Make no mistake, I’m a long-term buy-and-hold investor. The adage slow and steady wins the race is how I approach my portfolio. I go in thinking I’ll hold a stock for at least three to five years, but more likely for decades. Yet sometimes there appear to be stocks to invest in for the short-term.
Even Warren Buffett does it a time or two. He was in and out of Taiwan Semiconductor Manufacturing (NYSE:TSM) in less than one year. That’s like a single tick of the second hand on a clock for the Oracle of Omaha, who famously said, “our favorite holding period is forever.”
Now, there’s nothing wrong with quickly exiting a stock if the investing thesis of a company radically changes for the worse after purchase. That’s probably what happened with Buffett and TSM. Maybe you realize your thesis was wrong. Getting out and cutting your losses is the best thing to do.
But what if you go in with the mindset that you’re only going to hold the stock for a short period of time? I don’t recommend that as a regular practice, but I can see an argument for capitalizing on some unique catalyst or arbitrage situation.
While special situations are rare, the following three companies are ones I think are the best stocks for short-term investment in August.
Anheuser-Busch InBev (BUD)
The world’s biggest brewer, Anheuser-Busch InBev (NYSE:BUD), was kneecapped by a Bud Light marketing campaign that alienated many of its core customers. The beer is no longer the best-selling beer in America. It wore that crown for decades but now Constellation Brands’ (NYSE:STZ) Corona beer has that honor. In fact, Bud Light has fallen to fourth place. That’s a meteoric plunge in just a few months.
Anheuser-Busch’s stock price also suffered. Shares dropped 15%, causing the brewer to lose some $27 billion in market value. Although it’s up about 20% from the lows it hit in the aftermath, the damage wrought by the Bud Light campaign has spread throughout its portfolio. Its U.S. revenue tumbled by $395 million in the second quarter.
Yet, you might want to check out A-B for a short-term rebound from this catastrophe. Outside the U.S., the brewer is performing well. Overall revenue was up 7.2% compared to a year ago, with strong growth in China. It also saw double-digit gains in South Africa and Columbia.
There remains the likelihood Anheuser-Busch will bounce back. So why not a long-term hold? Beer drinking continues to decline. Spirits dollar sales surpassed beer for the first time in 2022. Spirit sales accounted for 42.1% of all alcoholic beverage sales. Beer came in second at 41.9%.
It’s not the end of beer drinking, but it is waning. As the world’s largest brewer, Anheuser-Busch InBev will feel the effects the worst. But you might still profit from the bounce back in the meantime.
Walt Disney (DIS)
Like Bud Light, Walt Disney (NYSE:DIS) waded into waters it did not need to be in. The House of Mouse is suffering the consequences of expressing an opinion unpopular with the state’s governor. Not only that, but its movies are also flopping at the box office, and the Disney+ streaming service is costing the company billions. Couple that with dwindling theme park attendance and a chief executive officer (CEO) whose pronouncements anger striking actors and writers, and it’s a prescription for collapse.
Disney was once the studio that could do no wrong. However, superhero fatigue and entering the culture wars add to a long and growing list of big-budget box office flops. Disney has lost around $1 billion on its movies this year.
Disney+ also continues to lose money. It has lost $11 billion since its 2019 launch and 11.7 million subscribers globally in the most recent quarter. However, most of those subscribers were from its Hotstar streaming service in India.
Yet this seems a short-term problem for Disney. CEO Bob Iger is on a cost-cutting mission. He expects to exceed the targeted $5.5 billion savings goal. He’s also paring down the business and selling assets.
At $92 a share, the stock is down 20% from earlier this year. It trades at less than two times sales — its lowest valuation since 2012.
Disney could be a stock you’d also want to own for decades, but as a short-term pick, it could entertain your portfolio now, too.
Lovesac (LOVE)
Home furnishings specialist Lovesac (NASDAQ:LOVE) is the third stock I’d pick for a short-term investment. Unlike Disney, though, I don’t see the modular couch maker as a forever stock. I’d only buy it for the immediate potential of a rebound.
Lovesac makes what it calls “sactionals,” sections of couches that can be rearranged nearly limitlessly to best meet a buyer’s needs. And with over 200 different cover choices, it can meet most design choices of homeowners.
One draw of Lovesac is its eco-friendly manufacturing. The sactionals are made from recycled water bottles. One of the strikes against them, though, is the price. A sactional can cost upwards of $10,000 depending on the number of pieces and options chosen.
That’s hurting Lovesac’s performance. Profit margins continue to compress even as sales climb. That indicates Lovesac needs to discount its couches to get them to move. It also swung to a $0.28 per share GAAP loss compared to a profit of $0.12 per share last year in its fiscal first quarter.
The housing market is slumping as mortgage rates stay about 7%. The median cost of a house also exceeded $400,000 for the first time. Those are harsh conditions for Lovesac. Its stock is off 35% from its 52-week high.
Yet it’s also very cheap. The stock trades at nine times next year’s earnings estimates and at a tiny fraction of its earnings growth rate and sales. Stocks tend to return to the mean in such situations. Lovesac is not a broken business. The stock could be one you could ride higher for a short period of time.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
