The beginning of a new year is a time for investors to rebalance their portfolio. This can have a bullish effect on stocks as it did this year. Why does this happen? Here are a few thoughts:
- Investors who engage in a tax loss harvesting strategy at the end of the year look for ways to redeploy capital.
- Investors who receive year-end bonuses may put money into the market.
- January is also a month where some fund managers rebalance their portfolios by dropping losers and buying the prior year’s outperformers.
That last point is a key one for investors. It’s always important to look at the market for what it is instead of looking to confirm the market conditions you want. Some investors hold onto stocks thinking that a change in the date on a calendar will change a company’s fundamentals.
They also frequently hang on to theories that may have merit but are not in line with the way the market is moving.
In this special presentation, we highlight seven stocks that have catalysts that can help your portfolio build off the market’s strong start.
Quick Links
- Dollar General
- Costco
- Deckers Outdoor
- Lululemon
- Advanced Micro Devices
- Pfizer
- Cal-Maine Foods
#1 - Dollar General (NYSE:DG)
The first stock for you to consider is Dollar General Corporation (NYSE:DG). Consumers are now facing the twin towers of inflation and higher interest rates. At times like this, they’re looking for ways to make their dollars stretch farther. And Dollar General can be that solution.
In addition to low prices, Dollar General operates strategically in rural markets that are not easily serviced by big box retailers. That means in addition to saving money while they’re at the store, consumers won’t have to drive as far which provides more savings.
The company hasn’t been immune from higher producer prices. Earnings have been down on a year-over-year basis. But that may be changing. And revenue continues to grow on a sequential and year-over-year basis.
Heading into 2023, DG stock is trading near the top of its 52-week range, while the S&P 500 is near its 52-week lows. And the stock is still a moderate buy from the analysts tracked by MarketBeat.
About Dollar General
Dollar General Corporation, a discount retailer, provides various merchandise products in the southern, southwestern, midwestern, and eastern United States. It offers consumable products, including paper and cleaning products, such as paper towels, bath tissues, paper dinnerware, trash and storage bags, disinfectants, and laundry products; packaged food comprising cereals, pasta, canned soups, fruits and vegetables, condiments, spices, sugar, and flour; and perishables that include milk, eggs, bread, refrigerated and frozen food, beer, and wine.
Read More - Current Price
- $118.09
- Consensus Rating
- Hold
- Ratings Breakdown
- 9 Buy Ratings, 11 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $147.86 (25.2% Upside)
#2 - Costco (NASDAQ:COST)
Costco Wholesale Corporation (NASDAQ:COST) stock is down nearly 20% for the year. Despite that, the stock still carries a hefty P/E ratio of 34x earnings. That means by most measures the stock is still overvalued. At the same time, analysts still give the stock a price target of $552, which suggests an upside of 21%.
But Costco has the benefit of being a members-only retail outlet. This brings to mind two catalysts. First, the company has retained its membership despite increasing its membership fee. Second, once consumers pay that fee, they’re more likely to shop at Costco because they want to get value from the membership. Plus, Costco locations also provide gas stations.
Costco took the unprecedented stop of leasing three container ships along with several thousand containers to help manage its supply chain in 2022. That helped them control prices and pass those savings on to its customers. And even in doing this, the company continues to deliver growth in both revenue and earnings.
About Costco Wholesale
Costco Wholesale Corporation, together with its subsidiaries, engages in the operation of membership warehouses in the United States, Puerto Rico, Canada, Mexico, Japan, the United Kingdom, Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden. The company offers branded and private-label products in a range of merchandise categories.
Read More - Current Price
- $817.60
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 20 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $799.33 (2.2% Downside)
#3 - Deckers Outdoor (NYSE:DECK)
Moving from the where consumers may buy to the what, brings to mind Deckers Outdoor Corporation (NYSE:DECK). The company is best known for its Uggs brand of slippers. But the company is increasingly known for its HOKA brand running shoes. And that’s where analysts believe the growth will come from.
The company reports earnings on February 2, 2023, and this will be one to watch. DECK stock is trading near the top of its 52-week range. Beating expectations will add validity to analysts such as Bank of America (NYSE:BAC) who are bullish on the stock and give it a $425 price target. Cowen has gone even farther boosting its price target to $450.
Deckers Outdoor does not pay a dividend, but at a time when investors are looking for stocks that could surprise in January, the stock is worth a look.
About Deckers Outdoor
Deckers Outdoor Corporation, together with its subsidiaries, designs, markets, and distributes footwear, apparel, and accessories for casual lifestyle use and high-performance activities in the United States and internationally. The company offers premium footwear, apparel, and accessories under the UGG brand name; footwear and apparel for ultra-runners and athletes under the Hoka brand; and sandals, shoes, and boots under the Teva brand name.
Read More - Current Price
- $894.90
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $1,040.13 (16.2% Upside)
#4 - Lululemon (NASDAQ:LULU)
Next on this list of stocks to buy for a January boost is Lululemon Athletica Inc. (NASDAQ:LULU). Perhaps the most widely acknowledged New Year’s Resolution is to lose weight. For many people, that resolution means getting back to the gym. And if they’re going to the gym, they’re going to need to have the right gear, including the right wardrobe.
I don’t know if investors need that much of a reason to buy LULU stock, but it’s likely to be a reason to invest in the company. With many companies expected to disappoint on earnings, Lululemon is expected to show strong earnings growth in the next two years. That’s supported by a profit margin that is nearly double the sector average.
That should be enough to support the company’s premium valuation. And the recent sell-off gives the stock an attractive 30% upside from its current level.
About Lululemon Athletica
Lululemon Athletica Inc, together with its subsidiaries, designs, distributes, and retails athletic apparel, footwear, and accessories under the lululemon brand for women and men. It offers pants, shorts, tops, and jackets for healthy lifestyle, such as yoga, running, training, and other activities. It also provides fitness-inspired accessories.
Read More - Current Price
- $253.50
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 7 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $416.26 (64.2% Upside)
#5 - Advanced Micro Devices (NASDAQ:AMD)
If you buy into the strategy of buying into the sectors that were the hardest hit in 2022, you may want to look at the chip sector. And if you do, Advanced Micro Devices, Inc. (NASDAQ: AMD) is starting to look like a good buy.
AMD stock is down over 50% in 2022. This is despite a year-over-year growth trend on both the top and bottom lines. In fairness, the chip market is projected to slow down so investors were likely trying to get the stock down to a more reasonable valuation.
With a forward P/E ratio of around 18x, reasonable may have arrived. And with analysts expecting the stock to grow at an average of 18% over the next five years, AMD stock is beginning to look attractive again.
The analysts tracked by MarketBeat give AMD stock a price target of $97.29, which would be a gain of over 52% from the current price.
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
- $139.99
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 26 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $194.97 (39.3% Upside)
#6 - Pfizer (NYSE:PFE)
Stock charts give investors a good sense of what is happening and what may happen with a stock. But they can’t explain the why behind those moves. Pfizer Inc. (NYSE: PFE) is down 12% in 2022 and has given investors fits.
One reason for the PFE stock volatility is possibly the belief that the company’s vaccine revenue may have peaked. There’s anecdotal evidence that suggests many Americans who have previously received two or more doses of the vaccine are not likely to get another booster shot.
But the story of Pfizer is broader than that. The Covid vaccine has shown that mRNA vaccines can be created. And that opens the door to what Pfizer terms Precision Medicine.
There is some concern that Pfizer’s earnings will be lower year-over-year in 2023. And analysts have a Hold rating on the stock with a 10% upside. However, PFE stock comes with an attractive dividend with a yield of 3.12% and has grown in the last 11 years.
About Pfizer
Pfizer Inc discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products in the United States, Europe, and internationally. The company offers medicines and vaccines in various therapeutic areas, including cardiovascular metabolic, migraine, and women's health under the Eliquis, Nurtec ODT/Vydura, Zavzpret, and the Premarin family brands; infectious diseases with unmet medical needs under the Prevnar family, Abrysvo, Nimenrix, FSME/IMMUN-TicoVac, and Trumenba brands; and COVID-19 prevention and treatment, and potential future mRNA and antiviral products under the Comirnaty and Paxlovid brands.
Read More - Current Price
- $30.77
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $34.50 (12.1% Upside)
#7 - Cal-Maine Foods (NASDAQ:CALM)
The last stock on this list is a small-cap stock. Historically, small-cap stocks lead the way out of bear markets. So if you’re looking for stocks to give your stock a January lift, Cal-Maine Foods, Inc. (NASDAQ: CALM) may be one to consider.
The reason is inflation, particularly the high price of eggs. In September, the wholesale cost of a carton of one dozen grade A large eggs was $2.34, nearly double the five-year average. And Cal-Maine is also investing in cage-free eggs which gives it a growth path when inflation eases.
CALM stock has been up 48% in the last 12 months. However, analysts continue to have a Buy rating on the stock. And with a P/E ratio of 5.6x earnings, the stock still appears to have room to move higher. Plus, investors can take advantage of a compelling dividend with a dividend yield of 6.27% and an annual payout of $3.41 on a per-share basis.
About Cal-Maine Foods
Cal-Maine Foods, Inc, together with its subsidiaries, produces, grades, packages, markets, and distributes shell eggs. The company offers specialty shell eggs, such as nutritionally enhanced, cage free, organic, free-range, pasture-raised, and brown eggs under the Egg-Land's Best, Land O' Lakes, Farmhouse Eggs, Sunups, Sunny Meadow, and 4Grain brand names.
Read More - Current Price
- $70.83
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 1 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $58.50 (17.4% Downside)
Any time certain stocks begin to buck an underlying trend, investors should remember that correlation doesn’t equal causation. At any given time, some stocks move contrary to the broader market.
That’s why we’ve put together this special presentation. We believe it’s worth your effort to find the stocks that are undervalued or outperforming the market. It’s also important to make sure you're investing in the sectors that are likely to grow. They exist in every market. Finding those stocks, particularly if they pay dividends, will set up your portfolio for long-term growth.
If you’re hesitant to invest in individual stocks now, another option is to look for exchange-traded funds (ETFs) that focus on some of the sectors expected to outperform in 2023. These may include energy, consumer staples, and if you want to be a contrarian, you can look at the tech sector as well.
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