $6.9 billion.
Therefore, as Chevron emerges from one of the worst crises in decades, the energy firm still has solid financials for growth. Because of that, it’s not surprising that the stock has surged through November. As a stronger fiscal year 2021 is discounted, I believe the stock will maintain its positive momentum.
The last on my list of short-term stocks is Walmart. With the broad consumption sector being a central GDP growth driver in the recent quarter, WMT stock has continued to trend higher and higher.
The National Retail Federation believes that holiday sales are “forecast to rise 3.6% to 5.2%” in comparison to a year ago. This is positive news for the retail sector. Naturally, Walmart is well-positioned to benefit.
On top of that, the company’s e-commerce growth has been stellar in the last quarter. With the pandemic, a significant amount of retail sales shifted online. Walmart capitalized on that trend. Of course, Amazon (NASDAQ:AMZN) will also deliver strong quarterly results. But I like WMT better from a valuation and low-beta perspective.
Last year, Walmart also beat earnings estimates in the holiday season, with strong e-commerce driven growth. I would not be surprised if the company delivers another earnings beat for Q4 2020. That will take WMT stock higher, making it a pick to consider both short- and long-term.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.