Investing isn’t generally a get-rich-quick scheme; it’s usually a process that pays over the long term but requires effort, patience, and commitment at the early stages. However, the market always presents short-term opportunities, which both traders and long-term investors cannot ignore. Investors and traders participate in the market to make money, and short-term stocks present opportunities to make quick profits and increase their portfolio’s returns. In view of that, we have created a list of short-term stocks to buy in 2021.
What are short-term stocks?
The term, “short term”, has varied meanings in stock trading. While most believe that short-term trading means holding a stock position for a year or less, others view “short term” as two years or less. However, we choose to stick to the one-year time frame. Short-term stocks are mostly momentum or cyclical stocks. Momentum, here, means that market sentiment may favor buying the stock at present — for example, GameStop and AMC had a lot of momentum in the last week of January 2021.
It may also be cyclical stocks, which are stocks that perform well during particular seasons due to an increase in demand — for example retail stocks experience a sales boom towards the end of the year and natural gas during winter. As an investor, you must be able to differentiate between long-term stocks and short-term stocks. Being unable to distinguish between the two could affect the rate of returns on your portfolio.
How to trade and invest in short-term stocks?
Choose a short-term stock to trade.
Choosing a short-term stock to trade can be challenging because what may be a short-term play to one investor, maybe long-term to another. You may have to use a combination of factors, such as market sentiment, economic conditions, technical analysis, and fundamentals, to determine whether to go short term on a stock. Any investor willing to invest in short-term stocks should look out for catalysts that don’t have long term implications on the stock or company.
Open a trading account
To trade short-term stocks, you must have a trading account. There are a variety of online brokers you can open an account with. When choosing a broker, pay attention to commissions and look out for hidden charges like interest on margins or service fees for withdrawals. Also, take note of trading limits and minimum account balances.
After you have selected your stock and opened a trading account, you can start trading. Short-term stocks tend to be unhinged from financial valuation, which makes them volatile. As such, you must pay attention to technical analysis. Also, look out for any news about the company or government policy that may affect the stock in the short-term.
Where can I trade short-term stocks?
Short-term stocks are publicly traded on different exchanges in the US stock market, so they are accessible to all traders and investors. But to trade them, you will need the services of a professional broker who will connect your orders to the exchanges where the stocks are traded. You have to conduct your due diligence to choose the broker that can help you fulfill your trading goals.
We've shortlisted the best short-term stocks to buy in 2021 and you can start trading them in our recommended brokers by clicking on the buttons of the following table.
Top 10 short-term stocks to trade
The stocks we have listed here are the best short-term stocks, based on parameters like prevailing and anticipated economic conditions and short-term trading strategies. Here is our list of the top 10 short-term stocks for 2021.
- Simply Good Foods (NASDAQ: SMPL)
- Accel Entertainment (NYSE: ACEL)
- Walgreens Boots Alliance (NYSE: WBA)
- Constellation Brands (NYSE: STZ)
- Dollar General (NYSE: DG)
- Procter & Gamble (NYSE: PG)
- T-Mobile (NASDAQ: TMUS)
- NextEra Energy Inc. (NYSE: NEE)
- IQvia Holdings (NYSE: IQV)
- Progressive Corp. (NYSE: PGR)
Simply Good Foods (NASDAQ: SMPL)
The Simply Good Foods Company is a food and beverage company located in Colorado with a $2.9bn market value. The company had an impressive quarter, posting earnings of $0.29 per share, beating the analysts’ estimate of $0.20 per share. This strong growth is driven by the company’s acquisition of Quest Nutrition. In the last three months, shares of SMPL have returned 43%. The stock looks fairly priced, making it a good purchase for bargain hunters.
Accel Entertainment (NYSE: ACEL)
Accel Entertainment, Inc. installs, maintains, and operates video game terminals in authorized non-casino locations, such as restaurants, convenience stores, bars, or truck stops. The $984.2m company suffered during the pandemic but looks set to gain from the reopening of the economy as people begin to engage in outdoor activities. In Q1 2020, hedge funds and institutional investors with bullish positions on ACEL increased by about 20% from the previous quarter.
Walgreens Boots Alliance (NYSE: WBA)
Walgreens Boots Alliance, Inc. is a health and beauty retail company with a $43.4bn market capitalization. This stock has a record of underperforming the S&P 500, though it's clawing back up at the moment. Revenue grew 6% on an annualized basis, driven by the increase in health consciousness among the general population, which saw the demand for drugs and medications surge. Shares of Walgreens have returned 34% in the last three months.
Constellation Brands (NYSE: STZ)
Constellation Brands is a producer and distributor of premium beer, wine, and spirits. The $41.8bn company had an impressive 2020 due to the increase of liquor during the pandemic. The company posted revenue growth of 12% in Q3 2020 despite the closure of bars and restaurants. Constellation Brands also has an ownership stake in Canopy Growth, as it looks to benefit from the anticipated legalization of Marijuana. Shares of Constellation have returned 17% in the last three months.
Dollar General (NYSE: DG)
Dollar General Corporation is a discount retailer operating in the south and the midwestern United States. The $48bn company took the visionary approach of expanding its retail footprint, which paid off during the pandemic. The stock recently received an upgrade from Loop Capital due to its strategic initiatives, which would drive improved financial performance in 2021 and beyond. Shares of Dollar General have slid by 9.48% in the last three months.
Procter & Gamble (NYSE: PG)
Procter & Gamble did not have a good 2020, as the stock underperformed the broader market. However, this does not exclude the fact that the company is a leader in its industry and would continue to dominate. The company’s brand products are ordered repeatedly and are insulated from changes in shopping trends because they are necessities. Shares of Procter & Gamble have slid by 8.3% in the last three months but can bounce back anytime soon.
T-Mobile (NASDAQ: TMUS)
Although most would regard this as a long-term play due to 5G, T-Mobile remains a short-term stock. The company has beaten analysts’ estimates for the last four quarters. It has also received a flurry of upgrades from analysts from Credit Suisse to Morgan Stanley. The buzz surrounding the company’s merger with Spring would generate short-term momentum on the share price. Shares of T-Mobile have rallied by 11.5% in the last three years.
NextEra Energy Inc. (NYSE: NEE)
NextEra Energy, Inc. generates electric power using wind, solar, coal, nuclear, and natural gas, which it supplies to the North American market. The company has a market capitalization of $163.7bn. NextEra Energy realized an income of $3.1bn last quarter. In the last three months, shares of NEE have rallied by 10.9%.
IQvia Holdings (NYSE: IQV)
IQVIA Holdings Inc is an analytic and technology solutions company that conducts research services in the life sciences industry. The company has a market capitalization of $35bn, with an impressive financial performance that has beaten analysts’ estimates in the last four consecutive quarters. Shares of IQV have returned 8.56% in the last three months.
Progressive Corp. (NYSE: PGR)
The Progressive Corporation provides insurance and related services in the United States. The company has a market capitalization of $51bn. PGR posted Q4 2020 earnings per share of $1.83, beating analysts’ estimate of $1.68. Moreover, the company’s annual income increased by 1.1%. Shares of PGR have returned 10.6% in the last three months.
Expert tip on investing in short-term stocks
When trading short-term stocks, pay close attention to your charts and technical analysis. Also, watch out for news or catalysts that would impact the share's price action. One way experienced professional traders make short-term plays in the market is by going short on a stock that has poor fundamentals, especially after a bubble.
Why invest in short-term stocks?
There are many reasons to trade short-term stocks. One of them is that short-term stocks provide opportunities to make quick profits. For astute investors, it is always good to have a portfolio mix of stocks with long-term and short-term potentials.
When trading or investing in short-term stocks, it is best to build positions gradually. This can be done by averaging your costs. This would help you minimize losses and hedge against volatility.
Frequently Asked Questions
T-Mobile is a great stock at the moment.
No, the economic policies of the current administration are still unclear. This can affect the performance of many stocks in the short term
T-Mobile is in good financial shape at the moment.
Anyone who is of legal age can invest in short-term stocks.
No, short-term trading requires mastery of technical and fundamental analysis.
They are popular because of quick returns within a short time.
No, they are traded on weekdays between 9:30 am and 4:00 pm New York Time when the stock market is open for trading.