The month of December has begun on a positive note for the stock markets. Optimism over the COVID-19 vaccine, a decisive victory for Joe Biden, and better-than-expected corporate earnings have fuelled the upbeat sentiment. It is quite likely that the month will end with a bigger than usual ‘Santa Rally.’ The rise in stock prices in the week between Christmas and New Year is popularly known as the ‘Santa Rally’.
In an interview with CNBC, Fundstrat's head of research, Tom Lee, indicated that he foresees a strong rebound in the economy and potential for fiscal stimulus. He is also optimistic that the stock market would finish the year strongly.The momentum in economic activity during the holiday season will support the bullish trend further. Another reason why we could see a huge uptick in trading volume during the end of December is the listing of Tesla (TSLA) on the S&P 500 index. The stock, with a capitalization of over $500 billion, is likely to be the largest company to be added to the index. The listing is slated to take place on December 21st.
Some of the other large-cap companies that investors can consider buying ahead of the ‘Santa Rally’ are Alphabet, Inc. (GOOGL), Walmart Inc. (WMT), Visa Inc. (V), and Berkshire Hathaway Inc. (BRK.B). With solid fundamentals and multiple growth catalysts, these stocks are poised for big gains.
Alphabet, Inc. (GOOGL)
GOOGL as a search engine commands a 90% share of the global market. The company also has a lot of other businesses such as YouTube, Google Play, and its Smart Home speakers. GOOGL’s path-breaking businesses like Waymo, a self-driving car company, as well as its Life Sciences business, Verily, also have immense prospects.
GOOGL’s revenue during the third quarter ended September 2020 increased 14% year-over-year to $46.2 billion. Its revenue was led by an uptick in the advertising revenue. YouTube’s ad revenues rose by 32.6% in the third quarter. At the end of the third quarter, YouTube Music and YouTube Premium had a combined paid subscriber base of over 30 million. Meanwhile, the company’s EPS for the third quarter jumped 62% year-over-year to $16.40.
Analysts expect revenue for the quarter ending December to be $53.1 billion, up 15.2% year-over-year. Meanwhile, EPS is likely to grow at 16.5% per annum for the next five years.
GOOGL has surged 36.3% year-to-date to end yesterday’s trading session at $1,821.84, quite close to its 52-week high at $1843.83. Over the past six months, the stock jumped 26.5%.
How does GOOGL stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
A for Industry Rank
A for Overall POWR Rating
The stock is also ranked #2 out of 59 stocks in the Internet industry.
Walmart Inc. (WMT)
WMT, the operator of discount stores for over six decades, is a global retailing giant in terms of revenue. Walmart U.S., Walmart International, and Sam's Club are the company’s three core segments. The various formats a company operates in include hypermarkets, supermarkets, cash and carry stores, warehouse clubs, and discount stores. The company has nearly 11,500 stores and several e-commerce websites under 56 banners across 27 countries.
In a move to boost subscriptions during the holiday season, WMT slashed off the $35 charge for next day delivery for Walmart+ members for most orders except groceries. The company is ramping up investment to give a push to its online operations as its in-store sales took a hit due to COVID-19.
During the third quarter ended September 2020, the company’s total revenue increased 5.2% year-over-year to $134.7 million. Walmart U.S. comp sales climbed 6.4% driven by strength across general merchandise, health & wellness, and food. Meanwhile, the U.S. eCommerce sales climbed 79% due to the increased online shopping during the pandemic. EPS for the quarter climbed to $1.34 from $1.16 posted in the same period last year.
Analysts expect sales for the fourth quarter ended January 2021 to be $147.8 billion, indicating a 4.3% increase year-over-year. Meanwhile, EPS is likely to increase by 8% to $1.49.
On a year-to-date basis, WMT surged 26.7% to end yesterday’s session at $149.30. Over the past six months, the stock rose 21.4%.
WMT’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade and Buy & Hold Grade, and a “B” for Industry Rank and Peer Grade. Among the 18 stocks in the Grocery/Big Box Retailers industry, it’s ranked #1.
Visa Inc. (V)
V is a leading global payment technology company which facilitates digital payments across consumers, businesses, strategic partners as well as government entities. Visa, Visa Electron, Interlink, V PAY, and V PLUS are the brands under which the company operates. Its transaction processing network, VisaNet, enables authorization, clearing, and settlement of payment transactions.
V wants to capitalize on the growing interest in cryptocurrencies and has partnered with BlockFi to release the first credit card to offer Bitcoin Rewards to residents in the United States in all states, except for New York, in spring 2021. Evolve Bank & Trust would issue the card, while Deserve would be the technology partner.
During the fourth quarter ended in September 2020, V’s net revenue dropped 16.8% year-over-year to $5.1 billion. EPS for the quarter also declined to $3.87 from $5.37 posted in the prior-year period. As a positive impact of the COVID-19, the cross-border payment volume and processed transactions growth improved during the quarter. According to the CEO of the company, Alfred F. Kelly, Jr., “As the world turns increasingly to digital payments, we see tremendous opportunity for growth.”
The consensus revenue estimate for 2021 is $23.2 billion, indicating a 6.3% rise over the prior-year period. The company’s EPS is expected to grow at a rate of 21.9% per annum over the next five years.
V ended yesterday’s trading session at $208.05, gaining 11.9% on a year-to-date basis. The stock also jumped 7% over the past six months.
It is no surprise that V is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Buy & Hold Grade, and Industry Rank. In the 46-stock Consumer Financial Services industry, it is ranked #1.
Berkshire Hathaway Inc. (BRK.B)
BRK.B is a holding company for multiple businesses managed by the veteran investor, Warren Buffet. The company’s business is diversified, however, most of its subsidiaries are into insurance. GEICO, Northern Santa Fe, Dairy Queen, Pampered Chef, Burlington, Fruit of the Loom, and NetJets are some of its subsidiaries. Buffett's classic investing approach has added a competitive edge to BRK.B.
BRK.B’s net earnings during the third quarter ended September 2020 climbed 82% on a year-over-year to $30.1 billion. However, its operating earnings during the quarter was $5.5 billion, indicating a decline of 30% from the year-ago period. BRK-B announced over $35 billion of investments during the quarter. The company also spent nearly $18 billion on stocks, repurchased a record $9 billion of its shares, and bagged deals worth $10 billion.
Analysts estimate BRK.B’s revenue for the fourth quarter ended December 2020 to be $64.3 billion, indicating a 33.5% decline year-over-year. Meanwhile, EPS is expected to grow 26.5% to $2.29 for the fourth quarter.
BRK.B gained 1.7% on a year-to-date basis to close at $231.02 in yesterday’s trading session. During the past six months, the stock surged 23.9%.
BRK.B’s strong fundamentals are reflected in its POWR Ratings, it has a “Strong Buy” rating with an “A” in Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. Within the Insurance - Property & Casualty industry, it’s ranked #2 out of 59 stocks.
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GOOGL shares were trading at $1,823.23 per share on Friday afternoon, up $1.39 (+0.08%). Year-to-date, GOOGL has gained 36.12%, versus a 16.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education.4 Top Stocks to Buy for a Big 'Santa Rally' appeared first on StockNews.com