It’s definitely the right time of the year to buy hot stocks. Traditionally, the market does very well in the last two months of the year, and high-momentum stocks are likely to be among the biggest beneficiaries of the “Santa Claus” rally.
That’s because, in order to enhance their overall 2021 numbers, fund managers are going to be looking to improve their statistics heading into the end of the year.
Additionally, with more federal stimulus on the way, inflation is likely to ease by mid-2022. With the Fed looking to wait awhile before raising rates and the pandemic easing, the medium-term macroeconomic outlook is actually fairly positive. Since the market is supposed to reflect future trends, it should do fairly well, at least until the end of the year.
One of the best sectors, in terms of both momentum and fundamentals, is energy. With oil prices high and the transition to renewable energy sources on the rise, fossil fuel stocks and alternative-energy names are attractive. Likewise, with electric vehicles quickly gaining ground and getting a boost, some electric vehicle (EV) makers look like excellent medium-term momentum plays.
And as the pandemic winds down, looking for hot stocks that are benefiting from that trend is a worthwhile strategy.
Five names are poised to benefit from one of those trends:
- Chevron (NYSE:CVX)
- Global X Lithium and Battery ETF (NYSEARCA:LIT)
- JinkoSolar (NYSE:JKS)
- MGM (NYSE:MGM)
- Arrival (NASDAQ:ARVL)
Hot Stocks for November: Chevron (CVX)
Benefiting from high oil prices, CVX stock climbed 9% in the past month.
Oil prices will likely stay elevated, as the economic opening reaccelerates, the Organization of the Petrol Exporting Countries has so far not agreed to pump much more oil, and the vast majority of America’s vehicles — and all of its planes — still use oil in some form to run.
In another positive development for CVX stock, high natural gas prices are also likely to continue, given the approach of winter and the rising demand for electricity in many regions.
Given this upbeat background, it’s not surprising that Chevron recently reported significantly stronger-than-expected third-quarter results. Its Q3 earnings per share came in at $2.96, versus analysts’ average outlook of $2.19, and its Q3 revenue was $44.7 billion, $3.82 billion above the mean estimate.
What’s more, the company reported its highest net income in over eight years, and it said that it may increase the amount of money that it allocates to share buybacks.
CVX stock still trades at a reasonable forward price-earnings ratio of 15, along with an impressive dividend yield of 4.7%.
Global X Lithium and Battery ETF (LIT)
With the EV revolution moving rapidly and accelerating, automakers are investing many billions of dollars in the production of lithium-ion batteries.
A multitude of companies, especially lithium miners and battery makers, are obviously going to benefit a great deal from this trend. Yet it’s not easy for everyone to invest in many of the world’s largest lithium miners, battery developers and battery-component makers. This is because a high number of them are listed in foreign countries and do not trade in the U.S.
The Global X Lithium and Battery ETF, which focuses on battery makers and lithium miners, solves that problem. For example, the fund’s second-largest holding is China’s Yunnan Energy New Material. Its third-largest holding is another Chinese company, Contemporary Amperex Technology Co., otherwise known as CATL, the world’s biggest developer of EV batteries. Neither Yunnan nor CATL is listed in the U.S.
The ETF has been a good performer in 2021, having steadily risen nearly 50% so far this year. With Europe, China, the U.S. and most of the world’s largest automakers all embracing EVs, that trend is likely to continue and even accelerate going forward.
Hot Stocks for November: JinkoSolar (JKS)
One of the world’s largest solar panel makers, JinkoSolar is poised to benefit a great deal from the quick expansion of government support for solar in the U.S, China, Europe and many other countries.
That’s a big part of the reason why JKS stock has jumped 15% in the past month.
Amid the global climate summit and with the U.S. Congress poised to pass large amounts of spending and powerful incentives for the solar sector, the rally of JKS stock is likely to continue at least through the end of the year.
In an intriguing agreement, JinkoSolar and CATL agreed to partner on the development of solar-plus storage technologies. The deal could wind up generating needle-moving royalties and profits for JinkoSolar.
I believe that investors are starting to become excited about the alliance. They’re also bullish on the IPO of Jinko’s main subsidiary on the Shanghai Stock Exchange. The IPO is expected to raise 2.5 billion RMB for Jinko.
JKS stock has an attractive forward price-earnings ratio of 13 and a still-miniscule trailing price-sales ratio of 0.5.
Not only is MGM a great reopening stock poised to benefit from pent-up demand, it’s also going to get a big boost from its sports gambling joint venture, BetMGM.
With the market finally starting to give MGM credit for these strong, positive catalysts, the shares have jumped over 25% in the last three months, 50% in 2021 and 130% over the last 12 months.
On Oct. 13, the website Lineups said “BetMGM has been elevating its offerings and is rapidly growing to become a real competitor to” DraftKings (NASDAQ:DKNG) and FanDuel.
In fact, BetMGM’s market share came in at a very respectable 26% in Q3, the website reported.
As the pandemic fades further and BetMGM becomes more firmly entrenched as a leader in the sports-gambling space, that trend should continue into the beginning of next year.
MGM stock is trading at an elevated forward P/E earning ratio of 87, based on analysts’ average 2022 EPS estimate.
But given BetMGM’s huge potential and the fact that analysts are likely underestimating the pent-up demand for Vegas gambling, I think that investors are likely to continue boosting the shares for some time.
Hot Stocks for November: Arrival (ARVL)
Shares for EV manufacturer Arrival have surged over 30% in the past month. Later this quarter, the company is expected to launch “trial productions” of its electric bus in the U.K. That news could provide a meaningful, positive for ARVL stock.
Municipalities and companies will likely be looking into avenues to improve infrastructure from the two major bills poised to be passed by Congress. As a result, there’s a good chance that Arrival will announce meaningful, new orders by the end of the year, boosting ARVL stock in the process.
Also likely making the shares appealing to investors these days is a Sept. 8 note from Bank of America. Specifically, the firm believes that the auto shortage will result in “true pent-up demand that would be more naturally released over a multi-year cyclical recovery.”
As I’ve noted in the past, UPS (NYSE:UPS) has ordered up to 20,000 delivery EVs from Arrival. The EV maker also has an alliance with Uber (NYSE:UBER).
On the date of publication, Larry Ramer held LONG positions in JKS, ARVL and MGM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.