Betting against a stock market's bullish run is often not a good idea. There's an adage warning investors against shorting stocks because "the market can remain irrational longer than you can remain solvent," but it also makes sense because bull markets typically last longer than market crashes, recessions, or even depressions.
While stocks typically fall much faster than they rise, over the past 30 years the stock market's gains have far eclipsed the relative declines. Even the Great Recession that was brought about by the financial markets' 2008 collapse only lasted about 18 months (though the effects were felt for much longer). A decade later, though, you can see in the graph below we're still in the midst of the bull market that began soon after.
And last year's swoon caused by the pandemic lasted literally weeks before the markets snapped back to continue their meteoric rise.
All that's to say: You never know when a sharp fall will occur, and it's better to bet on growth than a decline. Even if you do buy at the peak, you will undoubtedly regain parity relatively quickly. So while the current bull market is long in the tooth, it's still wise to believe there's more room to run. The three stocks below are ones to watch in September.
Image source: Getty Images.
1. AbbVie
Shares of pharmaceutical giant AbbVie (ABBV 2.88%) just got a major haircut, losing $20 billion in market value after the U.S. Food and Drug Administration said all Janus kinase (JAK) inhibitors for sale in the U.S. must carry a warning label announcing the drugs carry serious side effects, including blood clots and potentially death.
AbbVie was particularly hurt by the decision because its arthritis therapy Rinvoq is a JAK-inhibiting prescription drug, and it is supposed to be the pharma's replacement treatment when its mega-selling Humira goes off-patent. Pfizer and Eli Lilly will also have to slap a label on their JAK inhibitor drugs.
The FDA's announcement offset all of the gains AbbVie had made just weeks before after encouraging phase 3b study results on Rinvoq, which showed superiority to Dupixent, the similarly positioned (though non-JAK inhibitor) drug from Sanofi and Regeneron. Analysts, however, suspect the sell-off in AbbVie's stock was overdone.
While the FDA's label requirement applies to all JAK inhibitors, it came as a result of the agency's study of Pfizer's Xeljanz, and AbbVie maintains that Rinvoq's safety profile is different from that of Xeljanz. Analysts say the FDA's action wasn't a surprise (even if to the market it was), and the weakness resulting in AbbVie's stock is a buying opportunity.
At just 8 times next year's earnings estimates and less than 20 times the free cash flow it produces, AbbVie is a stock you'll want to watch (if not purchase) this month.
Image source: Getty Images.
2. Cresco Labs
It's obvious to most that cannabis is going to be a massive growth opportunity in the future, even if the marijuana industry is currently feeling its way through the maze of state legalization authorizations. Federal legalization ought to help pave the way for significant opportunities, and one company that's likely to benefit is Cresco Labs (CRLBF +4.98%), one of the largest vertically integrated multi-state operators, with a presence in 10 states.
Cresco holds 47 retail licenses, owns 37 dispensaries, and has 20 production facilities, giving it one of the biggest footprints in the U.S. cannabis industry and making it the leading wholesaler of branded marijuana products. Its offerings are sold in over 700 dispensaries nationwide.
In its fiscal first quarter, Cresco notched $178 million in revenue, up 10% from the fourth quarter and 169% above the year-ago figure. Of those sales, 54% were from its wholesale business, which offers lower profit margins but allows Cresco to more than make up for it in volume.
MSOs are one of the more intriguing plays in the marijuana space, and Cresco Labs is likely to be one of the leading players as cannabis legalization spreads. With its shares down 43% year to date, it (like others) has been weighed down by the contradictory messages sent by the government on regulation, taxation, and legalization. That makes it a stock to watch this month and beyond.
Image source: Getty Images.
3. PubMatic
The way video platforms and digitally native apps and websites sell advertising on their properties began changing several years ago. Instead of using managed services to launch campaigns across their various digital offerings, companies began implementing self-serve programmatic ad buying. PubMatic (PUBM +0.73%) takes this sea change in advertising to the next level.
Using machine learning and artificial intelligence, PubMatic is a sell-side platform that allows publishers to sell their ad space to advertisers while also assisting on the demand side by integrating its tools into other leading platforms like The Trade Desk and Google's own marketing platform.
PubMatic is having an impact, reporting almost 47 trillion ad impressions last year, up 69% from the year before. With almost 40 trillion impressions over the first six months of 2021 -- double the number from the same period a year ago -- PubMatic is growing exponentially.
The market, though, seems to be ignoring the growth it's experiencing at the moment, as PubMatic's stock has lost more than 60% of its value from the highs it hit in March. Considering the changing face of ad buying and selling, the 10% annual growth it expects globally in digital ad spend through at least 2024, and the tidal shift to digital advertising generally, PubMatic's stock is definitely one to watch.
