Investing isn’t generally a get rich quick tactic investors do for a short time period expecting to make significant financial gains. It’s typically a long-term process requiring commitment, patience, and the ability to remain calm during market fluctuations.
While most investors have heard of both short-term and long-term investments, many continue to be unsure of what the difference is, what they mean, or what investment strategy is right for them. Long-term investments generally offer an increased probability of maximizing returns over a ten-year period instead of bringing investors a high return in only a few years.
Meanwhile, short-term investments are investments investors anticipate holding for three years or less then sell or convert them to cash. While many investors enjoy playing the market or speculating with day trading, it’s a risky business. They need to educate themselves and do lots of research before trying short-term investing. Examples of short-term investments include short-term bonds, certificates of deposit, money market funds, and short term stocks.
8 Best Short Term Stocks
- Walt Disney (DIS)
- T-Mobile US (TMUS)
- Humana (HUM)
- Progressive Corp. (PGR)
- IQvia Holdings (IQV)
- Procter & Gamble (PG)
- NextEra Energy Inc. (NEE)
- Microsoft (MSFT)
Best Short-Term Stocks
An excellent rule of thumb when investing in short term stocks is to diversify your investments, buying different types of stocks across various sectors. Below are eight of the best short term stocks to invest in right now:
- Disney (NYSE: DIS)
A worldwide entertainment company, the Walt Disney Company, operates several segments, including direct-to-consumer international, studio entertainment, resorts and parks, and media networks. The company shows strong growth potential via earnings per share, its direct-to-consumer business, and the Fox assets under its brand.
- T-Mobile US (NASDAQ: TMUS)
T-Mobile has seen a rapid gain in market shares since 2013 as the company restructured itself as the “un-carrier,” determined to address pain points of the industry, including inflexible device upgrades, overage charges, international roaming and more. Experts anticipate the company to see large returns of capital to investors via share repurchasing thanks to it significantly expanding its margins due to a high degree of operating leverage and generating large amounts of free cash flow (FCF) over the next couple of years.
- Humana (NYSE: HUM)
A for-profit Louisville, Kentucky, based health insurance and healthcare company, Humana was established in 1961 and is currently the third-largest health insurance provider in the U.S. Experts recommend this stock for multiple reasons. First, it’s part of the Medicare Advantage market, which continually grows in the high single digits as populations continue to age. Second, experts anticipate Humana’s main business, health insurance, to see significant growth into 2020 and beyond. Finally, its strong capital investments, a strong capital position with low leverage, and anticipated 12%-15% long-term EPS growth.
- Progressive Corp. (NYSE: PGR)
Most investors recognize the Progressive name from company television commercials and lovable spokesperson Flo, who’s appeared in over 100 TV ads since 2008. The company offers clients various types of insurance, most notably auto insurance along with commercial vehicle, boat, RV, motorcycle, life, and home insurance. Experts anticipate Progressive’s 2020 EPS to be around $6, 13% above analyst consensus thanks to double-digit growth from better than expected margins and premiums.
- IQvia Holdings (NYSE: IQV)
IQvia Holdings serve both the health information technologies and clinical research sectors. It provides commercial outsourcing services and biopharmaceutical development with offices in over 100 countries worldwide. IQvia is set to be a research and development (R&D) leader, likely benefiting from continued drug development digitalization.
- Procter & Gamble (NYSE: PG)
An American consumer goods company, Procter & Gamble, has been increasing market shares both in the U.S. and worldwide due to its expansion into additional business segments and categories. The company also looks to benefit from decreased commodity prices, which are leading to decreased material costs. Experts consider this a short term stock to buy due to its earnings visibility and dividend yield giving investors a defensive return profile.
- NextEra Energy (NYSE: NEE)
Considered a “best-in-class utility,” NextEra and other utilities are often considered defensive plays. NextEra provides electrical power to both wholesale and retail consumers throughout North American via natural gas-fired, nuclear, solar, and wind facilities. With projected 6%-8% EPS growth through 2021 and dividend growth of 12%-14% through 2020, this is definitely a short term stock to consider.
- Microsoft (NASDAQ: MSFT)
Many experts position Microsoft as “best in tech” due to its storage and computing services, core financials, platform-as-a-service capabilities, and its front office apps and productivity. This is in addition to its on-premise technologies, distribution channels, and large customer base. Microsoft should experience stable growth in its commercial business, representing over 60% of its revenue. It also is forecasting a 12% three-year revenue compound annual growth rate (CAGR).
Value vs. Growth Stocks
While not formal classifications, stocks are generally identified as either value or growth in the marketplace. Short-term stocks can either be value or growth stocks.
Growth stocks are ones anticipated to increase significantly in value, enough that investors will make an attractive profit when they sell. Investors who are buying these stocks are usually focusing on younger companies with great growth potential. However, well-established companies doing well and that are ready for additional growth can also be good short term stock investments as well. Growth stocks are seldom cheap due to their high value in the traditional market.
Value stocks are ones considered currently undervalued on the open market, with prices usually lower than competitors. The primary risk with value stocks is that they remain a value stock for an extended period of time due to the market’s attitude of the company issuing the stock having to improve also in order for the stock’s price to increase. Investors purchasing value stocks are anticipating there’s unrealized potential that’s worth the risk.
Value and growth stocks are attractive to short-term stock investors as they have the potential to increase in value very quickly. Investors who are searching for good, short-term stock options to purchase generally focus on new companies with significant growth potential in sprouting industries. Attractive stocks typically have low prices, and the companies issuing these stocks have a service or product that has a rapidly increasing demand. Home health care, biotechnology, and information technology niches are favorites among investors.
However, the best short-term stock opportunities aren’t always offered by new companies ready for a big break, and cheap isn’t always the case. Established companies set for a growth surge can also be excellent short-term investments A short-term stock list of recommendations currently published included PepsiCo Inc. and General Motors Co.
All three types of investment strategies — short-term, growth, and value — are betting the value of a stock will substantially increase, short-term investors are just betting those increases will come sooner.
Locating Short-Term Stocks
There is definitely a certain appeal that comes along with short-term investing: Getting in, getting out, and making a profit. It is, however, important to remember that not every company quickly growing or positioned well for a surge of growth isn’t necessarily an ideal short-term purchase. There isn’t an established way of finding the top short-term stocks to purchase. A stock identified as a viable short-term investment option today may not be such tomorrow. This is where a little research can pay off greatly.
If a company seems to be positioned for quick growth because it’s competitive in a market already experiencing rapid growth, ask yourself if there is still room for additional growth. If a company is providing something unique in a larger target market, look to see if it has already shown sales relative to its size.
Take time to research upper management before buying. Investors may not be able to find the next Mark Zuckerberg, but a little research into a company’s top executives can tell an investor how much relevant experience they have regarding existing services and products, and if companies they’ve worked for in the past have been or are successful.
Stocks with values that are rapidly increasing are generally high beta index stocks, measuring risk and volatility compared to broad market indices such as S&P 500 or the Dow Jones Industrial Average. A high beta rating tells investors the stock is extremely sensitive to market changes, or an overall riskier investment. However, that same stock with high price volatility may have the opportunity to be an excellent short-term investment if the timing of the trades happens prior to the price decreases.
Learn more about how to identify short term investment options, including the best short term stocks to buy right now by scheduling a free online training session with one of Raging Bulls team of marketing experts.