Our 5 Top Stocks for December

Welcome to StockUp, the investing newsletter that can't decide among the sweater with the dancing reindeer, the sweater with the snowman, or... -------------------------------------------------------------------------------------------------- [View this email in your browser]( Welcome to StockUp, the investing newsletter that can’t decide among the sweater with the dancing reindeer, the sweater with the snowman, or -- to really shake things up -- the sweater with the menorah. This week, we’ve got five intriguing stock ideas for this most wonderful time of the year. (In 2020, it’s the most wonderful time of the year because it means 2020 is almost over.) Plus, the three most dangerous stock bubbles we think may be ready to burst, and sage wisdom from an investing legend who isn’t Warren Buffett. Honest. We mean it. — Nathan Alderman, StockUp Editor GET SOMETHING GOOD OUT OF 2020 Our 5 Top Stocks for December --------------------------------------------------------------- 2020 has certainly been … a year, hasn’t it? Or five. Or 10. Or whatever time means now. But before we all gleefully drop-kick this 366-day (don’t forget, it was a leap year!) dumpster fire into the history books, there’s still one more month of murder hornets and frothy-mouthed conspiracy theories and being stuck at home to get through. We’ve rounded up a team of intrepid Fools to make the best of the month ahead by finding compelling companies that might help improve your outlook for 2021: - A tech stock from the far side of the world that quietly offers three impressive businesses in one little-known package. - A social media idea for your vision board, with powerful network effects, retail tailwinds, and predictions of strong growth ahead. - A pandemic-punished REIT in a crucial market that’s riding a huge demographic wave. - A bargain-bin shopping opportunity for a post-pandemic world. - A well-run miner whose management is making all the right moves. To discover more about each of these five promising possibilities, chug eggnog straight from the carton while you [read the rest](. --------------------------------------------------------------- Already subscribed to a premium service? [Click here]( to view your subscriptions. Not a member yet? [Click here]( to sign up! --------------------------------------------------------------- JARGON DECODER Proxy Power They don’t call it “Wall Street” for nothing; the big banks there build bigger barriers of baffling terminology to keep regular Fools like you intimidated, underconfident, and ready to fork over your cash to a broker. Each week, Jargon Decoder translates one of those worrisome words or phrases into plain English, helping you get a leg up on the Wall Street Wise. This week’s term: proxy statement. Otherwise known to the [Securities and Exchange Commission]( as a form DEF 14A -- because what’s a government document without a baffling alphanumeric code to further obfuscate it? -- the proxy statement tells you three important things: - What a company and its shareholders want (or don’t want) to do about how the company’s run. - Who’s running the company. - How much they’re getting paid. Once a year, each publicly traded company holds a shareholders’ meeting, where the people who own stock in it can vote on things like… - Board membership: Executives make the day-to-day decisions at a company, but its board of directors-- the group of advisors it recruits to help steer those decisions -- can boss those executives around. Shareholders, in turn, get to vote for who gets onto the board. Board members serve for a set period of time (which varies from company to company), after which they either step down to make room for someone new, or come up for another vote. - Routine boring business stuff: Like which auditing firm the company intends to hire to ensure that the numbers it reports to investors all add up. Important? Yes! Exciting? Noooooo. - Shareholder proposals: Depending on the company, shareholders themselves can propose things that they believe the company should do. If enough of them support the proposal, it goes up for a vote at the annual meeting. Note that most of these proposals tend to be “nonbinding,” which is the company’s polite way of saying, “Ugh, fine, we’ll hear you out, but we don’t have to actually do anything about it.” - Executive and director compensation: You may possibly have noticed that ours is a capitalist society, which means that people generally expect to get paid for, you know, working. Shareholders get a yes-or-no vote on the company’s plan for how, and how much, it intends to pay its board members and executives. That last part can offer investors especially valuable insights into a company’s merits. Start with the board members: Do they actually have relevant experience in areas the company deals with? How many of them are also executives? (Generally, you want the board and the executives to remain as independent from one another as possible, which makes them more likely to make decisions for shareholders’ good, rather than their own.) How much is the company paying them, and what do they have to do to get that money? If a company’s board is made up of, say, primarily a lot of dubiously qualified people from the same family, and they don’t have to show up for a minimum number of meetings to still get paid, and (in non-pandemic times) they can literally phone into a meeting and still get paid, that company miiiiiiiight not have shareholders’ well-being at heart. Investors can also learn a lot from how much executives get paid, and what form that compensation takes. Do execs get most of their money in cash, or in stock? Do they get big bonuses based on performance? How does the company measure whether execs deserve those bonuses, and what incentives do those measurements create? (For example: If the company pays out bonuses based on how much its share price has grown, execs have an incentive to juice the short-term share price, even if the underlying business suffers over the long term.) Are executives getting huge raises even after the company’s had a bad year? And does the company have “clawback provisions” to take money back from those execs in the future if they don’t do a good job? Finally, remember these magic words: “Related-party transactions.” This term basically means, “Are executives doing things to enrich themselves, their families, or their friends on the company dime?” Companies have to list these, but they tend to bury them deeeep in the proxy statement in hopes that you won’t notice that, say, the CEO is having the company pay tall dollars to lease his private jet from a company that he personally owns. Related-party transactions, like so many other parts of the proxy statement, provide a quick sniff test to help you start to figure out whether you can trust the people who run a company to do so honestly, effectively, and in shareholders’ best interests. --------------------------------------------------------------- POP CULTURE 3 Investing Bubbles That Might Be Ready to Burst The U.S. economy still hasn’t recovered from the painful, ongoing effects of COVID-19 -- but don’t tell the stock market. That’s Wall Street over there, dancing on the table with a lampshade on its head, double-fisting overflowing champagne bottles as it hits record highs. Why, one might almost say its exuberance seems … irrational? Fool Sean Williams thinks the market should probably get down from there before it hurts itself. As investors get as giddy now as they were fearful back in March, he’s found three swingin’ sectors that seem ready for a nasty stumble: - Electric vehicles. Fossil fuels contribute to the climate change that now threatens to slowly cook us all. Gasoline-powered cars spew a good chunk of that climate-crushing carbon into the atmosphere. And as more countries wake up to this threat, electric vehicles -- which produce no emissions as they run, and can charge up from lower- or zero-emission energy sources like solar power -- seem like an inevitable part of the solution. Unfortunately, the market’s expectations for these companies way, way, wayoutpace their current reality. Companies that can’t make a profit to save their lives -- or can eke one out only through regulatory sleight of hand -- trade at vastly higher valuations than long-established companies that make way more actual cars -- and actual profits, too. - SPACs. Imagine you have a private company that wants to go public, but doesn’t want to jump through all the necessary hoops to score a listing on a public market. Enter a SPAC -- a special purpose acquisition company. It doesn’t actually do anything, but it’s filed all the right paperwork to earn a spot on the market. Merge your private company with that SPAC, and presto! Instant public company. Problem is, people have been buying into SPACs before they announce merger plans, when they’re just empty shells wandering the market in search of something to give them meaning. This “[shut up and take my money]( approach to investing seems unwise, to say the least. - Cryptocurrency. Folks. Come on. We’ve talked about this. Blockchain is a cool idea! Digital currency, too! But if your digital currency isn’t backed by anything real, makes up only the tiniest fraction of global GDP with no viable path to widespread use, and rises or falls for no apparent reason, maybe consider a different investment? To learn more about why you might want to avoid these three sectors, [place exorbitant bids in an auction for rare tulips]( while you [read the rest](. --------------------------------------------------------------- ALEXA, FIND THE ONE BURNED-OUT BULB THAT'S DISABLING ALL MY TREE LIGHTS [Smart Speaker] Not sure what to ask your smart speaker? Keep up with what's happening in the market by asking your Amazon Alexa or Google Home to "Play Motley Fool podcasts." --------------------------------------------------------------- FOR PETE'S SAKE 5 Investing Tips from Peter Lynch Between 1977 and 1990, investment manager Peter Lynch steered the Fidelity Magellan Fund (NASDAQMUTFUND: FMAGX) to average annual gains of 30%, and 11 out of 13 market-beating years. So, yeah, he’s probably worth listening to. Fool James Brumley has trawled Lynch’s writings and found five pieces of sound counsel that can help anyone make better stock decisions. We’ve got the first three here to get you started: - “The person who turns over the most rocks wins the game.” We weren’t aware that geology played a significant role in investing, but OK! Seriously, though, Lynch is basically encouraging investors to do their homework. Doing as much research as possible means you’ll likely know more than investors who don’t. And on Wall Street, knowing more than everyone else and making more money often go hand in hand. - “More people have lost money waiting for corrections and anticipating corrections than in the actual corrections.” We humans are, in general, super terrible at predicting the future. And when we try to do so, we usually end up making more mistakes than we would if we just sat tight, waited for the future to arrive, and then acted accordingly. - “You want to buy in the second or third inning and get out in the seventh or eighth.” In short: Let someone else take the risks on a “ground floor” investment, just until you see whether it’s actually living up to the hype. And when you do jump in, keep an eye on how the stock’s actual performance compares to its share price. Nothing lasts forever, and while you might miss out on some gains by leaving the party early, you’ll also avoid the possibility of a catastrophic loss. Discover two further pearls of wisdom when you [read the rest](. --------------------------------------------------------------- AND NOW FOR SOMETHING COMPLETELY DIFFERENT FEATURED PODCAST [Motley Fool Answers]( What Should You Ask Before Investing in a REIT? In this special episode of The Motley Fool’s real estate-focused Millionacres podcast, senior analyst Matt Frankel shares his system for evaluating real estate investment trusts (REITS). He covers the five questions everyone should consider before investing, as well as what to consider in 2021. [Subscribe on iTunes]( --------------------------------------------------------------- STRENGTH IN NUMBERS Quick Reads - [Immune platoon:]( Why we’ll need all five COVID-19 vaccine companies to quash the pandemic. - [Tick tick tick:]( Beneath retail’s seemingly robust recovery, a time bomb lurks. - [I owe, I owe, it’s off to work I go:]( American households are carrying a record amount of debt. --------------------------------------------------------------- "AVERAGE." RIIIIIIIIIGHT. Social Media Post of the Week [The S&P 500 is on track to return about 11% in 2020--exactly its long-term historical average return. An average year... with a bit of chaos mixed in. ]( [See all our Tweets!]( Join the 1,300,000+ people who follow us! [Facebook]( [Twitter]( [Instagram]( [YouTube]( [LinkedIn]( We work fervently, fastidiously, and Foolishly to make sure all the facts and figures we publish in our emails are 100% accurate and up to date. Returns as of December 02, 2020. Have a question or topic you'd like to see covered in a future edition of Stock Up? Email us at stockup@fool.com. For questions about your Motley Fool account, subscriptions, or anything else related to The Motley Fool, please email membersupport@fool.com Our mailing address is: The Motley Fool | 2000 Duke St. | Alexandria, VA 22314 Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](. This is a promotional message from The Motley Fool Copyright © 1995-2020 The Motley Fool. All rights reserved. [Legal Information.](