4 Stocks to Grab Now for a Santa Claus Rally

The markets closed lower yesterday due to the anticipated Federal Reserve meeting and the fast spread of the COVID-19 omicron variant. However, with a potential interest rate hike already factored in and the omicron variant seeming to be milder than expected, investor sentiment is expected to remain favorable.

The market expects nearly three rate increases in 2022, yet stocks are at record highs. According to Jefferies strategist Sherif Hamid, “A lot of near-term hawkishness is thus already in the price.” Also, according to a Factset report, the S&P 500 will close above 5,200 in 2022.

Given this backdrop, we think it could be wise to bet on fundamentally sound stocks QUALCOMM Incorporated (QCOM), GMS Inc. (GMS), Axcelis Technologies, Inc. (ACLS), and Huttig Building Products, Inc. (HBP). They have been rallying over the past few months and are expected to be part of this year’s Santa Claus rally.

QUALCOMM Incorporated (QCOM)

San Diego, Calif.-based QCOM develops and commercializes foundational technologies for the wireless industry worldwide. It has three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); & Qualcomm Strategic Initiatives (QSI).

On November 16, 2021, QCOM announced a collaboration to bring the latest advancements in driver assistance technologies and products of its Snapdragon Ride Platform to BMW Group's next generation of advanced driver-assistance systems and automated driving platforms. Cristiano Amon, the president and CEO of QCOM, said, "We are very proud of this milestone and cannot wait to bring our jointly designed products on the road."

QCOM’s non-GAAP revenues came in at $9.32 billion, up 43.4% year-over-year for its fiscal fourth quarter, ended September 26, 2021. Its non-GAAP net income came in at $2.92 billion, up 74.7% year-over-year. Also, its non-GAAP EPS increased 75.9% year-over-year to $2.55, and its non-GAAP EBT came in at $3.28 billion, up 76% year-over-year.

Analysts expect QCOM’s revenue to increase 18.2% in fiscal 2022, to $39.54 billion. Its EPS is expected to increase 25.5% to $10.72 in the current year. The stock surpassed its EPS estimates in each of the trailing four quarters. Over the past year, it has gained 27.1% in price to close yesterday’s trading session at $183.32.

QCOM’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

Also, the stock has an A grade for Momentum and Sentiment and a B grade for Value and Quality. Within the Semiconductor & Wireless Chip industry, it is ranked #11 of 100 stocks. Click here to see the additional POWR Ratings for Growth and Stability for QCOM.

Click here to checkout our Semiconductor Industry Report for 2021

GMS Inc. (GMS)

GMS distributes wallboards, suspended ceilings systems and complementary building products in the U.S. and Canada. The Tucker, Ga.-based concern has some 268 branches across 44 states and the District of Columbia and six provinces in Canada.

On December 1, 2021, GMS announced the completion of its acquisition of AMES Taping Tools LLC. John C. Turner, Jr., President and  CEO of GMS, said, “We are pleased to announce the successful completion of the AMES transaction as part of our strategy to grow our complementary product offerings as well as the continued execution of our strategic priority of platform expansion.”

GMS’ net sales increased 41.5% year-over-year to $1.15 billion for its fiscal 2022 second quarter, ended October 31, 2021. The company’s gross profit came in at $371.87 million, up 40.3% year-over-year. And its net income increased 161.2% year-over-year to $74.36 million.

For its fiscal year 2022, analysts expect GMS’ revenue to be $4.51 billion, representing a 36.8% year-over-year rise. The company’s EPS is expected to increase 104.5% year-over-year to $7.24 in the current year. It surpassed the EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 106.4% in price to close yesterday’s trading session at $57.70.

GMS has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. Also, the stock has an A grade for Growth and a B grade for Momentum and Sentiment. Within the Industrial - Building Materials industry, it is ranked #3  of 54 stocks. Click here to see the additional POWR Ratings for Value, Stability, and Quality for GMS.

Click here to check out our Industrial Sector Report for 2021

Axcelis Technologies, Inc. (ACLS)

ACLS in Beverly, Mass., designs, manufactures, and services ion implantation and other processing equipment used to fabricate semiconductor chips. In addition, it offers a complete line of high-energy, high-current, and medium-current implanters for all application requirements.

On November 3, 2021, President and CEO Mary Puma commented, "Axcelis delivered very strong third quarter financial performance driven by record implant systems revenue and solid gross margins. The mature and specialty markets, especially the implant-intensive power device segment, are generating significant market expansion.”

For its fiscal third quarter, ended September 30, 2021, ACLS’ total revenue increased 60% year-over-year to $176.69 million. The company’s gross profit came in at $76.51 million, up 58.9% year-over-year. Its income from operations came in at $36.39 million, up 162.2% year-over-year.

ACLS’ revenue is expected to come in at $646.78 million in its fiscal year 2021, representing a 36.3% year-over-year rise. In addition, the company’s EPS is expected to increase 98.5% year-over-year to $2.68 in the current year. Also, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 123.6% in price to close yesterday’s trading session at $63.41.

It is no surprise that ACLS has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Growth and Momentum and a B grade for Sentiment and Quality.

ACLS is ranked #7 of 100 stocks in the Semiconductor & Wireless Chip industry. Click here to see ACLS’ ratings for Value and Stability.

Click here to checkout our Semiconductor Industry Report for 2021

Huttig Building Products, Inc. (HBP)

Together with its subsidiaries, HBP in St. Louis, Miss., distributes millwork, building materials, and wood products for new residential construction, home improvement, remodeling, and repair work in the United States.

On November 3, 2021, Jon Vrabely, the President and CEO of HBP, said, “Our strong performance in the quarter, and on a year-to-date basis, are a direct result of the fortitude and dedication of our associates and the actions we have taken over the past two years to meaningfully and sustainably improve our financial model.”

HBP’s net sales increased 15.3% year-over-year to $245.3 million for its fiscal third quarter, ended September 30, 2021. Its net income came in at $18.7 million, up 206.6% year-over-year, and its EPS increased 183.3% year-over-year to $0.68.

Over the past year, the stock has gained 157.3% in price to close yesterday’s trading session at $9.34.

HBP’s strong fundamentals are reflected in its POWR ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.

In addition, it has an A grade for Growth and Value and a B grade for Momentum and Quality. It is ranked #1 in the Industrial - Building Materials industry. Click here to see the additional POWR Ratings for HBP (Stability and Sentiment).

Note that HBP is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.

QCOM shares fell $2.82 (-1.54%) in premarket trading Tuesday. Year-to-date, QCOM has gained 20.67%, versus a 25.23% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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