In January, a lot of investors go hunting for new stocks to buy. Some need to put money into their retirement accounts before April 15. Others are trying to put their end-of-year bonuses or holiday gift money to work. But rushing to pick investments can lead to picking poor investments. The better strategy may be to work on developing a watch list of stocks even before you're ready to invest, so you'll be ready to buy one when the time is right.
This month, stocks that you might want to keep an eye on without buying include companies facing uncertainty, such as U.S. oil stocks ConocoPhillips (NYSE:COP), Chevron (NYSE:CVX), and ExxonMobil (NYSE:XOM), as well as aircraft manufacturer Boeing (NYSE:BA). Then there's a stock that might be too expensive to pick up right now -- electric carmaker Tesla (NASDAQ:TSLA).
The oil industry is a wild card
Oil prices ended 2019 with a sustained three-month rally that pushed them more than 10% above where they stood at the beginning of October. Many oil production stocks responded with rallies of their own. Shares of the largest independent U.S. exploration and production company, ConocoPhillips, rose 14.1% in the fourth quarter.
This month, though, has served up a heaping helping of uncertainty, thanks in part to the escalation of tensions between the U.S. and Iran. After the U.S. assassination of Iranian Gen. Qassem Soleimani, oil prices spiked briefly, with Brent crude briefly topping $70 a barrel. Prices have eased a bit in the days since, but the potential for volatility remains.
Depending on how the situation unfolds, oil prices could go up...or down. The impact could be amplified for U.S. oil companies that do business in the Middle East, particularly ExxonMobil and Chevron, which have major Persian Gulf operations. ConocoPhillips, on the other hand, which has no Middle East oil presence, could fare better in the event that the regional instability worsens.
All energy investors should be keeping watch on this situation, but given the uncertainties, smart investors should probably just watch, and neither buy nor sell just yet. It's worth remembering that after the drone attack on one of Saudi Arabia's key oil facilities in September, oil prices spiked briefly, but quickly returned to their prior levels, leaving no lasting impact.
Boeing's fate is not fully in its own hands
Troubled aerospace giant Boeing closed out a rocky 2019 by firing its CEO. This month, it's hoping to make significant progress toward getting its grounded 737 MAX aircraft back in the air. Unfortunately, the timing on that is not up to Boeing, but various governments' regulatory agencies. In addition, Boeing needs to hammer out deals to compensate customers that have been impacted by fleet downtime and delivery delays.
Working against Boeing are allegations that it was too cozy with the U.S. Federal Aviation Administration during the initial review and testing phase of the new aircraft. That perception has put added pressure on regulators to take a harder-than-standard look at potential problems this time around. And in fact, according to The New York Times, new potential design flaws have been uncovered in the wiring of the airplane's tail: an issue completely unrelated to the flaws in the MCAS system that caused the two deadly 737 MAX crashes, which resulted in the model's grounding.
In good news for the company, it has reached agreements with several key customers including Southwest and American Airlines regarding reimbursement for the revenue losses associated with the grounding of the fleet. However, if the grounding drags on, or if more issues are uncovered, Boeing could be on the hook for more.
Which way will Tesla steer next?
Here's a stock price chart of four major automakers -- Ford, Toyota, General Motors, and Tesla -- for the last three months:
Even if the chart didn't have the legend, you'd probably be able to guess that of those four companies, the blue line -- showing a stock price that's more than doubled -- belongs to Tesla. Its shares were buoyed as analysts reconsidered their stance on the potential for its unusual CyberTruck and the company's prospects in China. In the wake of that rise, Tesla's share price of about $466 is by far its highest ever, and its market cap of $84.1 billion is roughly equal to GM's and Ford's combined.
That said, investing is an endeavor for years and decades, not months, and the bigger picture matters. Step back a bit, and one sees that up until October, Tesla was actually having a very bad 2019.
So the big question for investors is, will this current rally continue? Or will the company's ongoing issues -- a lack of profitability, unfavorable product mix, and high debt load -- throw cold water on shareholders' hopes?
When a company's share price performance has been this volatile, buying at the top can seem like a risky prospect. Yet investors will want to keep an eye on Tesla in case a more attractive entry point presents itself... and, historically speaking, that has tended to happen at least once every few months.
Don't be too eager to buy
Even if you need to make a big contribution to your tax-advantaged retirement account before April 15 rolls around, remember -- that's four months away. You don't need to rush to pick an investment right now. But developing a robust watch list of top stocks that you might want to buy under the right circumstances can help you make better decisions.
This month, putting Tesla, Boeing, ConocoPhillips, Chevron, and ExxonMobil on your radar screen may be a better move than putting them directly into your portfolio.