Investing in retail often means playing the long game.
However, the appeal of quick returns sometimes forces investors to invest at least part of their portfolio in shorter-term bets.
For those investors looking for “hot stocks” to buy now in hopes of strong potential returns, the experts have provided the following information on their top picks in the market. Before we get into that, a little market overview might help.
US stocks are in record highs. One big reason is that the Federal Reserve has had a very loose monetary policy with extremely low interest rates and bond purchases in hopes of helping the economy through the pandemic. Stimulus checks from Washington also helped propel stocks to record highs.
Now that the economic recovery is in full swing, demand for all sorts of things is returning – from clothing and restaurants to personal shopping, business and personal travel. This boom not only helps companies that make and sell finished goods, but also those that make the raw materials used in them.
A few words of caution
Economies go through cycles and boom times never last forever.
With inflationary pressures mounting and the economy looking steadier, the Fed is likely to hike rates at some point to keep the economy from overheating and scale back its bond purchases. Both steps would signal headwinds for the stock market. And we’re also facing a wildcard with the pandemic as a resurgence of virus cases raises the specter of a new round of local restrictions.
“We believe that equity valuations are high around the world and there is a wide range of potential market outcomes that could unfold over the next few years depending on economic growth and monetary policy,” said Sandi Bragar, Managing Director of Aspiriant. “That makes it imperative for investors to manage portfolio risk in this environment,” she says.
“Leading indicators seem to be peaking and US economic growth may already have peaked,” warns Chris O’Keefe, managing director of Logan Capital Management. “In an environment of declining growth and slow emptying of the punch bowl, investors are likely to prefer longer-lived business models to riskier, higher-potential growth stocks.”
But for now, there may be a window of time that investors can buy stocks that have done well this year and may point further up. All of the stocks on this list outperformed the S&P 500 in 2021. We stay away from so-called “meme stocks” simply because of their volatility and their tendency to trade on speculation rather than fundamentals. Also, keep in mind that this list doesn’t include defensive stocks.
Here are three hot stocks to buy today:
- Hess Corp. (Ticker: HES)
- Nvidia Corp. (NVDA)
- DocuSign Inc. (DOCU)
Play the reflation trade with Hess
As travel increases and production picks up, oil producers are doing fine. In this area, Jeff Bilsky, Portfolio Manager at Chartwell Investment Partners, Hess Corp.
The exploration and production company operates in addition to Exxon Mobil Corp. (XOM) Development activities in a huge petroleum province off the South American nation of Guyana, a project that Bilsky describes as “groundbreaking”.
Having beaten the market so far this year with a 33% increase at the end of Monday, “We believe this outperformance will continue as the project is expected to generate positive (free cash flow) in 2022, the HES will use to return to shareholders. “Says Bilsky. “We believe the market is still underestimating Hess’ potential FCF earnings potential in 2025, when the project is expected to reach the peak of oil production.”
“The biggest risk is that there are often significant production delays on large oil projects,” he says.
In the longer term, traditional fossil fuel businesses risk loss if they cannot successfully adapt to the world’s transition to renewable energy sources. In the short term, hot stocks like Hess can benefit from rising oil prices if they can keep costs down.
Data centers are a central part of Nvidia’s game
Although Nvidia is up 54% this year, believes Will Reese, director of equity research at UMB Financial Corp. (UMBF) that there is more upside potential for the computer chip maker Nvidia.
He predicts annual revenue growth of more than 20% for the next few years due to the growth in the company’s data center business and the ongoing momentum in the gaming business.
“We anticipate that the data center segment will account for most of the company’s growth due to the rapid growth in adoption of artificial intelligence in almost all industries,” said Reese.
There are some risks with this choice. Nvidia may not become the dominant player in the emerging AI market. Much of the company’s revenue comes from a mature PC market. And Nvidia’s proposed acquisition of British chip technology company Arm is likely to be blocked due to British security concerns, Reese says.
Investors may want to sign up with DocuSign
The last of the hot stocks to buy right now that has both momentum and a robust growth profile is DocuSign.
The stock is up more than 35% this year, and Reese sees more upside as the company expands into broader electronic contract solutions.
He sees booming customer growth that will support a 30% annual revenue increase over the next few years as customer retention rates are high and the company is selling more of its Agreement Cloud product and integration suite, which includes its flagship eSignature product.
With the e-signature market in its infancy, Reese believes that Agreement Cloud will double the company’s addressable market from $ 25 billion for e-signature alone to $ 50 billion with the suite included.
While DocuSign accounts for about 70% of the electronic signature market, it’s not the only game in town and competition, especially from Adobe Inc. (ADBE), is a risk, he says.
Investing in stocks just because their charts are right now can be risky. However, if you do your homework – and get expert advice – it seems that Hess, Nvidia, and DocuSign could be worth investing in, at least for the portion of your stock portfolio that isn’t reserved for defensive purposes.