We're getting into the time of year when people start talking about a Santa Claus rally. Specifically, that's an event in which stocks move sharply higher during the week between Christmas and New Year's Day. However, colloquially, investors have come to understand it as being a strong rally in the last month of the year.
Why should you believe that the market may rally to close the year? First, it's likely that the Federal Reserve will cut interest rates at least once, if not twice before the year ends. That will be bullish for stocks in the short term. Second, the stock market has already had a strong year despite the uncertainty surrounding the election. With that uncertainty out of the way, many investors may want to make up for lost time.
That means, if you have some money on the sidelines, now may be the time to look at putting some capital to work. In this special presentation, we're looking at seven “risk-on" stocks that are likely to outperform the market in the short term. These are stocks that may have been too risky in the past year but now may lead the charge forward.
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- Advanced Micro Devices
- Novo Nordisk
- MercadoLibre
- Barrick Gold
- Cameco Corp.
- Occidental Petroleum
- Weyerhauser
#1 - Advanced Micro Devices (NASDAQ:AMD)
Advanced Micro Devices Inc. (NASDAQ: AMD) is widely seen as the strongest competitor to NVIDIA Corp. (NASDAQ: NVDA) in the coming years. The company is ready to launch its high-performance chip that can compete with NVIDIA’s Hopper platform.
The window to capture market share is small as NVIDIA is already planning to deliver some of its Blackwell chips in the fourth quarter. However, NVIDIA and AMD make up a doupoly in the data center market. And while critics will note that NVIDIA commands about 90% of that market, AMD is the only other significant player in this space. That says nothing of the company’s position in the still-growing gaming category.
Some investors will argue that NVIDIA will be a better choice in the chip sector. I won’t try to dissuade that opinion. But if you feel that NVIDIA may be a little overvalued, AMD stock offers a good option. Analysts are forecasting an impressive 70.7% earnings growth in the next 12 months. And the analysts’ consensus price target of $195 is 23% higher than its price on October 17, 2024.
About Advanced Micro Devices
Advanced Micro Devices, Inc operates as a semiconductor company worldwide. It operates through Data Center, Client, Gaming, and Embedded segments. The company offers x86 microprocessors and graphics processing units (GPUs) as an accelerated processing unit, chipsets, data center, and professional GPUs; and embedded processors, and semi-custom system-on-chip (SoC) products, microprocessor and SoC development services and technology, data processing unites, field programmable gate arrays (FPGA), and adaptive SoC products.
Read More - Current Price
- $156.25
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 29 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $195.00 (24.8% Upside)
#2 - Novo Nordisk (NYSE:NVO)
Novo Nordisk A/S (NYSE: NVO) was one of the hottest stocks of 2023 as the company was first-to-market with its GLP-1 obesity drugs Ozempic and Wegovy. However, that growth has stalled in 2024 as competitors have entered the fray.
Nevertheless, revenue and earnings continue to grow year-over-year and analysts forecast 38.8% EPS growth in the next 12 months. And about 32% of that revenue growth is coming from the company’s GLP-1 products.
But there’s more to the story. Novo Nordisk continues to be a leader in diabetes treatments on a broad scale. Plus, the company has a deep pipeline that includes treatments for a range of conditions.
NVO stock is trading at around 39x forward earnings which may feel overvalued to some investors. However, the stock is down more than 12% in the three months ending October 17, 2024. That could be a buyable dip. Analysts maintain a consensus Moderate Buy rating with a price target of $144.50 which would be a 21% gain over the next 12 months.
About Novo Nordisk A/S
Novo Nordisk A/S, together with its subsidiaries, engages in the research and development, manufacture, and distribution of pharmaceutical products in Europe, the Middle East, Africa, Mainland China, Hong Kong, Taiwan, North America, and internationally. It operates in two segments, Diabetes and Obesity Care, and Rare Disease.
Read More - Current Price
- $118.22
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 6 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $144.50 (22.2% Upside)
#3 - MercadoLibre (NASDAQ:MELI)
MercadoLibre Inc. (NASDAQ: MELI) is another risk-on stock that investors should consider if a Santa Claus rally becomes a reality. The company is to e-commerce in Latin America as Amazon.com Inc. (NASDAQ: AMZN) is to e-commerce in the United States.
And no matter if you’re looking in the U.S. or abroad, acceptance of e-commerce is growing. According to Capital One Research, online shopping sales will grow at an average annual rate of 8.18% between 2023 to 2030. And by 2030, it projects that online shopping will make up 25% of global sales.
After fifteen years of rapid expansion across 18 countries, MercadoLibre is well positioned to take advantage of that growth. Analysts are forecasting a 33% growth in earnings per share (EPS) in the next 12 months. Revenue for the first two months of 2024 is already about 42% higher year-over-year (YOY).
That makes the forward P/E of around 52x earnings easier to digest. And if investors are struggling to digest a share price of over $2,000 per share, it’s important to note that the company has never split its stock, but at this level, it may be an attractive opportunity to attract new investors.
About MercadoLibre
MercadoLibre, Inc operates online commerce platforms in the United States. It operates Mercado Libre Marketplace, an automated online commerce platform that enables businesses, merchants, and individuals to list merchandise and conduct sales and purchases digitally; and Mercado Pago FinTech platform, a financial technology solution platform, which facilitates transactions on and off its marketplaces by providing a mechanism that allows its users to send and receive payments online, as well as allows users to transfer money through their websites or on the apps.
Read More - Current Price
- $2,065.87
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 15 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $2,283.00 (10.5% Upside)
#4 - Barrick Gold (NYSE:GOLD)
Some analysts project gold prices could soar to between$2,900 and $3,000 a troy ounce by the end of 2025. And with the spot price of gold cracking the $2,700 mark as of this writing, those estimates may be too low. Central bank demand along with concerns over a weak dollar are two catalysts pushing the price of the yellow metal higher.
That's bullish for gold mining stocks like Barrick Gold Corp. (NYSE: GOLD). The stock is up over 22% in the six months ending October 17, 2024. The company has a rock-solid balance sheet and is primed to take advantage of rising gold prices with investments in strategic expansion projects that a higher gold price makes possible.
GOLD stock, like physical gold, is likely to remain volatile. However, analysts are forecasting earnings growth of 38.5% in the next 12 months. That corresponds to a consensus Moderate Buy rating and a price target above $23 that would be a gain of approximately 18%.
About Barrick Gold
Barrick Gold Corporation is a sector-leading gold and copper producer. Its shares trade on the New York Stock Exchange under the symbol GOLD and on the Toronto Stock Exchange under the symbol ABX.
In January 2019 Barrick merged with Randgold Resources and in July that year it combined its gold mines in Nevada, USA, with those of Newmont Corporation in a joint venture, Nevada Gold Mines, which is majority-owned and operated by Barrick.
Read More - Current Price
- $20.35
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $23.60 (16.0% Upside)
#5 - Cameco Corp. (NYSE:CCJ)
Cameco Corp. (NYSE: CCJ) is a mining stock of a different kind. The company is the world’s largest publicly traded uranium miner at a time when uranium prices are likely to move sharply higher due to a demand spike as nuclear energy is having a revival.
Nuclear energy is one of the only forms of truly clean energy. However, a key reason for the revival in nuclear energy demand is more practical. Data centers continue to grow along with the demand for AI applications. This will require a massive amount of energy delivered 24/7. And expanding electrical capacity to meet the needs of electric vehicles will be another growth driver.
CCJ stock is a momentum stock that is up 30.6% in 2024. However, that growth still appears to be lagging behind the anticipated 95% growth in earnings in the next 12 months. That’s why the $66.56 consensus price target for the stock may be moving higher in coming months.
About Cameco
Cameco Corporation provides uranium for the generation of electricity. It operates through Uranium, Fuel Services, Westinghouse segments. The Uranium segment is involved in the exploration for, mining, and milling, purchase, and sale of uranium concentrate. The Fuel Services segment engages in the refining, conversion, and fabrication of uranium concentrate, as well as the purchase and sale of conversion services.
Read More - Current Price
- $56.68
- Consensus Rating
- Buy
- Ratings Breakdown
- 7 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $66.56 (17.4% Upside)
#6 - Occidental Petroleum (NYSE:OXY)
Occidental Petroleum Corp. (NYSE: OXY) is down 14% in 2024. That’s not surprising. Despite wars raging on two continents and stimulus measures being adopted by world central banks, the price of crude oil remains suppressed. But analysts are still bullish on the outlook for oil.
With the solid backing of Warren Buffett, Occidental Petroleum is a solid choice. Buffett’s Berkshire Hathaway (NYSE: BRK.B) owns approximately 29% of Occidental as of this writing. And the firm has regulatory approval to buy up to 50% of the company stemming from the $10 billion that Berkshire gave to Occidental that allowed it to acquire Anadarko in 2019.
Some investors may look at energy stocks as a one-sided bet on a Republican victory in November. But the reality is that oil stocks are likely to benefit no matter the outcome of the election. That's because lower interest rates are expected to spur economic activity – and the need for energy which still largely comes from fossil fuels.
About Occidental Petroleum
Occidental Petroleum Corporation, together with its subsidiaries, engages in the acquisition, exploration, and development of oil and gas properties in the United States, the Middle East, and North Africa. It operates through three segments: Oil and Gas, Chemical, and Midstream and Marketing. The company's Oil and Gas segment explores for, develops, and produces oil and condensate, natural gas liquids (NGLs), and natural gas.
Read More - Current Price
- $51.73
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 11 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $65.78 (27.2% Upside)
#7 - Weyerhauser (NYSE:WY)
The housing market is likely to remain front and center for investors in 2025. Both candidates have different proposals to stimulate this crucial sector. It’s too early to tell what this will look like. However, assuming there will be more homebuilding activity, it may be time to look for lumber stocks like Weyerhauser Co. (NYSE: WY).
This is an example of trying to skate to where the puck is moving. If building activity increases, it will be seen in commodity stocks first. Weyerhauser is one of the world’s largest private owners of timberlands. After a sharp move higher in 2021 and 2022, the stock has been trading sideways for the last two years.
That said, analysts predict earnings growth of 68% in the next 12 months. That’s not reflected in the consensus price of $36.33, which is an 11% gain. However, by the time the company starts showing earnings growth, that gap could already be gone.
About Weyerhaeuser
Weyerhaeuser Company, one of the world's largest private owners of timberlands, began operations in 1900. We own or control approximately 11 million acres of timberlands in the U.S. and manage additional timberlands under long-term licenses in Canada. We manage these timberlands on a sustainable basis in compliance with internationally recognized forestry standards.
Read More - Current Price
- $32.79
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $36.33 (10.8% Upside)
When you get right down to it, any asset can be a risk-on asset, depending on what's happening in the economy and the markets. And any stock can be a risk-off stock if you intend to hold it over the long term.
But for the purposes of this special presentation, we're defining risk-on as stocks that will likely outperform the market in the next year. That's because markets historically perform worse in the year after the presidential election than they do in an election year. So much for a honeymoon period.
Also, there's no guarantee that a Santa Claus rally will happen this year, but as we noted in the introduction, the odds are favorable. The premise behind a Santa Claus rally is that investors want to end the year on a high note.
With that said, many investors will try to position their portfolios to align with where public and monetary policy is likely to go. That may be a mistake.
Stock performance for specific sectors is rarely as good or bad as analysts may suggest. That's why the stocks in this presentation are more evergreen. The catalysts for each one exist no matter who is in the White House or what the composition of Congress will be.
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