3 best stocks to buy in December
No matter what happens in the world or in the economy, there will always be great companies laying the groundwork to produce future profits for their shareholders. The challenge for investors, of course, is determining who is best positioned to deliver these efforts.
To give you some ideas, we asked three Motley Fool contributors to name their top stock picks this month. Here’s why they chose Amazon (NASDAQ: AMZN), Hasbro (NASDAQ: HAS), and Chegg (NYSE: CHGG).
The leader in e-commerce continues to invest to meet growing demand
John Ballard (Amazon): One of the reasons Amazon is my number one stock to buy now is because it continues to invest billions in expanding its capacity to serve its growing customer base, which is a key part of its wide competitive divide. It also shows that management is preparing for increased demand to come. Additionally, the stock appears undervalued compared to the amount of cash Amazon generated from its operations, which has grown 78% over the past three years to $ 55 billion.
Millions of new customers were sucked into the Prime tractor beam during the pandemic, bringing the number of loyalty program members to over 200 million by the start of 2021. This too is a clear signal of increased profits to come. .
Amazon does not make a huge profit on its retail sales, but it does generate substantial margins on its fees from third-party sellers, which helps the e-merchant to offer many items that they would not otherwise have. Third-party products are popular with its customers, accounting for 56% of total paid units sold in the third quarter. In addition, third-party seller services revenue grew 37.5% year-over-year in the first three quarters of 2021, double the revenue growth rate of Amazon’s online stores.
Amazon is also generating high margins through the sale of sponsored ads and offering cloud services through Amazon Web Services, which experienced a re-acceleration of growth in the last quarter and generated 12% of total revenue for Amazon.
The higher margins of these non-trading categories sent Amazon’s free cash flow to a record high of $ 25.9 billion in 2020. The stock is currently trading at 33 times its operating cash flow, which is the same that several investors paid for Amazon almost 10 years before the action. epic race. I would consider buying stocks before more investors realize what they’re missing out on with this highest growth stock.
Hasbro isn’t just the toy company you remember
Jennifer saibil (Hasbro): When you think of great stocks, Hasbro might not be the first name that comes to mind. The toy company, which owns classic board games like Monopoly, as well as popular children’s brands like Transformers and My little Pony, has been around for almost 100 years. But Hasbro is evolving to adapt to the present moment and harnessing the power of digital to solidify its position in gaming and gaming.
Its activity fell earlier in the pandemic, but it has come back in force. Hasbro saw an 11% year-over-year sales increase in the third quarter of 2021. The entertainment division led the way, with a 76% increase in revenue. CEO Brian Goldner recently passed away, but his vision of creating strong entertainment brands that combine a full digital content experience with products still guides the organization. For example, Hasbro released a new My little Pony animated film on Netflix which he produced in collaboration with the creatives of eOne, which he acquired in 2019. He supported the success of the film with a dedicated Amazon store, and he launched numerous games and support products to complement the stories and brands based on TV shows such as Peppa Pig and PJ Masks.
Like many other companies, Hasbro faces supply chain issues; A request for $ 100 million was not met in the third quarter. But the company has found alternative procurement methods, and most of what was delayed has already shipped in the fourth quarter. What’s in the company’s favor is the focus on digital content and games, which are less prone to supply chain issues. Wizards of the Coast franchise revenue, for example, increased 32% in the third quarter. Management expects a revenue increase in the fourth quarter and a double-digit percentage increase for the year.
Hasbro pays a lavish dividend that earns 2.7% of its current share price. Its stock has underperformed the S&P 500 after falling in 2020, but it is poised to post a strong holiday performance and reward investors.
An education technology company selling at a huge discount
Parkev Tatevosian (Chegg): Educational technology company Chegg emphasizes services for the college program, helping students complete their courses with less stress and a little more confidence. For a subscription of less than $ 20 per month, students have access to over 70 million pieces of content, as well as the ability to ask up to 20 questions per month and have them answered by subject matter experts. .
These questions and step-by-step solutions then become part of Chegg’s database, which can be viewed by all other subscribers, present and future. It’s a nifty method of creating precisely the content that your subscribers want, literally creating the content that those customers ask for.
It turns out to be a lucrative business model. Chegg will have increased its adjusted profit before taxes on interest, depreciation and amortization by 65% ââfrom 2015 to the end of its 2021 fiscal year. The company pays for each piece of content once, but it can stay in the database and useful. for years, or potentially decades.
In addition, the content library acts as a low cost customer acquisition tool. Students looking for help with their courses can search a search engine for answers or advice. If Chegg has the specific help they need, their website will show up in the search results. A few clicks later, the student gets the help they need and Chegg gets a new subscriber.
Chegg’s share price is down 68% in 2021. While most US colleges have brought students back to campus for in-person learning, some students have balked at returning to classrooms. classroom, dining halls and dormitories, and university enrollment plummeted. Still, fears of contracting COVID-19 on campus are likely to prove to be a temporary headwind. In the long term, it can be expected that young people will continue to pursue higher education in increasing numbers, given the benefits they provide. Nonetheless, the recent drop in Chegg shares has created an opportunity for investors to acquire great stock at a relative discount. This is why this is my best stock to buy in December.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.