Two of this year’s top stocks slipped lower in December, but traders say both are primed to climb higher in the new year.
2020 was a remarkable year for stocks.
After the coronavirus sparked a rapid sell-off in March, we witnessed one of the swiftest bear markets in history. And since the March bottom, the S&P 500 is up nearly 67%, the Dow has gained more than 63%, and the tech-heavy Nasdaq has run-up a whopping 87.6%.
However, in December, a few of this year’s notable winners have lost ground.
Costco (NASDAQ: COST) is down more than 3% over the last month after climbing nearly 34% since its March bottom. D.R. Horton (NYSE: DHI) is down just under 3% this month but has gained 143% since it hit bottom. FedEx (NYSE: FDX) has fallen almost 10% but is up 187% since its low. Regeneron (NASDAQ: REGN) has slid 7% in December and is up 40% since it hit its low for the year. And Salesforce (NYSE: CRM) is down nearly 8% over the last month and is up 79% since bottoming out mid-March.
But traders say one of these stocks, despite slipping lower this month, remains a solid investment and is now presenting investors with buying opportunities.
“Although they’re taking a little bit of a bath here through December, I think there’s a reason to find all of them attractive,” said Bill Baruch, founder and president of Blue Line Capital. “Whether we stay in a lockdown mode or shift into a vaccine-and-reopening mode, I think these are here for the long run.”
On Salesforce, Strategic Wealth Partners’ Mark Tepper said the stock is one investors “could hold forever,” noting that he added to his position in the stock this month.
“It’s all recurring revenue, very sticky customers with high switching costs, and if you think about it, data is a company’s most valuable asset only if you’re actually using it properly,” Tepper said. “A lot of people thought maybe they were overpaying for Slack. But they have proven that they do very well on acquisitions. They integrated Tableau and MuleSoft very, very nicely, added a lot of synergy, and when I look at the Slack integration, I feel like that’s just going to completely improve their competitive advantage.”
Early this month, Salesforce announced that it was buying Slack for more than $27 billion in cash and stock.
Salesforce CEO Marc Benioff said the acquisition should help the company in its quest to double revenue.
“I have a $50 billion (revenue) dream, which is what I’m shooting for,” Benioff said. “I feel very excited and motivated on everything that we need to do to double the company once again, and to make that happen we have to architect a complete solution” encompassing selling, marketing, service, and integration.
“Slack changes everything and makes Salesforce a whole new type of company,” Benioff added. “Customers are rearchitecting how they are working. Now with Slack, it provides this incredible credible windows into a collaborative interface onto all of our services and the whole enterprise itself.”
Baruch, too, increased his position in Salesforce on this month’s weakness in the stock and noted the company’s softer-than-expected forecast for this year created the potential for “some exacerbated downside coming into the first part of 2021.”
“Ultimately, this is welcomed,” Baruch added. “This is a good stock to hold for the long run.”
From a technical perspective, Baruch also said that Salesforce shares are in a good buy zone after the stock fell to its 38.2% Fibonacci retracement of its rise from its March lows through its September peak.
“It’s also the gap from the post-earnings close with a big spike up at the end of August,” Baruch added. “There is a tremendous amount of support technically at $220 in Salesforce. It’s a great place to be a buyer. I love it down there.”
Salesforce closed Wednesday at $222.40.
Another stock in the group that looks promising now is D.R. Horton, which Tepper said was his favorite homebuilder “by far.”
“D.R. Horton specializes in affordable homes, so, those entry-level and move-up level homes, [and] has a very asset-light model, which means better risk-reward metrics for all of us investors,” Tepper continued. “For those reasons, it deserves a premium valuation over its peers.”
What’s more, the stock will see a boost as people continue to move from cities to the suburbs, as millennials’ spending power rises, interest rates stay low, and with improved pricing power.