A Santa Claus rally is an upturn in the stock market in the trading week between the Christmas and New Year's holidays. In 2023, investors will be eyeing the period between December 26 and December 29 for signs of this common, but not assured occurrence.
There are many theories to explain why the market tends to rally during this time. One of them is investor sentiment due to expectations of increased holiday spending. There are also more tangible indicators, such as investors who reinvest their holiday bonuses and lower activity from institutional investors who tend to go on vacation during this time.
Those reasons aside, a Santa Claus rally is not guaranteed to occur in 2023. There will be data about inflation and interest rates before St. Nick comes down the chimney. But if one does occur, where should investors look?
One place to consider is stocks that are seeing strong insider buying. You can find a list of the Top Insider Buying Stocks on MarketBeat.com. For this article, let's look at one large-cap, one mid-cap, and one small-cap stock for investors to consider for a potential Santa Claus rally.
A refreshing choice for an overlooked stock
Keurig Dr Pepper Inc (NASDAQ: KDP) stock is down 9.9% in 2023. But the stock appears to have hit a 52-week low and has rallied over 3% in the last month. That lags the broader market, but that's where the opportunity may lie.
KDP stock has been dropping even though the company has continued to post earnings and revenue that have beat expectations. However, expectations for a recession have weighed on all consumer discretionary stocks, which may explain why KDP stock can't gain traction.
While best known for its signature Dr. Pepper brand, the company also owns the Keurig coffee brand. The company also made a $50 million investment in the Athletic Brewing Company in 2022. That gave the company a minority stake in the non-alcoholic craft beer maker.
Since Keurig Dr Pepper Inc last reported earnings on October 26, 2023, MarketBeat shows three insiders buying shares of the stock.
Will the sun shine on this beaten-down stock?
It's been a terrible year to own energy stocks in general and, particularly, solar stocks. And Enphase Energy Inc. (NASDAQ: ENPH) has been one of the sector's biggest disappointments. ENPH stock is down over 60% in 2023. At one point, the stock was trading at around $75, a three-year low.
Revenue and earnings are both over 20% lower year-over-year. And the larger concern is that analysts don't expect the solar industry to improve in 2024. In fact, there's concern that the solar slump could get worse.
That's the bad news. The good news is that Enphase has a strong balance sheet. In addition to having over $500 million in net cash, the company continues to generate positive free cash flow (FCF). The company generated $122 million in FCF in its most recent quarter.
That suggests that the sell-off in Enphase is likely to be overdone. And despite analysts projecting a 17% year-over-year decline in earnings, they are projecting a 73% upside for ENPH stock.
A new name that may deliver beyond expectations
Beyond Inc (NASDAQ: BYON) is a relatively new name to traders. The company was formerly known to investors as Overstock.com. BYON stock (then OSTK) sold off sharply in the summer, and not without reason. The company's revenue and earnings are down sharply YOY as consumers put off discretionary purchases, even those selling at discounted prices.
However, the stock has been rallying since getting a bullish rating from D.A. Davidson. Even more impressive than the Buy rating is the $41 price target, which is about 80% higher than the current stock price.
A lot has to go right for Beyond to live up to that bullish expectation, but a bullish insider buy in November may indicate that a turnaround story is underway.
