After months of campaign ads and political saber-rattling, the midterms are finally over.
Now it’s time to focus on something else. Something like what stocks to buy at a discount after a difficult October.
And now is likely a good time to buy. The third year of any presidency or the year following midterm elections are typically good ones for the market regardless of which party is in control. In fact, since 1928, the third year of a presidency has had an average gain of nearly 14%, and is the best year in terms of returns of any of the four years a given president is in office.
So as we enter both the third year of this presidency and the year after a midterm election, it makes sense to be in the equity market.
Here are two stocks to buy now as they are both trading at a bit of a discount and are well positioned to deliver big gains over the next twelve months.
Alaska Air Group (NYSE: ALK)
Boeing (NYSE: BA) recently published a long-term industry outlook that indicated that demand for air travel would increase by 4.7% annually for the next 20 years. It was meant to bolster the idea of rising demand for aircraft, but it’s also getting investors in airlines excited as well as it’s airlines that will buy the planes to meet the demand.
When considering this growing demand, you might first think to look at a big carrier. But a smaller carrier, like Alaska Air Group (NYSE: ALK), might be a better choice.
Early this year, rising fuel prices and unit revenue declines had led to concerning margin erosion at the airline with pre-tax margins falling from 18% in 2017 to 7.5%. It was expected that this margin erosion would continue, but then Alaska Air reported its Q3 results.
In its third quarter, Alaska still reported a significant decline in its adjusted earnings per share, but its revenues climbed to $2.21 billion—compared to $2.11 billion in the same quarter a year ago—and it also reported that its pre-tax margins had recovered to 14.1% – and the airline expects the improvements to continue.
Alaska has refined its flight routes, eliminated underperforming routes, and is focusing on its efforts to boost ancillary revenue. Early this year, the airline announced fee and policy changes to the tune of $150 million in additional annual revenue by next year. It will also increase its baggage fees starting on December 5, which could add $50 million in incremental revenue next year.
The average analyst price target for ALK is $76.69, indicating possible upside of 16.71% over the next twelve months. Imperial Capital recently rated the stock an Outperform and set a price target of $90 – nearly 37% higher than today’s price.
Nvidia (NASDAQ: NVDA)
Chipmaker Nvidia (NASDAQ: NVDA) had a rough October and lost -25% during the month as investors feared a slowdown in the chip industry.
While the stock is still down nearly -13% over the last month, there’s good reason to think about buying the stock while its down.
Nvidia is in the thick of several rapidly-growing markets. Gaming has been a big growth driver for the stock as graphically intensive games become increasingly popular, driving demand for Nvidia’s GPUs. The company is currently positioned at the forefront of the industry as it continues to roll-out exciting new technologies, including its Max-Q chips used in gaming laptops.
Artificial intelligence (AI) presents another massive growth market for the chipmaker, and the company is also focused on snagging market share in the Internet of Things (IoT), cloud computing, driverless technology, and robotics.
This unique positioning makes NVDA particularly attractive, and I believe the stock will rebound quite strongly over the next several months.
The average price target for NVDA is $290.35, indicating upside of nearly 41% over the next twelve months. Evercore ISI recently boosted its price target for the stock from $300 to $400 – or 94.2% higher than Thursday’s closing price.