🎁 Market Gifts from Santa: Stocks that are Incredibly Cheap Right Now
Discover unbeatable opportunities for your portfolio with these gift-priced stocks!
🎅 Ho Ho Ho, Investor!
Welcome to this festive edition of Jimmy's Journal! As we step into 2025, I’ve got a holiday surprise for you: 3 standout stocks that could be the ultimate gifts for your portfolio this season. These picks are trading at bargain levels and brimming with potential. Dive in below and discover some market opportunities worth celebrating! 🎄
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Why do stocks become cheap? Often, it's because the market is driven by emotions, short-term news, or macroeconomic uncertainties that overshadow the fundamentals of a business. Fear and speculation can push prices down, just as euphoria can inflate them. But the market, as efficient as it may seem, doesn’t always get it right. This creates moments where the true value of a company diverges from its market price—opportunities for those who take the time to look deeper.
Our role as investors is to identify these divergences and act on them with conviction. By understanding the underlying strengths of a business and its potential for long-term growth, we can see what others might overlook. Below, you'll find a carefully curated list of stocks that we believe offer great value this Christmas season, precisely because the market has underestimated their potential. Let’s uncover these opportunities together.
1. Ulta Beauty (ULTA)
Ulta Beauty has endured a challenging 2024, marked by guidance cuts and revised expectations for 2025. However, periods of reset often set the stage for recovery. With sales trends stabilizing and competitive pressures, particularly from Kohl’s/Sephora, easing, Ulta is well-positioned to regain momentum.
As the beauty industry’s long-term growth remains intact, Ulta’s strong fundamentals and adaptability create a compelling opportunity for investors.
Business Model
Ulta Beauty operates a distinctive business model that integrates a wide range of beauty products—from affordable mass-market items to premium prestige offerings—with in-store services such as salons. This combination makes Ulta a one-stop destination for customers.
The company’s omnichannel strategy, supported by a robust loyalty program and personalized marketing, drives customer retention and recurring revenue, setting Ulta apart in a competitive landscape.
Valuation
Ulta’s current valuation of 16x 2025 P/E reflects market skepticism following its guidance cuts. However, with earnings growth projected in the low double digits, supported by stable sales and share repurchases, the company is positioned for multiple expansion.
Historically, Ulta has traded closer to 18x, indicating potential upside as investor confidence returns and growth prospects are re-evaluated.
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2. Charles Schawb (SCHW):
Investment Thesis
Schwab is well-positioned to outperform its peers in 2025 as it approaches more normalized earnings. In an environment where multiple expansion for well-regarded companies has plateaued and valuations for low-growth businesses have stalled, Schwab stands out as it reduces high-cost short-term borrowing.
This strategy is expected to drive a recovery in net interest margins (NIM) toward 250bps with only a moderate balance sheet adjustment. Combined with organic growth targets of 6-8%, Schwab has the potential to deliver strong earnings growth and re-rate to a higher teens multiple.
Business Model
Schwab operates a diversified and scalable financial services platform, offering brokerage, wealth management, and banking solutions. Its recent integration of Ameritrade expands its client base, and management has indicated that customer promoter scores are rebounding post-migration, signaling improved client retention and growth prospects.
Additionally, Schwab’s foray into acting as an intermediary for alternative investment products represents a promising revenue stream, aligning with broader industry trends and providing a competitive edge in high-margin areas.
Valuation
Schwab’s current valuation reflects cautious sentiment around its balance sheet adjustments and macroeconomic headwinds. However, as short-term borrowing costs decline and organic asset growth approaches long-term targets, there is significant room for multiple expansion.
The introduction of new high-margin offerings in alternative investments further enhances Schwab’s growth trajectory, suggesting that the stock could see a re-rating in 2025 as the market begins to price in these opportunities.
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3. Amazon.com, Inc (AMZN)
Investment Thesis
Amazon is well-positioned for strong performance into 2025, supported by accelerating growth in its core business segments and improving operational efficiency. AWS continues to benefit from secular growth trends, with significant IT spend still on-premises (~85-90%) and increasing contributions from generative AI workloads.
Meanwhile, its retail Stores segment is gaining traction through share expansion in under-penetrated verticals like grocery and apparel, along with enhanced delivery capabilities through Same-Day/1-Day options. Combined with operational improvements and disciplined cost management, Amazon is poised to deliver robust free cash flow growth despite ongoing investments in AI and infrastructure.
Business Model
Amazon’s business model is built on a diversified ecosystem encompassing e-commerce, cloud computing, advertising, and subscription services. AWS remains the crown jewel, with ~33.4% operating margins driven by strong revenue growth, cost rationalization, and a leaner headcount.
On the retail side, the Prime ecosystem drives customer loyalty, while innovations in logistics, automation, and robotics improve efficiency and enhance customer satisfaction. Advertising also plays a key role, contributing high-margin revenue to the company’s bottom line.
Valuation
Amazon’s valuation reflects its dual growth story, with AWS and its retail Stores segment both offering significant upside. The ongoing shift to regionalized inventory placement and automation in North America supports operating margin expansion, while disciplined investment in AI and generative technologies sets the stage for future revenue streams.
With free cash flow expected to inflect positively in 2025 and 2026, Amazon’s diverse and scalable model positions it as a top performer in the tech and retail sectors.
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Thank you for reading, and we wish you a very Merry Christmas filled with joy, prosperity, and new opportunities! 🎅🏻💫
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