This year is approaching an end, but investors shouldn't ignore some fairly priced stocks before the calendar flips to 2025. Often, fund managers reposition their portfolios in December, which can lead to what's called a "Santa Claus Rally." This effect causes stock prices to rise significantly in December because a lot of people are buying.
Three stocks that see heavy buying interest in December are Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), Meta Platforms (NASDAQ: META), and ASML Holding (NASDAQ: ASML). Each company is well-positioned for the long term yet has short-term reasons why it's a good buy.
Alphabet
Alphabet is better known as Google's parent company but also has other strong areas under its umbrella. It's deeply involved in the generative AI arms race through its Gemini model, which has emerged as a top model to use in this space. Part of this strength comes from its cloud computing division, Google Cloud.
Google Cloud allows clients to rent computing space so they can easily scale up or down. It also gives them access to industry-leading graphics processing units (GPUs) and AI accelerators to train their AI models quickly. This division has been on fire lately, with revenue rising 35% last quarter.
Altogether, Alphabet is executing at a very high level, yet its stock price doesn't reflect that fact. The stock trades for a mere 21.5 times forward earnings, which is a huge discount from other tech peers like Microsoft and Apple, which trade at a respective 31.7 and 30.4 times forward earnings. Furthermore, Alphabet is growing its earnings much faster than these two, so this undervaluation makes no sense.
To add even more fuel to the fire, Alphabet trades at a lower price than the S&P 500, which trades at 24.6 times forward earnings. Alphabet is a great company that's trading at a huge discount, and I expect both fund managers and investors to take advantage of this price shortly.
Meta Platforms
I could nearly copy and paste the Alphabet paragraph onto the Meta Platforms portion and have most of the same be true. Instead of search engine dominance, though, Meta has social media dominance.
The company derives a massive chunk of revenue through 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 executing at a very high level, with revenue rising 19% year over year and diluted earnings per share (EPS) increasing 37%. These are very high levels, considering Meta's size, and show the company's strength.
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 considering 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 also makes a great long-term investment.
ASML
ASML is quite a bit different than Alphabet and Meta. It doesn't have to do any advertising 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 microscopic levels. Without ASML's technology, there wouldn't be the same computing capabilities there are today, putting AI advancements on hold.
As ASML is the only company in the world with these capabilities, its machines are highly regulated, and a growing number of them are increasingly outlawed from being sold to China and its allies. This is a problem because China made up nearly 50% of sales in the third quarter.
However, this was an outsized portion, compared to historical averages, and management expects its China revenue share to come down to around 20% in 2025. This decrease also affected ASML's 2025 revenue outlook as it decreased the range from 30 billion to 40 billion euros down to 30 billion to 35 billion euros.
Investors didn't like that news and sent the stock tumbling following the release. 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 been done, and it now trades at 33 times forward earnings.
ASML PE Ratio (Forward) data by YCharts.
While that may be expensive compared to the other two, it's the cheapest that ASML's stock has been in a long time. Furthermore, ASML has no competition in this space. While the short-term may be a bit bumpy, the long-term trend of consumers using more chips and more powerful chips is undeniable. As a result, ASML is a fantastic buy before 2025.
Don’t miss this second chance at a potentially lucrative opportunity
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*Stock Advisor returns as of November 18, 2024
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keithen Drury has positions in ASML, Alphabet, and Meta Platforms. The Motley Fool has positions in and recommends ASML, Alphabet, Apple, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
