Back to top

Image: Bigstock

Secret Santa Stocks to Surprise You This Christmas

Read MoreHide Full Article

After wild swings over the past couple of weeks, Wall Street has built up positive momentum thanks to easing Omicron fears and upbeat economic data. Additionally, the optimism over a Santa Claus rally has bolstered investors’ confidence.

A Santa Claus rally refers to the increase in stock prices in the final week of the calendar year (i.e., between Christmas and New Year’s Day) that extends into the first two days of the New Year. According to Sundial Capital Research, the S&P 500 has gained an average of 2.66% during this period over the past 92 years with positive returns 77% of the time.

Some hidden gems, or Secret Santas as we call them, could surprise investors with big returns this Christmas too. Some of these are Medallion Financial Corp. (MFIN - Free Report) , Summit Hotel Properties (INN - Free Report) , Hess Midstream Partners (HESM - Free Report) , LouisianaPacific Corpoartion (LPX - Free Report) , and Microchip Technology (MCHP - Free Report) .

Santa Arrives!

Good tidings have started to flow in with consumer confidence improving further in December, as more consumers planned to buy a house and big-ticket items such as motor vehicles and major household appliances or go on vacations over the next six months.

A recovering jobs market and rising wages have been driving the growth in the economy despite the Fed's taper plans. The central bank plans to buy $60 billion per month of bonds in combined Treasuries and agency mortgage-backed securities starting in January, down from $90 billion in December and 120 billion from the outbreak of the pandemic through November. The move indicates a solid U.S. economy despite higher inflation and the fast spread of Omicron.

Meanwhile, President Biden’s administration took steps to eliminate supply-chain bottlenecks, indicating that higher inflation will not last very long. In another encouraging development, the Food and Drug Administration granted approval to Pfizer Inc.'s (PFE) oral antiviral COVID-19 pill for at-risk people aged 12 and above. This makes it the first at-home treatment for the coronavirus and a potentially important tool in the fight against the fast-spreading Omicron variant. The medication could be available to patients as early as this weekend.

The ongoing trend suggests that Santa has arrived in the market and will stay for a week. Further, the Santa rally is supported by year-end seasonal factors such as holiday optimism, tax-related affairs, investment of Christmas bonuses, mutual fund manager window dressing, and the “January effect.”

Stocks to Jingle

The high-beta and high-momentum stocks mentioned above are expected to outperform in the next seven days and are intriguing choices for a short spell. High-beta stocks experience larger gains than their broader market counterparts in a bullish market. On the other hand, momentum investing looks to capture profits from buying hot stocks, which have shown an uptrend over a few weeks or months.

As a result, we have chosen the best stocks using the Zacks Screener that fit our criteria: a Zacks Rank #1 (Strong Buy) or 2 (Buy), Momentum Score of B or higher, a market cap of more than $100 million, beta greater than 2, Zacks Industry Rank within the top 45% and a positive four-week price change. You can see the complete list of today’s Zacks #1 Rank stocks here.

Medallion Financial is a specialty finance company that originates and services loans that finance taxicab medallions and various commercial loans. It offers consumer loans for the purchase of recreational vehicles, boats, motorcycles, and trailers, as well as to finance home improvements; commercial loans for the purchase of equipment and related assets necessary to open a new business, or for the purchase or improvement of an existing business; and medallion loans. Medallion Financial has a market cap of $210.8 million and beta of 2.83.

Medallion Financial has risen about 4% over the past month and carries a Zacks Rank #1. Medallion Financial belongs to a top industry rank (in the top 39%) and has a Momentum Score of B.

Summit Hotel is a publicly traded real estate investment trust focused primarily on owning premium-branded, select-service hotels in the upscale and upper midscale segments of the lodging industry. With a market cap of $1 billion and a beta of 2.28, Summit Hotel belongs to a top industry rank (in the top 42%).

Summit Hotel has a Zacks Rank #1 and a Momentum Score of B. Shares of INN have gained 1.7% in a month.

Hess Midstream Partners is a master limited partnership company. It owns, operates, develops and acquires a set of midstream assets to provide services to Hess and third-party crude oil and natural gas producers. Hess Midstream Partners has a market cap of $895.4 million and a beta of 2.00.

Hess Midstream Partners has gained about 5.5% over the past month and belongs to the top 2% of the industry rank. It has a Zacks Rank #2 and a Momentum Score of B.

LouisianaPacific is a leading manufacturer of sustainable, quality engineered wood building materials, structural framing products as well as exterior siding for use in residential, industrial and light commercial construction. The stock has gained 3.9% in a month.

With a market cap of $6.4 billion and beta of 1.72, LouisianaPacific has a solid Zacks Industry rank in the top 13%. LPX has a Zacks Rank #2 and a Momentum Score of B.

Microchip Technology develops and manufactures microcontrollers, memory and analog and interface products for embedded control systems, which are small, low-power computers designed to perform specific tasks. Microchip Technology has a market cap of $47.3 billion and beta of 1.54.

Microchip Technology has gained 2.4% over the past month and carries a Zacks Rank #2. Microchip Technology belongs to a top industry rank (in the top 2%) and has a Momentum Score of B.

Bottom Line

These stocks could be the winning picks for the next few days, as they would generate higher returns compared to other products when the market is booming.