This year is nearing its end, but investors shouldn’t ignore some reasonably priced stocks before the calendar turns to 2025. Often fund managers reposition their portfolios in December, which can lead to what is called a ‘Santa Claus Rally’. This effect causes stock prices to rise significantly in December as many people buy.
Three stocks seeing strong buying interest in December are Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), Metaplatforms (NASDAQ: META)And ASML Holding (NASDAQ: ASML). Each company is well positioned for the long term, but has short-term reasons why it is a good buy.
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Alphabet is better known as the parent company of Google, but it also has other strengths under its umbrella. It is heavily involved in the generative AI arms race through its Gemini model, which has emerged as a top model to use in this space. Some of this power comes from its cloud computing division, Google Cloud.
Google Cloud allows customers to rent computer space so they can easily scale up or down. It also gives them access to leading graphics processing units (GPUs) and AI accelerators to quickly train their AI models. This division has been on fire lately, with sales up 35% last quarter.
Overall, Alphabet is performing at a very high level, but its stock price does not reflect that fact. The stock trades for just 21.5 times forward earnings, which is a huge discount to other tech companies like Microsoft And Applewhich trade at 31.7 and 30.4 times forward earnings respectively. Furthermore, Alphabet is growing its revenues much faster than these two, so this undervaluation makes no sense.
To add more fuel to the fire, Alphabet is trading at a lower price than the S&P500which trades at 24.6 times forward earnings. Alphabet is a great company trading at huge discounts, and I expect fund managers and investors alike to take advantage of this price soon.
I could almost copy and paste the Alphabet paragraph into the Meta Platforms section and most of the same would be true. However, instead of search engine dominance, Meta has social media dominance.
The company gets a huge chunk of revenue from its Facebook, Instagram and other platforms through advertising. Meta also has generative AI aspirations through its Llama model, which has also become a top choice for anyone developing a model powered by generative AI.
Meta is also performing at a very high level, with revenue increasing 19% year over year and diluted earnings per share (EPS) increasing 37%. These are very high levels considering Meta’s size and demonstrate the strength of the company.
One area where it differs from Alphabet is its price tag, as it trades at 24.5 times forward earnings. This is essentially the same price as the S&P 500, but given how quickly Meta is growing earnings and revenue, it’s a cheap stock price.
Meta Platforms could see a further run-up before the end of the year. I think it’s also a great long-term investment.
ASML is very different from Alphabet and Meta. It doesn’t need to advertise and is the only company in the world that can build its extreme ultraviolet (EUV) lithography machines.
Semiconductor companies use these machines to put traces on chips at a microscopic level. Without ASML’s technology, there would not be the same computing capabilities as today, putting AI advances on hold.
Because ASML is the only company in the world with these capabilities, its machines are highly regulated and a growing number of them are increasingly banned from being sold to China and its allies. This is a problem because China accounted for almost 50% of sales in the third quarter.
However, this was an excessively large share compared to historical averages, and management expects the Chinese revenue share to decline to around 20% by 2025. This decline also affected ASML’s 2025 revenue outlook, as the company reduced its range from 30 billion to 40 billion euros. from 30 to 35 billion euros.
Investors were not happy with that news and sent shares plummeting after the publication. However, management was clear that the long-term growth picture was still intact and that this was just a bump in the road. The damage to the stock has already been done and it now trades at 33 times forward earnings.
ASML PE Ratio (Forward) data according to YCharts.
While that may be expensive compared to the other two, it is the cheapest ASML shares have been in a long time. Moreover, ASML has no competition in this area. While the short term may be a bit bumpy, the long-term trend of consumers using more chips and more powerful chips is undeniable. This makes ASML a fantastic buy before 2025.
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in ASML, Alphabet and Meta Platforms. The Motley Fool holds positions in and recommends ASML, Alphabet, Apple, Meta Platforms and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
3 Stocks That Could Make a Bull Run Before 2024 is Out was originally published by The Motley Fool
