The end of the year can spur myriad feelings when deciding which stocks are the best buys.
Some investors may feel they have missed out on the broader rally in the major indexes and are looking for high-octane growth stocks to start 2025 off with a bang. Others may be looking for a balanced approach or reliable blue chip stocks they can count on no matter what the market throws at them.
There's also the opportunity to scoop up shares of deep-value stocks or companies at the bottom of the bargain bin in desperate need of a turnaround.
No matter how you're feeling, these five Fool.com contributors have you covered. Here's why Intel (NASDAQ: INTC), Occidental Petroleum (NYSE: OXY), BioNTech (NASDAQ: BNTX), McCormick (NYSE: MKC), and Coca-Cola (NYSE: KO) are five excellent stocks to buy in December.
The stock price has fallen more than 50% in 2024, despite a 10% gain in November. Trailing sales are down 31% from the $79 billion peak in 2021. Free cash flows have been mostly negative for a couple of years. Intel lost its spot on the Dow Jones Industrial Average market index, replaced by soaring rival Nvidia. Intel's generous dividend policy has been paused in order to use that cash for infrastructure investments. Longtime underdog Advanced Micro Devices has a market cap twice the size of Intel's nowadays, making an underdog out of the company formerly known as "Chipzilla."
This litany of misfortunes may scare some Intel investors, but I see a fantastic buying opportunity here.
You know that old investing adage about getting greedy when others are fearful, and vice versa? That idea applies to Intel's current situation. Market makers are terrified of Intel's business prospects, and I think it's high time to get greedy about this stock.
The company took its business model in a radically different direction in 2021. In the midst of a global shortage of chip manufacturing services, Intel laid out plans to sell its in-house manufacturing capacity to other semiconductor designers.
It was always an ambitious and expensive plan, requiring enormous investments in chip-making equipment, which in turn strained Intel's cash reserves. But the foundry business is up and running, accounting for 33% of Intel's total revenue in the recently reported third quarter. Current infrastructure upgrades should allow Intel to resell next-generation manufacturing technologies next year. A $7.86 billion grant from the Biden administration's U.S. CHIPS and Science Act will support Intel's continued manufacturing investments on American soil, adding up to more than $100 billion in just a couple of years. Furthermore, the Gaudi 3 series of AI accelerator chips may challenge Nvidia's and AMD's market-moving AI chips next year.
So Intel has built (and keeps building) an all-American chip-building powerhouse, which could take over the financial performance burden traditionally carried by its processor designs. This high-end technology hub could become a preferred manufacturing center for chip designers around the world -- a role currently played by Taiwanese companies. That's a plan I can get behind, especially since Intel's stock trades near the lowest price-to-sales ratios in its decades-long history. That's why I recommend buying Intel stock in December 2024.
Neha Chamaria (Occidental Petroleum): Commodity stocks are inherently volatile, but it becomes even tougher for investors to put faith in a company piling on debt in a weak environment. This pretty much explains why shares of Occidental Petroleum are down nearly 15% this year, as of this writing. Much of the fall occurred in the second half of the year after the oil and gas giant acquired CrownRock in August for nearly $12 billion, including debt. With oil prices falling consistently since, Occidental Petroleum stock has taken a big hit.
Investors, however, appear to be overlooking Occidental Petroleum's efforts to deleverage its balance sheet, making the stock an intriguing buy now. Occidental committed to repaying at least $4.5 billion in debt within one year of acquiring CrownRock. The company had already achieved 90% of its goal by mid-November, having repaid $4 billion in debt in the third quarter alone, driven by strong cash flows.
Its early success with its short-term debt reduction goal means that Occidental Petroleum can focus on generating more cash flows and investing in growth in 2025. The bulk of Occidental Petroleum's capital spending next year is expected to go into its chemicals (OxyChem) and low-carbon venture businesses, both of which have strong growth potential.
I believe Occidental Petroleum deserves credit for its debt reduction efforts. As the company continues to cut debt further and generate higher cash flows from its newly acquired assets, it might also want to pay bigger dividends to shareholders. All of this should drive Occidental Petroleum stock higher, making it a value buy before we enter the new year.
Keith Speights (BioNTech): Allow me to apologize in advance. I know many people don't like math. However, crunching a few numbers is the best way to explain why BioNTech is a fantastic stock to buy in December. The good news is that the math is simple.
Let's start with BioNTech's market cap of $28.4 billion at the time of this writing. Now subtract the biotechnology innovator's hefty cash stockpile (including cash, cash equivalents, and current security investments) of around $17.5 billion from that market cap. Then add the company's debt of roughly $216 million to that total. This gives BioNTech an enterprise value of $11.1 billion.
The average price-to-sales ratio for biotech stocks is in the ballpark of 7.7. This means that BioNTech would need to generate sales of $1.4 billion or so to have an average valuation. The company expects to rake in at least 2.5 billion euros (around $2.6 billion) this year from the COVID-19 vaccine it markets with Pfizer.
So is the fact that BioNTech is attractively valued the reason to buy the stock now? Yes, but there's more to the story. BioNTech is inexpensive based solely on its COVID-19 vaccine revenue. However, the market appears to view its pipeline as worthless. Hint: It isn't.
BioNTech has four late-stage programs, two of which target cancer. It has 13 programs in phase 2 clinical testing, with another 26 in phase 1 studies. The company expects to launch its first cancer immunotherapy in 2026. It hopes to have regulatory approvals for 10 cancer indications by 2030.
Why buy BioNTech stock in December? The numbers add up.
Demitri Kalogeropoulos (McCormick & Co.): Spice and flavorings giant McCormick has given investors some tasty reasons to consider buying the stock lately. In October, it revealed a return to modest sales volume growth in a tough consumer spending environment and higher profitability thanks to cost cuts. "We expect this momentum to continue into the fourth quarter," CEO Brendan Foley said in a press release as the company affirmed its short-term outlook.
Later in the month, the company confirmed management's long-term targets, too, which call for about 5% annual sales growth and 9% annual boosts in operating earnings. Toss in a growing dividend, and investors have most of the ingredients they need for excellent long-term returns.
Speaking of that dividend, McCormick just raised its payout, announcing in November that it will now be paying $0.45 per share from $0.42 per share in the prior year. The consumer packaged foods giant has paid a dividend every year since 1925 and it has an unbroken streak of annual raises that stretches back 39 consecutive years.
None of those factors would be particularly impressive if investors had to pay a big premium for this business. But that's just not the case here. McCormick stock is valued at 26 times earnings heading into December, down from 27.5 times earnings at the start of 2024.
An investor could certainly find faster-growing stocks, even in the consumer food space. PepsiCo comes to mind as another good option, for example. But McCormick is more profitable than its larger peer and has room to expand deeper into attractive consumer categories like sauces. Holding this stock over the long term, then, might set your portfolio up for higher returns and less volatility ahead.
Daniel Foelber (Coca-Cola): 2024 has reinforced the idea that paying up for quality is better than getting a great price for a mediocre business.
Industry-leading companies across virtually every sector have done well this year -- as evidenced by the Vanguard Growth ETF and the Vanguard Value ETF both hitting all-time highs on the same day. For a while, Coca-Cola was riding the wave and was on track for its best year in a decade. But then Coke stock fell 12% in a single month after reporting weak earnings and identifying challenges that may last longer than some investors may be willing to accept.
When great companies go on sale, it's usually an opportunity for long-term investors to step in and buy -- but only after identifying the risks and what is driving the stock price down.
In Coke's case, the main issue is declining volumes. Coke had been relatively resilient, especially compared to its peer PepsiCo. But in its recent quarter, Coke saw slowing demand. It was still able to grow earnings thanks to pricing power. However, price increases have their limits.
Investors can take solace in knowing that Coke is experiencing an industrywide problem. Coke has a focused brand portfolio centered around the nonalcoholic beverage category. This is a far different approach than other consumer staples companies that target multiple product categories, like Pepsi with drinks and snacks or Procter & Gamble, which sells a variety of household products.
When I look at Coke, I see a company with an elite supply chain and distribution pipeline, high operating margins, a reasonable valuation with a forward price-to-earnings ratio of 22.6, an elite dividend with a yield of 3%, and 62 consecutive years of dividend increases. Add it all up, and Coke stands out as a passive income powerhouse worth buying in December.
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Anders Bylund has positions in Intel, Nvidia, and Vanguard Index Funds-Vanguard Growth ETF. Daniel Foelber has no position in any of the stocks mentioned. Demitri Kalogeropoulos has no position in any of the stocks mentioned. Keith Speights has positions in Pfizer. Neha Chamaria has positions in Pfizer. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Nvidia, Pfizer, Vanguard Index Funds-Vanguard Growth ETF, and Vanguard Index Funds-Vanguard Value ETF. The Motley Fool recommends BioNTech Se, McCormick, and Occidental Petroleum and recommends the following options: short February 2025 $27 calls on Intel. The Motley Fool has a disclosure policy.
5 Top Stocks to Buy in December was originally published by The Motley Fool
