The more things change, the more they stay the same. That could be the mantra for investors in the early days of 2021. Long-term investments may look a little shaky. Which could make now an ideal time to look for short-term stocks to buy.
As I write this, the market is in a sell-off that could be happening for several reasons. Some investors are settling positions. The recent runoff election in Georgia will also have a significant impact on the monetary and tax policy of the United States.
However, you can’t ignore the novel coronavirus, which continues to vex society. The world was already dealing with a post-holiday surge in cases attributed to recent holiday travel. Now there’s news of a mutated, more contagious strain that is ensuring we all will be dealing with the pandemic longer than any of us would like.
But there is real hope in the form of a vaccine. And that means that there will be some stocks that may look a lot better, or worse, today than they will in a few months. Investors call these short-term stocks. In other words, stocks they are looking to hold for less than a year. In some cases, these may be stocks they only plan on holding for a few months.
There are no specific criteria for these stocks. Investors can find short-term stocks to buy across all market caps and sectors. With that in mind, here are seven candidates to consider:
- Simply Good Foods (NASDAQ:SMPL)
- Advanced Micro Devices (NASDAQ:AMD)
- Walgreens Boots Alliance (NYSE:WBA)
- Constellation Brands (NYSE:STZ)
- Dollar General (NYSE:DG)
- Procter & Gamble (NYSE:PG)
- T-Mobile (NASDAQ:TMUS)
Short-Term Stocks to Buy: Simply Good Foods (SMPL)
Simply put (no pun intended), the reason to consider SMPL stock is because it is the parent of the Atkins brand of meals, snacks and beverages. The company had a stellar 2020 fourth quarter that they reported in late October. A good bit of that growth came from the company’s acquisition of Quest Nutrition. But it’s the Atkins link that should have investors intrigued.
A new year brings with it resolutions. And perhaps no other resolution is more prevalent than the desire to lose weight. Holiday sweets can easily be replaced by Atkins snacks. Even though Simply Good posted a decline in Atkins sales in the fourth quarter, they did post a rise in digital sales. This suggests that they have a base of customers that have already become comfortable adjusting to their new normal.
Simply Good stock is down from its record high set at the end of 2020. The stock is looking a little overbought at the moment, but opportunistic investors should look for a chance to buy this stock on a dip.
Advanced Micro Devices (AMD)
The year 2020 brought one record high after another for AMD stock. So it seems hard to believe that the chipmaker’s stock won’t take a pause at some point. For the bold investor, that could justify taking a short position in Advanced Micro Devices. And other investors may want to continue to buy and hold the stock. I’d recommend that approach if you already own it.
However, if you don’t already own the stock, the beginning of 2021 may present an interesting opportunity for short-term investors. Advanced Micro Devices hit its latest record high at the end of December. As of this writing, however, the stock is trading down about 3% from those highs. This could mean that investors will get an opportunity to buy AMD stock at a price you’re unlikely to see for quite some time.
David Moadel recently suggested that increasing competition may make 2021 a more challenging year for AMD. However, the long-term narrative for AMD seems sound. And that means short-term investors may have a short-lived opportunity.
Walgreens Boots Alliance (WBA)
Earnings season can present investors with an opportunity to take advantage of short-term price movement. And that may be the case for Walgreens Boots Alliance as one of my short-term stocks to buy. The company is expected to report increased sales of prescription drugs, which is why Forbes suggests WBA stock may have a valuation that’s more than 20% higher than its stock price as of this writing.
Walgreens continues to face significant challenges in the online prescription drug marketplace, not the least in the form of Amazon (NASDAQ:AMZN). That’s one of the reason it was among the worst value stocks in 2020.
However, as the immediate fear of the pandemic begins to ease, it should prompt higher sales of prescription drugs, particularly if hospitals are able to continue performing elective surgeries in the meantime.
And let’s not forget that value stocks are not likely to have another disastrous year, which bodes well for Walgreens. The company not only continues to pay out a generous dividend, but has continued to grow that dividend for 44 years.
Constellation Brands (STZ)
Another stock that may be ready to give short-term investors a lift after earnings is Constellation Brands. The producer and distributor of premium beer, wine and spirits is coming off a great year in 2020. Liquor stocks in general were a pandemic winner, and Constellation was no different.
Investors should also consider that the company’s ownership stake in Canopy Growth (NASDAQ:CGC) is still weighing down the company’s earnings. For example, in its most recent quarter, the company posted what would be considered a very modest 1.5% year-over-year (YoY) increase in earnings per share (EPS). However, if a loss from Canopy is removed from those results, Constellation’s YoY EPS growth would have been around 7%.
Constellation also pays a modest dividend. So for value investors who are hoping for a resurgence in value stocks, a company that continued to pay a dividend throughout the pandemic may very well be worth keeping on your radar.
Dollar General (DG)
Staying with the value-stock theme, another of my short-term stocks to buy is Dollar General. The discount retailer was one of the largest pandemic winners. The company took what may have been seen as a gamble by continuing to expand its retail footprint even in the midst of a pandemic.
But in 2020 that strategy worked out well, because Dollar General was exactly where its customers needed them to be. And with an expanding online presence, DG stock looks poised to improve on the roughly 37% gain it made in 2020.
However, after posting solid earnings in December, Dollar General stock is in retreat. I certainly can’t explain it. You would think that with virus cases on the rise and stimulus checks hitting bank accounts, the stock would surge. However, the market tends to do what it will do, which presents a nice short-term opportunity to buy a stock that should continue to climb as long as the pandemic continues.
As of this writing, DG stock looks to be reaching a level of support at around $206. The stock looks like a buy now. And if the stock were to fall through this level, all the better.
Procter & Gamble (PG)
In 2020, PG stock underperformed the broader market. However, this is a defensive stock that deserves a place in any investor’s portfolio. As the great toilet-paper shortage emerged at the onset of the pandemic, it simply proved the value of consumer staples. And Procter & Gamble is an undisputed leader in this sector. Their products are ordered over and over again and are agnostic to the way that consumers will choose to do their shopping.
And the company has a couple of other catalysts. First, the company has been expanding its market share worldwide due to expansion into additional business units. Another stimulant for the stock is the decline in commodity prices. For a company like PG, this reduces their material costs, which should increase earnings.
However, both of these may only give Procter & Gamble a short runway to outperform the market. However, that time would appear to be now. The stock has made all its growth in the last six months and looks to be approaching a level of resistance around $140.
The last on my list of short-term stocks to buy is T-Mobile. The reason for this isn’t due to 5G. Nor is it due to the likelihood that the economy is dipping into a recession, which will aid this defensive stock. It’s more traditional than that. After years of gaining market share, analysts believe that now will be a time for T-Mobile to start repurchasing shares, which will be a way of returning capital to shareholders.
TMUS stock should also benefit from expanding margins as it increases its operating cash flow in upcoming years. The largest question for investors is if they should wait for the stock to drop from its current level. The stock is at the upper end of its 52-week average, so investors may want to wait for a dip in the share price as an opportunity to buy the stock.
However, for those investors that put stock in analyst ratings, the company recently received a $140 price target from JP Morgan Chase (NYSE:JPM).