We now have just 30 full days left before we ring in a new year. I'm pretty certain most folks will be glad to put 2020 in the rearview mirror. That includes Wall Street professionals and retail investors who've been whipsawed by extraordinary levels of volatility over the past nine months.
However, periods of heightened volatility are usually blessings in disguise for opportunistic investors with long-term mindsets. Even with the benchmark S&P 500 at an all-time high, investors can still buy into great companies at fair valuations. Here are three top stocks perfectly set up to make investors richer in December and well beyond.
Don't look now, but marijuana stocks are blazing hot once again. This time around, the immediate and long-term outlook for U.S. and Canadian pot stocks is very different. There's little question that you'll want to invest your money in U.S. marijuana stocks, with vertically integrated multistate operator Cresco Labs (CRLBF 0.42%) at or near the top of the list.
Cresco Labs' operating model has two major revenue generators. Retail sales through its 19 currently operational dispensaries are the first. Cresco holds enough licenses to open as many as 29 retail stores in up to nine legalized states, but it's concentrated on the Land of Lincoln. Approximately half of the company's operational dispensaries are located in the limited-license state of Illinois, which should be a billion-dollar annual market by 2024. The mere fact that Illinois is a limited-license state gives Cresco a good opportunity to gobble up significant market share.
Perhaps the more exciting growth driver for Cresco, though, is its wholesale cannabis business, which is the largest in North America. When Cresco completed its acquisition of Origin House in January, it inherited a very lucrative cannabis distribution license in California, the biggest marijuana market on the planet. With this license, Cresco can now put cannabis products into more than 575 dispensaries throughout the Golden State. In the September-ended quarter, Cresco produced over $90 million in wholesale revenue.
Cresco generated $128.5 million in sales in 2019. Wall Street is now looking for $477 million in full-year sales this year, over $800 million in 2021, and for the company to decisively push into recurring profitability by next year. It has all the markings of a long-term winner in the pot industry and should be scooped up by growth-seeking investors in December.
Annaly Capital Management
I have a treat for the income seekers out there. Though it's largely been shunned by Wall Street for the past seven years, mortgage real estate investment trust (REIT) Annaly Capital Management (NLY 0.21%) is ripe for the picking.
Without getting too technical, mortgage REITs borrow capital at short-term rates and buy assets with a higher long-term yield. In Annaly's case, we're talking about purchasing mortgage-backed securities (MBS). The difference between the yield generated from these MBSs and the short-term borrowing rate is known as the net interest margin (NIT). The wider the NIT, the more money Annaly makes -- and the more the company makes, the higher its annual payout.
Things were downright ugly for Annaly Capital Management when the yield curve inverted and, for a brief period, short-term yields were higher than long-term yields. However, history has shown time and again that the early stages of an economic recovery feature a broad-based steepening of the yield curve. When combined with the Federal Reserve's dovish monetary policy, this should lead to a steady expansion of Annaly's NIT in years to come.
Furthermore, Annaly predominantly purchases agency-only assets. This means its MBSs are backed by the federal government in the event of default. Although the yields on agency-only MBSs are lower than non-agency assets, the perceived safety of agency assets has allowed Annaly to use leverage to its advantage.
With Annaly Capital Management's book value again heading higher, this is a 10.8% yield you're going to want to add to your portfolio for December and beyond.
Walgreens Boots Alliance
The entire pharmacy industry was hammered last month after Amazon announced its entrance into the pharmacy business. This was always the expectation after Amazon purchased PillPack for $753 million in 2019. With deep pockets and a lust for market share, Wall Street is clearly worried about the long-term potential of predominantly brick-and-mortar pharmacy chains like Walgreens. I'm here to tell you that this company has a strategy to fend of Amazon and thrive, and it's already well underway.
Walgreens has identified approximately $2 billion in annual expenditures that it plans to cut by or before 2022, all while reinvesting heavily in digitization. This should result in double-digit online sales growth and increased mobile pick-up order usage.
The company also announced a partnership with VillageMD in July that'll see the duo open about 700 physician-led clinics at Walgreens locations in over 30 U.S. markets. Walgreens is attempting to become a full-service medical destination at the grassroots level, with the goal of boosting demand at its higher-margin pharmacy. If the company can effectively bolster consumer loyalty and engagement with this partnership, it'll be well worth it.
Value investors buying into Walgreens are getting a company valued at less than 8 times Wall Street's forward earnings forecast that also happens to be a Dividend Aristocrat. That's right: You'll get a 4.8% yield as the cherry on top of this deeply discounted value stock.