December is usually one of the calmest months in the stock market, but this year was a bit different. Most of the time, there isn’t much company-specific news, with earnings season behind us and everyone settling into holiday mode.
We didn’t have that luxury in 2021. The ongoing global pandemic and big economic news drove major gains and losses in different industries — including the five listed below — even though the individual companies didn’t report much about their businesses.
1. Healthcare plan providers
The five largest stocks in the U.S. healthcare-plan market all had a great December for shareholders.
- UnitedHealth Group (NYSE: UNH)
- CVS Health (NYSE: CVS)
- Anthem (NYSE: ANTM)
- Cigna (NYSE: CI)
- Humana (NYSE: HUM)
These stocks have a combined market cap around $850 billion, so they had a big influence over major indexes overall.
These sorts of moves are usually a signal that something strange is going on. Value stocks outpaced growth stocks by nearly 4% in December, which could explain what we see happening in the healthcare plan industry. UnitedHealth is the most expensive of the bunch, and its forward price-to-earnings ratio is only 23. Health plans aren’t immune to recessions, but their cash flows tend to be less cyclical than most other businesses.
The major health insurance companies have provided stability and modest growth in cash flows for the most part. Some have even increased dividends during the past few months. There’s nothing particularly exciting going on here, but investors are seeking the safety and dividends.
2. Cruise line operators
The travel industry has endured a real saga throughout the pandemic, and cruise lines might be the most dramatic part of that industry. Carnival (NYSE: CCL), Royal Caribbean (NYSE: RCL), and Norwegian Cruise Line Holdings (NYSE: NCLH) all enjoyed a good month in December.
The cruise operators have to spend enormous amounts of cash on upkeep of their ships, and they typically have debt-heavy capital structures. This means that things can get ugly quickly if there’s an abrupt drop in cash flow, which is the case with pandemic-driven travel bans. November was a rough month for cruise lines, as coronavirus cases climbed across the globe. December’s reversal was caused by optimism about the relatively mild symptoms associated with the new omicron variant, along with promising news about a highly effective treatment from Pfizer (NYSE: PFE).
These stocks lost tons of value when COVID-19 shut the world down, and they haven’t fully recovered. As it stands, Carnival’s price is roughly equal to its total sales from 2019, and only 7 times its earnings from that year. There should be plenty more room to rise and fall as the global health situation changes.
3. Beverage giants
Old rivals Coca-Cola (NYSE: KO) and PepsiCo (NASDAQ: PEP) had huge months, rising 13% and 9.5%, respectively. Both companies produced impressive earnings reports in October, exceeding analyst estimates while navigating supply chain challenges. However, that news is multiple months old, and nothing noteworthy has happened in the interim.
This looks like another instance of investors moving toward value and stability. Coca-Cola and PepsiCo each have a diversified portfolio of global brands, and they tend to perform well through any economic conditions. Both stocks are Dividend Aristocrats with long histories of consistent dividend growth. Investors appear eager to get that dividend income in their portfolio. The stocks pay higher yields than many other consumer staples leaders, but their yields are among the lowest that they’ve been in years.
4. Payment processors
Visa (NYSE: V) and Mastercard (NYSE: MA) are another pair that pleased shareholders in December. Mastercard rose 14%, followed by Visa’s 12%. Surging credit card applications helped spur this optimism early in the month.
The incumbents in the payment processing industry are no doubt feeling some competitive heat as blockchain technology transforms fintech. Still, Visa and Mastercard have a wide moat for the time being, and they’ve shown willingness to transform themselves via acquisition to keep up with disruption. As investors look for value instead of growth, these stocks could provide a combination of dividend cash flow along with growth potential.
5. Bitcoin stocks
It was a rough month for stocks associated with Bitcoin (CRYPTO: BTC), with the crypto markets experiencing steep losses. Block (NYSE: SQ) tumbled 22.5%, Coinbase Global (NASDAQ: COIN) fell 20%, MicroStrategy (NASDAQ: MSTR) lost 24.5%, and Robinhood Markets (NASDAQ: HOOD) was down 31.5%. These companies all own significant amounts of Bitcoin or generate revenue based on Bitcoin trading.
All of these stocks have more-complicated businesses than a simple one-to-one correlation with the crypto markets, but we should expect their prices to reflect volatility in the cryptocurrency and blockchain sectors.
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