Every month, we ask our freelance writers to share their top US stocks with investors — here’s what they would like to buy for January!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
Amazon
What it does: Amazon is the world’s largest e-commerce company. It is also a major player in cloud computing.
By Edward Sheldon, CFA. Amazon (NASDAQ: AMZN) shares fell a long way in 2022 and are now back at pre-pandemic levels. I think this is a great buying opportunity for me.
I’m not expecting explosive returns from the stock in the near term. With interest rates still rising, it’s not the best environment for expensive growth shares like Amazon right now.
However, in the long run, I think the stock has the potential to go much higher. Not only does it look set to enjoy tailwinds from the expansion of the online shopping industry, but it also looks set to benefit from the growth of a number of other industries including cloud computing, video streaming, digital advertising, digital healthcare, self-driving cars (it owns Zoox), and artificial intelligence.
So, I think building a position in the stock now — while it is way off its highs — is a smart move for me to make.
Edward Sheldon has positions in Amazon.
Intuitive Surgical
What it does. Intuitive Surgical is the world-leading designer and manufacturer of robotic surgery machines for minimally invasive care.
By Zaven Boyrazian. Medical technology is evolving rapidly. And one of the most exciting spaces, in my opinion, is robot-assisted surgery.
While it’s still an expensive procedure, the risk to patients is significantly reduced, as is the recovery time. And Intuitive Surgical (NASDAQ:ISRG) controls around 80% of the global market share with its da Vinci system!
Today, over 7,000 da Vinci machines are deployed worldwide, with more than 60,000 surgeons trained to use them. But the sale of these devices is not what’s driving cash flow. Instead, it’s the recurring purchases of consumable products required to use these machines, such as scalpels.
This razor and blade business model has worked wonders in delivering ever-expanding cash flow to investors. And it’s a trend that continues to improve. On a valuation basis, it’s certainly not a cheap stock. And that opens the door to share price volatility. But given its seemingly monopolistic status, it’s a premium I feel is worth paying.
Zaven Boyrazian has positions in Intuitive Surgical.
Kraft Heinz
What it does: Kraft Heinz is a food and drink producer that owns eight brands with annual sales of $1bn or more.
By Royston Wild. Kraft Heinz (NASDAQ:KHC) is one of legendary investor Warren Buffett’s favourite stocks. In fact his Berkshire Hathaway investment firm owns more than a quarter of the food and beverage producer’s shares.
I think this is a top US share to own in this uncertain economic climate. This is thanks to its wide range of popular brands like Heinz Ketchup sauce, Philadelphia spreadable cheese and Oscar Mayer hot dogs.
These labels have been around for decades. And as a result customers remain extremely loyal to them, even when their spending power is reduced. This provides Kraft Heinz with exceptional earnings stability at all points of the economic cycle.
In fact, this brand loyalty allows the business to raise prices without a significant fall in volumes. This means it can confidently and effectively pass on rising costs to the consumer.
Indeed, Kraft Heinz’s net sales rose 3% (to $6.5bn) in the three months to September. This was thanks to a 15.4% increase in prices which offset a 3.8% drop in volumes sold.
Royston Wild does not have positions in Kraft Heinz or Berkshire Hathaway.
PayPal
What it does: PayPal is a fintech company operating a payments system that support online money transfers, and serves as an electronic alternative to traditional paper methods.
By John Choong. PayPal (NASDAQ: PYPL) stock may be off its all-time high of $308, but its current share price presents plenty of upside, which is why I’ll be planning to buy more in the coming days. Here’s why.
Having initially warned of a slow holiday season, fears of a slowdown in spending were arguably rebuffed in the most recent Black Friday and Cyber Mondays figures, which PayPal is expected to benefit from, given that the majority of these transactions occur online. In fact, spending for the holiday season is now forecasted to hit a record $209.7bn.
With the fintech firm also expected to cut costs going into the new year, and expand its user base with better functionality and synergies across its many entities such as Honey and Buy Now Pay Later, analysts alike are now expecting its share price to hit $108 next year. And with the shares currently trading below that, at a PEG ratio of 0.3, widening my position on the stock is a no-brainer.
John Choong has positions in PayPal.
Axon Enterprise
What it does: Axon Enterprise develops software and non-lethal weapons for law enforcement, the military, and civilians.
By Ben McPoland. Axon Enterprise (NASDAQ: AXON) used to be known as TASER International. It still sells its legacy electroshock weapons, but the company’s additional technology products now comprise a whole law enforcement ecosystem.
For example, its ubiquitous in-vehicle and body cameras are supported by its digital evidence platform (called Evidence.com). The captured evidence is uploaded instantly to this cloud-based platform, where it can be stored, retrieved, managed, transferred, and shared.
That makes this high-margin subscription platform extremely sticky. Net revenue retention is very strong at 120%. That means it’s retaining all its customers and they’re spending more on top.
Axon has expanded its customer base to include fire departments, paramedics, prisons, and various federal agencies. And it’s just started to enter the vast Indian and Brazilian law enforcement markets.
One risk is that the company’s total dominance of its industry has attracted scrutiny from regulators. Nevertheless, enterprises with no real competition normally make tidy investments.
Ben McPoland has positions in Axon Enterprise.
Alphabet
What it does: Alphabet is the parent company of Google and owns other online properties, including YouTube.
By Christopher Ruane. 2022 has seen a distinct cooling in investor enthusiasm for Alphabet (NASDAQ: GOOG). The online giant has seen its shares fall 37% over the past 12 months.
Part of the reason for that is the negative impact an ongoing advertising downturn is expected to have on earnings at the company. While revenues in the third quarter grew by 6% compared to the same period last year, net income was 26% lower.
I think things could get worse as the advertising market looks far from ready to return to growth. As a long-term investor, though, I see the current Alphabet share price as a buying opportunity for my portfolio if I have spare funds to invest.
The company generates enormous revenues and has a large customer base. It benefits from economies of scale that make it hard for new market entrants even to think about trying to compete.
Christopher Ruane does not have a position in Alphabet.
McDonald’s
What it does: operating in over 100 countries, McDonald’s is the world’s largest restaurant chain by revenue — and home to the Big Mac.
By Paul Summers. As much as I’ve been taking advantage of the big sell-off in US tech stocks this year, I do recognise the need to remain diversified across sectors. An investment in fast food giant McDonald’s (NYSE: MCD) is one way of balancing things out.
This company has delivered superb gains for investors over the long term thanks to its enduring brand and resilient business model.
It’s also a great source of income in inflationary times. As prices rise, the company will pick up a larger fee on all product sales by its franchisees. That’s attractive considering the dire forecasts for 2023 being offered by some economists.
Of course, the defensive qualities of McDonald’s haven’t been overlooked by the market. As a consequence, the stock has barely lost any ground in 2022 and isn’t cheap to acquire.
Still, as stable, recession-proof shares go, McDonald’s hits the spot as a top US stock for me to buy in January.
Paul Summers has no position in McDonald’s Corp.
